Foreclosure Auctions: FHA Loans Drove Nearly All of 25% Rise

Foreclosure auctions are climbing, but almost all of the climb comes from one corner of the mortgage market. Completed foreclosure auctions rose 25% in the third quarter from a year earlier to the highest quarterly total since early 2020, according to the Auction.com Q3 2026 Auction Market Dispatch published Thursday, Oct. 22. Loans insured by the Federal Housing Administration made up 43% of that volume and grew 73%. Run those figures together and FHA loans account for roughly 90% of the year over year increase, by TradeFlock's estimate. Everything else, from Fannie Mae and Freddie Mac loans to VA and private loans, rose only about 3% combined.

That split matters because the headline number reads like a broad housing turn. The report's own figures point to something narrower: a stress pocket among FHA borrowers, many of them recent buyers, sitting on top of a market that is still well below its pre-pandemic foreclosure pace.

How the FHA Share Explains the 25% Jump

The arithmetic is simple. If FHA loans are 43% of third quarter volume after growing 73%, they were about 25% of this quarter's total a year ago, or about 31% of last year's smaller total, by TradeFlock's estimate. Total volume grew by an amount equal to 20% of this quarter's total. FHA alone added about 18 points of that, which is where the roughly 90% share comes from. The remaining 57% of volume compares with about 55% a year ago on the same basis, an increase of about 3%, by TradeFlock's estimate.

Auction.com does list one other loan group. Volume from loans backed by Fannie Mae and Freddie Mac grew 30%, so the government sponsored enterprises are also rising. But the report does not give their share of total volume, and the 3% figure for everything outside FHA implies that the loans not covered by either label, such as privately held loans, likely fell. The report says FHA reached its highest share of auctions since the first quarter of 2015. The inputs are rounded percentages, so the estimates above should be read as approximate, within a point or two.

Outside FHA, Volume Sits Near Half of 2020

The same method can be applied to the pre-pandemic benchmark. Auction.com says total completed auctions reached 70% of their first quarter 2020 level, while FHA volume reached 117% of its own level from that quarter. Combining those with the 43% share puts FHA at about 26% of auction volume in early 2020. Volume outside FHA comes out at about 54% of its first quarter 2020 level, by TradeFlock's estimate. In TradeFlock's reading, the recovery in foreclosure auctions is mostly an FHA recovery, and the rest of the market has barely moved from its low base.

Other data line up with that picture. The Mortgage Bankers Association's second quarter National Delinquency Survey, released Aug. 13, put the seasonally adjusted FHA delinquency rate at 11.79%, up 122 basis points from a year earlier, against 2.72% for conventional loans, up 12 basis points. The FHA seriously delinquent rate, covering loans 90 days or more past due or in foreclosure, rose 227 basis points from a year earlier, compared with 6 basis points for conventional loans. Across all loans, 0.67% were in the foreclosure process at the end of June.

Recent Borrowers Carry the Thinnest Discount

The vintage data tell a similar story. Loans originated in 2022 or later made up 46% of completed auctions and grew 73%, the same pace as FHA. That cohort was about a third of volume a year ago, by TradeFlock's estimate. Auction.com describes these borrowers as the first generation to lock in at materially higher rates than buyers in 2020 and 2021.

Those recent loans also come to auction with the highest opening bids relative to value. The credit bid, the minimum a lender is willing or able to accept, averaged 70.5% of estimated market value for loans written in 2022 or later, compared with 64.2% for all foreclosure auctions and 48.0% for loans from 2010 to 2014. In TradeFlock's reading, a higher credit bid ratio for recent loans is consistent with less built up equity, which leaves a smaller cushion between what is owed and what a buyer will pay. FHA pricing moved the other way, falling to 62.6% from 64.6% a year earlier, and the FHA sales rate rose 19%. Buyers paid an average of 65.3% of estimated retail value across all foreclosure auctions, up from 64.5% a year earlier.

What the Pipeline Shows for the Fourth Quarter

Auction.com's scheduled auctions point higher for the rest of the year, up 11% for October, 31% for November and 15% for December from a year earlier. Intercontinental Exchange's August First Look, released Monday, Sept. 28, counted 37,000 foreclosure starts, up 29% from a year earlier, and 298,000 loans in foreclosure inventory, up 41%. Completed foreclosure sales of 7,800 were running at 57% of August 2019's pace.

One counterweight sits at the front of the pipeline. In its July First Look, ICE said 102,000 borrowers became 90 or more days delinquent, down 4% from a year earlier, and that FHA loans led the decline with 13% fewer new defaults. If that holds, the FHA wave now reaching auction reflects defaults that began months ago rather than a fresh acceleration. TradeFlock is not forecasting fourth quarter auction volume.

For borrowing costs, Auction.com cites a 30 year fixed mortgage rate of 6.86% for September. TradeFlock has covered why mortgage rates stayed high even as the Fed cut and how rising borrowing costs hit mortgages and car loans. The figures here describe activity on Auction.com's marketplace, not a national foreclosure rate. The open questions are whether FHA's share keeps rising into the fourth quarter and whether loans outside FHA begin to follow.

Cover photo: Minneapolis City Council Chambers gavel close up by Czbik / Wikimedia Commons, CC0 (cropped and resized).