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Is Mortgage Relief Fueling the Next Housing Bubble?

September 15, 2025 | Housing Policy | Presented by ReadySetLoan™️


Despite stubbornly high interest rates, home prices across the U.S. — and right here in Connecticut — continue to rise. A major factor behind this trend may not be simple supply and demand, but rather the government’s expanded mortgage relief policies. While these programs aim to protect homeowners, they’re also distorting the market, suppressing foreclosures, and quietly inflating prices.


FHA Risk Rising

The Federal Housing Administration (FHA) has loosened its lending standards over the past decade, and the numbers are eye-opening:

  • Before 2008: 35% of FHA borrowers carried debt-to-income (DTI) ratios above 43%.

  • By 2020: That share climbed to 54%.

  • Today: It sits around 64%.


Nearly 80% of first-time FHA buyers have less than a month of savings in reserve, leaving them highly vulnerable. And the results are showing: in 2024, 7.05% of FHA loans became seriously delinquent within 12 months of origination — a delinquency rate slightly worse than the subprime peak during the last housing crisis.


The Cost of “Relief”

Rather than letting distressed loans move through the system, federal programs step in with sweeping relief measures:

  • Missed payments are rolled into the loan balance with no added interest.

  • Borrowers can cut payments by 25% for up to three years, with the difference added to their loan.

  • Servicers get financial incentives each time they process relief.

In 2024 alone, the FHA made over 550,000 incentive payments to servicers—almost as many as the number of new FHA loans issued. This creates a cycle where lenders profit regardless of loan performance, borrowers never fully recover, and distressed homes stay off the market.


Suppressed Foreclosures, Higher Prices

After the 2008 crash, foreclosures skyrocketed, peaking at 4.6% of all mortgages in 2010. Today, the foreclosure rate is under 1%—but not because homeowners are universally stronger. Instead, federal relief has effectively bottled up the pressure.

This artificial suppression keeps housing inventory tight, leaving fewer homes available for buyers. That scarcity continues to push prices higher, even in markets like Connecticut that desperately need affordability relief.


🎤 Neil’s Take “History shows us that foreclosure suppression doesn’t erase risk—it just delays it,” said Neil Caron, Area Sales Manager at CMG Mortgage. “In 2010, we saw foreclosures peak at record highs after years of loose lending. Today’s relief programs may feel like stability, but they could easily become tomorrow’s crisis. The housing market runs on trust and fundamentals, not temporary fixes.”


🐷 RSL Piggy Points

  • FHA delinquency rates are now at or above subprime-era levels.

  • Today’s foreclosure rate (<1%) looks artificially low compared to the 4.6% peak in 2010.

  • Suppressed foreclosures = fewer listings = inflated home prices.

  • Many FHA borrowers are now “trapped” in negative equity.

  • Relief programs benefit servicers but leave taxpayers and future buyers exposed.


The RSL Perspective

At ReadySetLoan™️, we believe transparency is critical. Relief programs may be helping families stay in their homes today, but they also risk creating another bubble tomorrow. For Connecticut buyers, sellers, and policymakers, it’s important to remember: housing stability must come from sound lending and balanced supply, not quick fixes that delay the inevitable.




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