The Quick Read: as of September 28, 2026, foreclosure supply is growing, but from a low base, and the discounts come with real costs. Roughly 813,000 borrowers are underwater, per ICE’s August report. Mortgage rates rose four weeks in a row through Freddie Mac’s survey dated September 24. Inventory sits at a decade high. A cheap foreclosure only wins if it beats the repair bill, the financing cost and the ordinary homes now competing with it.
Key Takeaways
- ICE’s August Mortgage Monitor counted about 813,000 underwater borrowers, up 44% from a year earlier. Negative equity is not default.
- ATTOM’s August report showed bank-owned completions up 42% from a year ago, yet activity is still far below 2009–2010.
- Freddie Mac’s 30-year average climbed for four straight weeks, to 7.03% for the week of September 24.
- NAR reported 4.9 months of supply for August, the highest in more than ten years, so foreclosures now compete with plenty of regular listings.
- A discount is not a profit. Price the repairs, the financing and the alternatives before you bid.
What Changed
The foreclosure numbers are rising. The crisis talk is not supported.
ATTOM’s August 2026 report, released September 17, counted 40,277 properties with a foreclosure filing. That is up 1% from July and 13% from a year earlier. Foreclosure starts were 25,894, up 7% year over year. Completed foreclosures, the bank-owned homes buyers actually see listed, hit 5,794. That is up 42% from a year ago.
Context matters here. ATTOM says activity remains below pre-pandemic norms. Scotsman Guide’s coverage of the same report describes the national foreclosure rate as a tiny fraction of a percent of housing units, far below the peak levels of 2009 and 2010. Rising from a very low base is still low.
Now the underwater count. ICE’s August Mortgage Monitor, released August 10, put about 813,000 borrowers underwater. That is up 44% from a year earlier. Inman’s coverage notes the same report shows record homeowner equity overall. The underwater group is concentrated among FHA and VA borrowers, people who bought between 2022 and 2025, and owners in Texas and Florida. That report is about seven weeks old, and I found no September edition, so treat it as the latest available.
Underwater means the loan balance exceeds the home’s value. It does not mean the owner has stopped paying. WRE News, summarizing ATTOM, says the data do not support calling this a foreclosure crisis. The thing to watch is whether price weakness erodes equity cushions further.
Rates moved the wrong way.
Freddie Mac’s survey put the 30-year fixed at 7.03% for the week of September 24. The weekly readings ran 6.71% on September 3, 6.76% on September 10 and 6.95% on September 17. A year earlier the Freddie Mac PMMS showed 6.30%. That is about 73 basis points higher.
Different sources measure different things. The Mortgage Bankers Association’s weekly survey, released September 23, put its 30-year contract rate at 7.12% for the week ending September 18. The MBA’s chief economist called that the highest since May 2024. Mortgage News Daily’s index read 7.43% on September 25. Freddie’s survey covers conforming loans with 20% down and excellent credit. Foreclosure purchases and investor loans often sit outside that box, so use Freddie’s number as a benchmark, not a forecast of what any buyer pays.
On September 16, the Federal Reserve’s FOMC statement raised the target range by 25 basis points, to 3¾–4%. The vote was 12–0, and the statement calls inflation elevated. The 10-year Treasury yield stood at 5.234% on September 28, per CNBC.
One common misreading: the Fed’s move did not cause this. The MBA attributes the climb in mortgage rates to Treasury yields, and the 10-year had risen well before the September meeting.
Supply is the other half of the story.
NAR’s August existing-home sales report, released September 10, showed sales down 2.0% for the month, at a 3.98 million annual pace. Inventory reached 1.62 million homes, up 5.9% from a year earlier. Months’ supply was 4.9, described as the highest in more than ten years. The median price was $429,100, up 1.6% from a year ago.
Realtor.com data, as reported by WRE News on September 24, showed active inventory up 5.8% year over year and median list prices down for a 36th straight week. NAR measures closed sales and Realtor.com measures asking prices, so the two can point in different directions at once.
What Does This Mean for a Foreclosure Buyer?
The discount is real, but it is not your profit.
ICE’s August report says buyers of bank-owned properties paid a 27.5% discount to comparable sales. I could only see a cut-off excerpt of that finding, so I can’t tell you exactly how ICE built the comparison. Read it as a signal that discounts exist, not as a promise about any one house.
Whatever the discount is, it sits before repairs, holding costs and financing. A bank-owned home has often sat vacant. Nobody has maintained it, and the seller usually offers little or no disclosure. Inspection rights are often limited. The purchase price is the smallest number you don’t know yet.
More homes for sale changes the math.
Five years ago, a discounted foreclosure had almost no competition from ordinary listings. That is no longer true. With months’ supply at its highest in more than a decade and asking prices falling week after week, a buyer has negotiating room on regular homes too. Realtor.com’s September 10 release says active listings remain about 11% below pre-pandemic levels, so this is not a glut. But the choice is wider than it was.
So the honest comparison is not “foreclosure versus market price.” It is “foreclosure after repairs and carrying costs versus a clean listing I can negotiate on.”
Foreclosure supply is uneven.
Bank-owned inventory is concentrated. Scotsman Guide’s coverage of ATTOM’s report says Houston, Dallas and San Antonio lead REO counts. ATTOM’s data put the highest foreclosure rates in South Carolina, Nevada, Florida, Texas and Maryland. A 42% national jump in REOs does not mean deals sit in every town. In most places you may be looking at a handful of listings.
Financing is where rising rates bite.
Higher rates hit foreclosure buyers twice. They shrink borrowing power for owner-occupants, and they cut into the cash flow on any property held as a rental. The MBA reported September 23 that the refinance index was 62% below a year earlier and that the unadjusted purchase index was 11% below a year earlier. Buyers are pulling back.
Some borrowers are reaching for adjustable-rate mortgages. The MBA’s Newslink summary puts the ARM share at 9.8%, because 5/1 ARMs sit more than a point below fixed rates. An ARM can make a purchase pencil today. It also hands you a reset risk, which is exactly how many underwater borrowers got into trouble. Choose one with eyes open.
Investors face their own version of this. If you plan to rent the property, the rent has to cover the debt with room to spare, and rates have moved against you. That is why the financing structure deserves as much attention as the price. I’d start by comparing loan options that fit a property in rough condition, since some programs are built around the borrower’s income and others around the property’s, subject to lender guidelines. The linked page carries the current guidelines.
Why Are Underwater Owners Not the Same as Foreclosures?
Underwater owners are a pool of risk, not a pipeline of listings. An owner with negative equity who keeps paying is not going to auction. Trouble starts when a job loss, a payment reset or a sale forces the issue. With a solid labor market, as Freddie Mac’s chief economist described it on September 24, most of those 813,000 borrowers can keep paying.
Still, the pool is worth watching. FHA and VA loans, 2022–2025 purchases and the Texas and Florida concentration tell you where stress would show up first. If prices soften further, more owners slip underwater, and the ones who need to sell have fewer options. That is how bank-owned supply grows from a low base. I would not call it a wave. I would call it a slow build worth tracking.
Owners with equity are the much larger group. ICE puts total mortgage-holder equity at a record $18 trillion in the second quarter. If you’re weighing whether to tap that equity rather than buy a discounted house, my earlier piece on record home equity meeting rising rates covers that trade-off.
My Take
Here is my read. The foreclosure story is real but small, and the headlines are bigger than the data. Filings up 13% on a base near 0.028% is not 2009. Anyone telling you deals are everywhere is selling something.
For the right buyer, though, this is the best foreclosure market in years. Supply is growing. Discounts look wide in ICE’s data. Sellers of regular homes are cutting asking prices. A patient, well-capitalized buyer has more choices than at any point since the pandemic.
The wrong buyer is the one stretching to make payments work. Take a first-time buyer with thin reserves who falls for a steep discount on a house needing a new roof and a new furnace. The discount vanishes on day one. Rates at a 2026 high make that worse, because there is less room in the budget for surprises.
I keep going back and forth on whether rising supply will pull prices down soon. NAR shows the median up 1.6% from a year ago, while asking prices have fallen 36 weeks running. My honest answer: it’s a toss-up. Closed sales lag asking prices, so the weakness may not have shown up in the sale data yet. It may also be that sellers are cutting to meet a smaller pool of buyers and prices simply stabilize.
One more point. Rates could keep rising. The 10-year is already above 5.2%, and markets price one more Fed hike in December. If you find a house you can afford at today’s cost of money, the discount you see is not going to widen by waiting. I’d rather buy a house that works now than bet on a rate drop.
What I’d Do Now
None of this is advice to buy or sell a particular property. It is how I’d approach the decision.
Price the total cost first. Take the purchase price, add a realistic repair budget from an actual inspection (where access allows it) and add the months you’ll carry the property before it is livable or rented. Compare that all-in number to a clean listing nearby. If the gap is thin, skip it.
Compare like with like. Quotes gathered on different days are not comparable, because rates moved almost every week this month. Line up quotes on the same day, for the same scenario. Then decide.
Understand the lock. A rate lock is an agreement that holds a quoted rate for a set period. Floating means you leave it open and accept the market’s next move. With rates rising four straight weeks, floating has been costly. If a deal works at today’s numbers and you like the house, lock it.
Match the loan to the property’s condition. A home that needs heavy repairs may not fit standard financing at all. Some borrowers use renovation-oriented financing. Some investors use loans qualified on the rent the property produces. I’d sort that out before bidding, not after you win. Self-employed buyers who can’t show a standard paycheck have another route, and I covered it in my guide to bank statement loans for business owners.
Know your state. Foreclosure timelines, redemption rights and eviction rules differ by state, and I am not going to summarize fifty of them. Read your state’s rules or ask a local real estate attorney before you bid at auction.
Watch what’s next. ICE has not yet published a September Mortgage Monitor that I could find. When it does, check whether the underwater count kept rising. Watch the next Freddie Mac survey too. If rates ease, buyer demand comes back, and the window on these discounts narrows.
If you’re weighing a purchase or a refinance this fall, Lendmire can walk you through how the current programs fit your file.
For the end-to-end picture of how these loans work — qualification, structures, and the full process — see Lendmire’s complete DSCR loans guide.
Frequently Asked Questions
Are foreclosures increasing in 2026?
Yes, from a low base. ATTOM’s August report showed 40,277 properties with a foreclosure filing, up 13% from a year earlier, and completed foreclosures up 42%. ATTOM also says activity remains below pre-pandemic norms, and the national rate is far below the 2009–2010 peak.
Does 813,000 underwater borrowers mean a wave of foreclosures is coming?
No. ICE’s figure counts borrowers who owe more than the home is worth, not borrowers who have stopped paying. Most underwater owners keep making payments. The risk rises if prices fall and a job loss or a payment reset forces a sale. The ICE data are from the August report, so look for the next edition.
Is a bank-owned home actually cheaper than a regular listing?
Usually cheaper to buy, not necessarily cheaper to own. ICE’s August report says bank-owned buyers paid a 27.5% discount to comparable sales, but that is before repairs and holding costs. I could not confirm how ICE measured it. Compare the all-in cost against clean listings, which are now plentiful.
Will the 7% mortgage rate in the news be what I pay on a foreclosure?
Probably not. Freddie Mac’s survey, at 7.03% for the week of September 24, covers conforming loans with 20% down and excellent credit. Foreclosure purchases and investor loans often fall outside that group. Rate sources also differ: the MBA showed 7.12% and Mortgage News Daily 7.43%. Treat each as a benchmark.
Should I wait for rates to fall before buying?
That depends on what you can afford today. The Fed raised its target range on September 16, and markets price another hike in December. Waiting is a bet, not a plan. If the property works at current costs and you’ve priced the repairs, that’s the better test than guessing the market.
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References
1. ATTOM August 2026 foreclosure report via PR Newswire
2. Scotsman Guide on foreclosure trends
3. Inman on ICE homeowner equity
4. WRE News on August foreclosure activity
6. Federal Reserve FOMC statement, September 16, 2026
8. NAR August 2026 existing-home sales
9. WRE News on inventory and listing prices
This article is part of Lendmire’s Mortgage News series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: DSCR Loan After Foreclosure: Can You Qualify? · The Impact of Higher Mortgage Rates: What Homebuyers Need to Know · Can I Buy Real Estate Abroad?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.