Q4 Update: Delinquencies, Foreclosures and REO
Industry Update
March 3, 2026
Source: CalculatedRisk Newsletter
Even with the recent weakness in house prices, it is important to note that there will NOT be a surge in foreclosures 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 substantial equity, and low mortgage rates (mostly at a fixed rates), few homeowners will have financial difficulties.
But it is still important to track delinquencies and foreclosures.
Here is some data on REOs through Q4 2025 …
The dollar value of 1-4 family residential Real Estate Owned (REOs, foreclosure houses) was up 26% YOY from $790 million in Q4 2024 to $998 million in Q4 2025. This is still historically very low, but increasing.
Fannie Mae reported the number of REOs decreased to 4,519 at the end of Q4 2025, up slightly from 4,496 at the end of the previous quarter, and down 23% year-over-year from 5,895 in Q4 2024. Here is a graph of Fannie Real Estate Owned (REO).
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 this time.
Here is some data on delinquencies …
It is important to note that loans in forbearance are counted as delinquent in the various surveys but not reported to the credit agencies.
The percent of loans in the foreclosure process increased year-over-year from 0.45 percent in Q4 2024 to 0.53 percent in Q4 2025 (red) but remains historically low.
From the MBA:
Compared to last quarter, the seasonally adjusted mortgage delinquency rate increased for all loans outstanding. By stage, the 30-day delinquency rate decreased 5 basis points to 2.07 percent, the 60-day delinquency rate increased 16 basis points to 0.92 percent, and the 90-day delinquency bucket increased 16 basis points to 1.27 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 fourth quarter was 0.53 percent, up 3 basis points from the third quarter of 2025 and 8 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 recent increase is almost back to pre-pandemic levels.
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 had equity in their homes – and they were able to restructure their loans once they were employed.
And on foreclosures …
ICE reported that active foreclosures are still very low but have increased recently.
While foreclosure activity remains low by historical standards, 2025 saw about 401,000 loans referred to foreclosure, up 25% year over year and the highest annual total since 2019.
December alone brought 40,000 foreclosure starts, the third-highest monthly tally of the year, with activity picking up noticeably in the final months.
Foreclosure inventory climbed by 47,000 (+25%) in 2025, reaching its highest level since 2023, driven by a sharp rise in FHA loans entering foreclosure (+59%).
Foreclosure sales also moved higher, with 80,000 sales in 2025 (+17% YoY) — the biggest volume since 2019 — and 2,100 sales in December, up 41% from last year.
For full report, please click the source link above.
