Servicers are broadly expecting foreclosure activity to accelerate, but they think the increase will be relatively small, according to a new Auction.com survey.

The vast majority or 74% anticipate a “slight” uptick in the next 12 months compared to what’s been seen so far this year, in line with other indicators showing mortgage default rates are on the rise but still below pre-pandemic levels. Only 15% of servicers are planning for a “substantial” increase in completed foreclosure volume, and 11% think activity will decrease. Just 3% are betting on a “substantial” drop, and 8% anticipate a “slight” decline.

The fact that mortgage companies are expecting a mild foreclosure rebound as pandemic-related restrictions fade adds to evidence that financial distress from the coronavirus was successfully contained by public policy and industry actions.

“It’s clear that the pro-active response to the pandemic by policymakers and mortgage servicers helped to avoid a feared foreclosure wave triggered by the crisis,” said Jason Allnutt, CEO of Auction.com, in a press release. “While most in the default servicing industry expect to see foreclosures gradually increase over the next year, they are expecting a higher percentage of delinquent mortgages to avoid foreclosure than the historical average.”

Servicers on average expect the roll rate from serious delinquency to foreclosure auction in their inventory for the next 12 months to be 23%. That compares favorably to a historical average of 27%, according to Auction.com’s Seller Insights report. Sellers are largely optimistic due to high home equity levels. Respondents on average reported that 72% of their distressed collateral properties had 10% equity, which could help protect loan performance in a cooling housing market. However, a small share of respondents (20%) did predict a higher roll rate of more than 30%.

Respondents to the Auction.com expect distressed to be primarily concentrated in the market for government-insured loans generally taken out by first-time homebuyers with limited financial means.

More than 70% of respondents identified loans insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs and the U.S. Department of Agriculture as the most likely to experience a greater number of dispositions. Others (22%) expect private loans in securitizations or bank portfolios to be the most distressed. Both categories of mortgages have tended to have high forbearance rates, and the survey indicates more than one-third (36%) of servicers see pandemic-related backlogs as the main driver of distressed mortgage activity, followed by regulatory intervention (31%), recession (15%) and home equity (13%) and interest rates (5%).

Over 40% of servicers expect the Midwest to be the most foreclosure-prone region, followed by the Northeast (27.5%), the West (17.5%) and the South (12.5%).

Interestingly, Homeowner Assistance Fund money available to distressed homeowners at the state level was not found to be a big factor in foreclosure cancellations or postponements, with only 5% of respondents describing it as such. More traditional loss mitigation strategies like the modification of loan terms for long-term reductions income ranked highest in this category at 59%.