A remarkable downward trend in foreclosure auction volumes will likely continue for a second straight year in 2025, a testament to the roaring success of COVID-19 pandemic-inspired loss mitigation waterfalls and the enormous amounts of home equity that homeowners have built up in the last four years.
But recent shifts in the up-funnel distressed market metrics of unemployment rates, seriously delinquent mortgage rates and home price appreciation — along with possible shifts in the regulatory environment for mortgage servicing in 2025 — suggest that completed foreclosure auction volumes could turn a corner higher in late 2025 and beyond.
Completed foreclosure auction volume in 2024 is on track to decrease by 11% from 2023. That would put it at an astounding 67% below the 2019 level — which was considered historically low at the time. Auction.com is expecting completed foreclosure auction volume to decrease another 9% in 2025, according to a regression analysis using public record data from Attom, delinquency data from the Mortgage Bankers Association (MBA) and home price appreciation data from the Federal Housing Finance Agency (FHFA).
A paradigm shift in the default servicing industry’s approach to loss mitigation coming out of the pandemic is keeping more delinquent loans from rolling to completed foreclosure auction. That approach doubles down on prioritizing home retention over foreclosure and is seen as the long-term future for loss mitigation rather than just a temporary approach triggered by crises. These two points are highlighted by commentary in the annual report to Congress from the Federal Housing Administration (FHA) for fiscal year 2024.
“Since the foreclosure crisis, however, government policy has recognized that the robust use of home retention solutions reduces losses to the government in addition to benefiting borrowers and communities. … In FY 2024, FHA has begun work to update its permanent home retention options using lessons learned from its temporary COVID-19 loss mitigation home retention policies.”
The heavy focus on home retention in loss mitigation — and the resounding success of such an approach in recent years — is bolstered by the ample home equity available even to distressed homeowners. That equity is also helping to keep fewer mortgages from falling into delinquency in the first place. Data from the MBA shows the seriously delinquent rate for U.S. mortgages falling to a more than 40-year low in the second quarter of 2024.
The four-decade low in these delinquency rates combined with lower roll rates from those cases that move to completed foreclosure both point to a continued downward trajectory in completed foreclosure auction volume in 2025 — assuming relatively stable unemployment and slowing-but-still-positive home price appreciation.
Emerging trends in those same metrics point to foreclosure auction volume turning a corner higher in late 2025 and into 2026 — especially if those emerging trends continue and even accelerate. The unemployment rate rose to 4% in May 2024 after 27 consecutive months below 4% and has remained above 4% through October of 2024, according to data from the Bureau of Labor Statistics.
The seriously delinquent rate showed signs of turning a corner higher in the third quarter of 2024 after dropping to the 40-year low in the second quarter. The Q3 2024 seriously delinquent rate for all mortgages increased to a five-quarter high of 1.55%, up slightly from a year ago. The year-over-year increase in the third quarter marked the first such increase following 13 consecutive quarters of year-over-year declines.
Home price appreciation has slowed to about 4% after ending 2023 at about 7%, according to data from FHFA, and homeowners are gradually pulling more equity out of their homes. Home equity lending in the first half of 2024 rose to the highest level in the first half of any year since 2008, according to CoreLogic. Combined, these mean less of an equity cushion for many distressed homeowners facing foreclosure.
Lastly, given the new presidential administration’s slant toward deregulation, there could be a more hands-off approach to loss mitigation from policymakers at FHA and the FHFA and regulators at the Consumer Financial Protection Bureau (CFPB). Although it’s unlikely that the home retention focus will be abandoned, the pendulum could swing more toward an expedited foreclosure process when there is no long-term solution for a distressed homeowner.
If these trends continue, they point to a corresponding uptick in foreclosure volumes — especially if the trends accelerate. Given that the foreclosure process takes an average of 815 days, any nationwide uptick would most likely occur well into 2026 with some possible localized increases in late 2025.
