Q2 Update: Delinquencies, Foreclosures and REO
Industry Update
September 3, 2026
Source: CalculatedRisk Newsletter
It is important to note that there will NOT be a surge in foreclosures this cycle that could lead to cascading house price declines (as happened following the housing bubble) for two key reasons: 1) mortgage lending has been solid, and 2) most homeowners have substantial equity in their homes.
With most homeowners having substantial equity, and low mortgage rates, few homeowners will have financial troubles. However some recent buyers might have difficulties.
It is important to track delinquencies and foreclosures.
Here is some data on REOs through Q2 2026 …
The dollar value of 1-4 family residential Real Estate Owned (REOs, foreclosure houses) was up 25% YOY from $852 million in Q2 2025 to $1,066 million in Q2 2026. This is still historically low, but steadily increasing.
Fannie Mae reported the number of REOs increased to 4,967 at the end of Q2 2026, up 3% from 4,826 at the end of the previous quarter, and up 6% year-over-year from 4,666 in Q2 2025.
This is very low and well below the pre-pandemic levels. REOs are a lagging indicator. REOs increase when borrowers struggle financially and have little or no equity, so they can’t sell their homes – as happened after the housing bubble. That will not happen in large numbers this cycle.
Here is some data on delinquencies …
Here is a graph from the MBA’s National Delinquency Survey through Q2 2026. Overall delinquencies decreased in Q2. The overall delinquency rate is close to pre-pandemic levels.
The sharp increase in 2020 in the 90-day bucket was due to loans in forbearance (included as delinquent but not reported to the credit bureaus).
The overall delinquency rate (excluding foreclosures) increased from 3.93 percent is Q2 2025 to 4.37% in Q2 2026.
The percent of loans in the foreclosure process increased year-over-year from 0.48 percent in Q2 2025 to 0.67 percent in Q2 2026 (red) but remains historically low.
From the MBA:
Compared to last quarter, the seasonally adjusted mortgage delinquency rate decreased for all loans outstanding. By stage, the 30-day delinquency rate decreased 3 basis points to 2.21 percent, the 60-day delinquency rate decreased 5 basis points to 0.73 percent, and the 90-day delinquency bucket increased 1 basis point to 1.43 percent. …
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 0.67 percent, up 3 basis points from the first quarter of 2026 and 19 basis points higher than one year ago.
Both Fannie and Freddie release serious delinquency (90+ days) data monthly.
These are mortgage loans that are “three monthly payments or more past due or in foreclosure”. The pandemic related increase in serious delinquencies was very different from the increase in delinquencies following the housing bubble. Lending standards have been fairly solid over the last decade, and most of these homeowners have equity in their homes – and they have been able to restructure their loans once they were employed.
The bottom line is there will likely be an increase in delinquencies and foreclosures, but there will not be a huge wave of foreclosures as happened following the housing bubble. The distressed sales during the housing bust led to cascading price declines, and that will not happen this time.
For full report, please click the source link above.