You have been watching foreclosure filings for the distress everyone keeps predicting, and the filings are not there. The borrowers are, and the reason nothing shows up on the public record is a program that pays servicers to keep it off there.
A mortgage industry show plays a segment about what happened to FHA loans that went bad, and the count in it is the part worth writing down: “Of the 52,531 FHA loans last year that went seriously delinquent within their first year, only nine resulted in foreclosure.”
The segment's framing of how that happened: “Under the guise of pandemic relief, the administration masked the growing troubles in the housing market by paying off borrowers and mortgage servicers to prevent foreclosures.”
Two mechanisms are named. The first: “The FHA actually introduced a program that pays mortgage servicers to make borrowers miss payments for them.” Those payments do not vanish — “Miss payments are added to the loan’s principal, but without interest.”
The second: “The FHA also pays servicers to cut monthly payments for delinquent borrowers by 25% for 3 years with the payment reductions also added to the principal without interest.”
So the distress is real and the filing is not. It sits behind the first mortgage as balance the borrower owes, and the loan reads as current.
“Of the 52,531 FHA loans last year that went seriously delinquent within their first year, only nine resulted in foreclosure.”
If you track your market's health by foreclosure filings and notices of default, you are reading an instrument that has been deliberately disconnected. Nine out of fifty-two thousand is not a housing market with no distress in it — it is a housing market where distress has been moved somewhere that does not produce a public record.
For you the practical consequence is not opportunity, it is arithmetic on your own listings. A seller who was helped through a rough stretch believes their loan was brought current, because they were told exactly that, and the statement they hand you shows one balance. Ask every seller whether they ever missed payments, went into forbearance, or had a modification — in those words — and order the title work early enough that anything sitting behind the first mortgage surfaces while the deal can still be restructured.