Foreclosure Starts Climb While Delinquencies Hold Steady, FHFA Reports

The Federal Housing Finance Agency (FHFA) released its latest data showing a modest increase in foreclosure starts in July 2025, while overall delinquency rates remained largely unchanged. The report offers a snapshot of mortgage performance for loans backed by Fannie Mae and Freddie Mac, highlighting both ongoing recovery efforts and emerging trends in the housing market.

Foreclosure Prevention Actions

According to the FHFA, the Enterprises completed 17,929 foreclosure prevention actions in July 2025, contributing to a total of 7,231,733 actions since the start of the conservatorships in September 2008. Of these, nearly 39% were permanent loan modifications, reflecting long-term adjustments made to stabilize borrowers’ finances.

Permanent loan modifications alone totaled 8,089 in July, bringing the cumulative count to 2,796,127 since 2008. Among these, 34% involved extended-term modifications, while 65% included principal forbearance, underscoring the continued focus on sustainable repayment plans.

While these measures have historically been a cornerstone of the FHFA’s efforts to reduce foreclosures, uncertainty remains over how these programs would continue under potential privatization of Fannie Mae and Freddie Mac.

Forbearance and Delinquency Trends

The number of borrowers entering payment deferrals following forbearance increased slightly from 5,735 in June to 6,275 in July. Additionally, new forbearance plans rose from 7,145 to 8,030 during the same period. Despite these increases, the total number of loans in forbearance fell from 34,713 to 33,927, accounting for just 0.11% of total serviced loans and 6.6% of delinquent loans, highlighting that most borrowers are maintaining regular payments.

The 30–59-day delinquency rate decreased marginally to 0.92%, while the serious delinquency rate loans 90 days or more past due remained steady at 0.54%, signaling stability in the broader mortgage portfolio.

Foreclosure Starts and Sales

July saw an 11% increase in foreclosure starts, rising to 8,073, even as third-party and foreclosure sales dipped slightly to 1,091. The data suggest that while lenders are initiating more foreclosures, the number of completed sales is not growing at the same pace, reflecting both market caution and continued efforts to keep borrowers in their homes.

Refinance Activity

The FHFA report also noted a decline in total refinance activity, attributed to persistently high mortgage rates. The average interest rate on a 30-year fixed-rate mortgage fell slightly to 6.72% from 6.82% in June, providing some relief but not enough to spur a significant uptick in refinancing.

Interestingly, cash-out refinances as a share of all refinancing increased to 65% in July, up from 62% the previous month, though still below the three-year high of 82%. This indicates that homeowners are increasingly leveraging home equity for purposes other than purchasing or paying down their mortgage, such as consolidating debt or financing home improvements.

Outlook

Overall, the FHFA’s July report paints a nuanced picture. Foreclosure starts are ticking up, but delinquency rates remain relatively low, and many borrowers are successfully navigating repayment modifications and forbearance programs. While mortgage performance is largely stable, ongoing high rates are keeping refinancing activity subdued, and potential privatization of Fannie Mae and Freddie Mac could add a layer of uncertainty for borrowers and lenders alike.

The report highlights the delicate balance between maintaining homeowner stability and managing credit risk, underscoring the importance of careful monitoring as the housing market adjusts to evolving economic conditions. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.