Homeowners who bought in 2023 are emerging as the most vulnerable group in today’s housing market, with FHA delinquency rates reaching 11.52 percent in the fourth quarter of 2025, the highest level since mid-2021. While millions of Americans locked in sub-3% mortgage rates during the pandemic, those who entered the market in 2023 face a very different reality: they bought near peak prices with mortgage rates that peaked at 7.79% in October 2023, the highest rate seen since 2000, and now find themselves with little equity and few options when financial trouble strikes.
The problem is particularly acute for FHA borrowers, who typically put down just 3.5% and often represent first-time buyers with limited financial cushions. For FHA loans, the vintage years 2022 and 2023 are performing worse than the vintage years 2020 and 2021, and in Cape Coral, nearly 70% of 2023-2024 vintage FHA loans are underwater. This isn’t the systemic collapse of 2008, but it’s a quiet crisis affecting a specific cohort of strivers who stretched to achieve homeownership at precisely the wrong time.
The broader foreclosure picture is worsening. ATTOM’s Mid-Year 2026 U.S. Foreclosure Market Report shows 227,548 properties with foreclosure filings in the first six months of the year, up 21% from the same period in 2025 and 28% from 2024, with average timelines falling to 563 days, the lowest average timeline since 2013.
The 2023 trap
Why recent buyers have no escape hatch
High purchase prices, elevated rates, and minimal down payments created a perfect storm for 2023 buyers.
The math is unforgiving for homeowners who bought in 2023. Home prices reached the previous record high of $365,000 in June 2023, and buyers financed those purchases at rates hovering between 6% and 8%. Many FHA buyers put down just 3.5%, leaving them with paper-thin equity from day one. When local markets pulled back even modestly, borrowers who purchased from 2022 onward bought at or near peak prices with high mortgage rates and small down payments, and when local prices pulled back, these thin-equity buyers crossed into negative equity quickly.
Negative equity alone does not trigger foreclosure, but it removes the homeowner’s escape hatch: an underwater owner who hits a financial shock cannot sell to cover the loan or refinance to lower payments, so default and foreclosure become far more likely. With home equity loan rates averaging 7.57% in July 2026, even tapping equity—if any exists—is expensive. Meanwhile, the number of borrowers who are 90 days or more past due or already in foreclosure has increased to over 850,000, the highest level since mid-2022.
The rising costs of homeownership compound the problem. It’s not just the mortgage payment. Property taxes, homeowners insurance, and utilities have all climbed sharply. Insurance premiums alone tell the story: costs have surged in high-risk states, with Florida homeowners now paying premiums far above the national average. For a borrower already stretched thin by a 7%+ mortgage, an extra $200 per month in insurance or a property tax reassessment can be the difference between staying current and falling behind.
The equity gap by market
Florida and Texas lead by a wide margin in underwater mortgages, with Cape Coral at about 10.1% of mortgages underwater and Austin about 9.2%, versus a 2.1% national average. About 1.2 million homeowners (2.1% of mortgages) are underwater, up from 1.3% the prior year. Florida, South Carolina and Indiana posted the highest foreclosure rates among states in the first half of 2026, with Punta Gorda, FL (0.50 percent of housing units with foreclosure filings), Lakeland, FL (0.48 percent), and Columbia, SC (0.43 percent) leading metro areas.
The data
How FHA loans are driving the foreclosure wave
Government-insured loans account for a disproportionate share of distress.
FHA loans have always carried higher delinquency rates than conventional mortgages, but the gap has widened dramatically. The total FHA seasonally adjusted delinquency rate increased 74 basis points to 11.52 percent in the fourth quarter of 2025, and by the first quarter of 2026, the delinquency rate increased 126 basis points for FHA loans from the previous year. In contrast, conventional loan delinquencies have remained relatively flat.
The concentration of risk is striking. FHA loans are heavily used by first-time homebuyers and lower-income households, groups that are more exposed to cost increases, and these borrowers often entered the market during periods of high home prices between 2021 and 2024, leaving them with limited equity buffers. Analysts estimate that up to 250,000 distressed sales could emerge over the next 12 to 18 months as seriously delinquent FHA borrowers struggle to meet updated payment requirements.
Forbearance programs, which provided a critical safety net during the pandemic, have largely wound down. The number of active forbearance plans has declined significantly, dropping to around 42,700 loans as of early 2026, and with fewer safety nets in place, more borrowers are moving from delinquency into foreclosure rather than being stabilized through intervention programs. The official data confirms this: the Enterprises completed 20,330 foreclosure prevention actions in January 2026, with 6,670 permanent loan modifications, but that’s a drop in the bucket compared to the number of borrowers in distress.
For more on FHA loans and how they work, see our guide to mortgage financing options. If you’re a first-time buyer evaluating your options, our first-time buyer guide covers the trade-offs between low down payments and long-term risk.
Foreclosure filings by the numbers
227,548 properties had foreclosure filings in the first half of 2026, up 21% from the same period in 2025. Lenders initiated the foreclosure process on 26,217 U.S. properties in June 2026, up 20 percent from a year ago. The U.S. foreclosure inventory rate rose to 0.4% in March 2026, reaching its highest level in six years, and 77% of U.S. metropolitan areas experienced higher rates in the first quarter of 2026. The official ATTOM data is available on ATTOM’s foreclosure report page.
Your options
What to do if you’re falling behind
Act early—waiting only narrows your choices.
If you bought in 2023 or 2024 and you’re struggling, the worst thing you can do is wait. Contact your lender or servicer immediately. If you are experiencing difficulties making your mortgage payments, you are encouraged to contact your lender or loan servicer directly to inquire about foreclosure prevention options that are available. FHA and VA loans come with specific loss mitigation programs designed to help you avoid foreclosure.
For FHA borrowers, options include loan modifications that extend your term or reduce your rate, partial claims that bring your loan current (with repayment deferred until you sell or refinance), and forbearance plans that temporarily reduce or suspend payments. VA borrowers have access to similar tools, including a partial claim option that lets the VA work with your servicer to pay your missed mortgage payments and bring your loan current, which you pay back when you pay off your loan or sell your home.
Free HUD-approved housing counselors can help you navigate these programs and negotiate with your lender. The U.S. Department of Housing and Urban Development (HUD) funds free or very low-cost housing counseling nationwide, and housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender. Call 1-800-569-4287 to find a counselor near you, or visit HUD’s foreclosure prevention page.
Some states still have funds available through the Homeowner Assistance Fund (HAF), a federal program created during the pandemic. The Homeowner Assistance Fund provides nearly $10 billion to help homeowners impacted by COVID-19, with $9.39 billion allocated to states, though many state HAF programs have already closed or run out of funds. Funds are available until September 30, 2026—check your state’s housing finance agency website to see if assistance is still available. Our assistance programs guide has links to every state’s resources.
If you have some equity—even a small amount—selling may be your best option, especially if you can cover your loan balance and closing costs. It’s better to walk away with your credit intact than to let a foreclosure destroy your score for seven years. For strategies on navigating a tough market, see our guide to negotiating and making offers.
Quick answers
2023 homebuyers and foreclosure risk: common questions
Why are 2023 homebuyers at higher foreclosure risk than other recent buyers?
Buyers who purchased in 2023 faced a uniquely difficult combination: home prices were at or near all-time highs, mortgage rates spiked to levels not seen in two decades (peaking at 7.79% in October 2023), and many used low-down-payment FHA loans. This left them with minimal equity. When prices softened in some markets or their costs rose, they had no cushion and no ability to refinance or sell their way out of trouble. Earlier buyers (2020–2021) got low rates and have since built equity through appreciation; later buyers (2024–2026) entered after some price corrections and with slightly lower rates.
What does it mean to be “underwater” on a mortgage?
You’re underwater (or have negative equity) when you owe more on your mortgage than your home is currently worth. For example, if you bought a house for $365,000 with a 3.5% down payment in 2023, you borrowed roughly $352,000. If your local market declined 5% and your home is now worth $347,000, you owe more than you could sell it for. Being underwater doesn’t cause foreclosure by itself, but it traps you: you can’t sell without bringing cash to closing, and you can’t refinance because lenders won’t lend more than the home’s value.
How do I know if I qualify for foreclosure prevention help?
If you have an FHA, VA, USDA, or Fannie Mae/Freddie Mac loan and you’re struggling to make payments, you likely qualify for some form of assistance. Contact your loan servicer (the company you send payments to) immediately—don’t wait until you’re months behind. Ask about forbearance, loan modification, or partial claim programs. You can also call a free HUD-approved housing counselor at 1-800-569-4287; they’ll review your situation, explain your options, and can negotiate with your lender on your behalf. Act early: the earlier you reach out, the more options you’ll have.
Are foreclosure rates really rising, or is this media hype?
Foreclosure filings are genuinely rising. ATTOM, the leading property data provider, reported 227,548 properties with foreclosure filings in the first half of 2026, up 21% from the first half of 2025 and up 28% from 2024. The foreclosure inventory rate hit 0.4% in March 2026, the highest in six years, and 77% of metro areas saw increases. That said, this is not 2008: overall delinquency rates remain well below the financial crisis peak, and most homeowners have substantial equity. The distress is concentrated among recent buyers (especially 2022–2023 vintages) and FHA borrowers, not spread across the entire market.
If I bought in 2023 and I’m okay now, should I be worried?
If you’re comfortably making your payments and you have an emergency fund, you’re likely fine. The risk is highest for borrowers who are already stretched thin or who experience a financial shock (job loss, medical bills, divorce). Review your budget: are you saving anything each month, or are you living paycheck to paycheck? Check your home’s current value on Zillow or Redfin—do you have equity, or are you close to underwater? If you’re in a strong market (much of the Northeast, Midwest) you’ve probably gained equity. If you’re in Florida, Texas, or another market that saw price corrections, run the numbers. Knowledge is power.
What states or cities have the worst foreclosure rates right now?
Florida dominates the top of the list. In the first half of 2026, Florida had a foreclosure rate of 0.27% (one in every 373 homes), followed by South Carolina (0.26%) and Indiana (0.25%). Among metro areas, Punta Gorda, FL, Lakeland, FL, and Columbia, SC had the highest rates. Cape Coral, FL, has an especially severe problem with underwater mortgages: nearly 70% of 2023–2024 FHA loans there are underwater. Texas metros like Austin also saw price declines after the pandemic boom. If you’re in one of these markets and you bought recently, pay close attention to your equity position and keep your emergency fund topped up.