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Negative equity positions are deteriorating for FHA and VA mortgages originated between 2022 and 2026. Rick Palacios Jr. adds that a significant portion of these loans are likely for new homes with large mortgage rate buydowns, which could mean that negative equity percentages are even higher than reported.
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Homebuilders have increased sales since late 2022 by using temporary mortgage rate buydowns, according to Rick Palacios Jr. Industry surveys also recorded new cycle lows in key metrics last October, with unsold inventory rising during the period. These developments may have affected the risk profile of recent FHA and VA mortgage originations.