The U.S. foreclosure inventory as of the end of the first quarter was at its highest level in six years, with over three quarters of the nation's metro areas reporting higher rates, Cotality's latest Loan Performance Indicators report disclosed.
The foreclosure inventory rate rose for the first time in 15 months, with both quarterly and annual increases of 0.1 percentage points to 0.4% as of March 31.
Foreclosure activity has increased on an annual basis for 14 consecutive months as of May, a recent Attom Data Solutions report noted.
Currently, 3% of all mortgages are in some stage of delinquency, a gain of 0.2 percentage points year-over-year. But it was down from 3.2% in the report for year-end 2025.
The growth in the foreclosure inventory "reflects a gradual transition from the historically low levels seen through 2024, as more loans move through later stages of delinquency," said Molly Boesel, senior principal economist, in a press release.
The 77% of cities reporting foreclosure rate increases shows this is a broad-based trend rather than being isolated to a few markets, Boesel continued. Furthermore, it is markedly higher than in the December report, when Cotality found just under half of metros had increases in their foreclosure rate.
"In many areas, particularly across parts of Florida and Texas, the rise in foreclosure activity aligns with earlier increases in serious delinquencies, suggesting that once borrowers fall behind, it is becoming more difficult to recover," Boesel said.
Early stage delinquencies, defined at between 30 and 59 days late, totaled 1.5% for the period, down from 1.6% in December but up from 1.4% compared with March 2025.
What Cotality defined as the adverse delinquency period, between 60 and 89 days past the scheduled payment due date was 0.4%, unchanged from one year prior, but down from 0.5% in the December report.
But loans over 90 days late, those viewed as serious delinquencies, broke through the 0.9% to 1.1% range these occupied since June 2024. The rate in the March report of 1.2% compared with 1.1% in December and 1% in March 2025.
"While overall mortgage performance remains relatively stable, the growing number of metros with rising foreclosure rates points to emerging pressure in pockets of the housing market that warrants close monitoring," Boesel said.
In a mid-May discussion with National Mortgage News editors and reporters, Cotality Chief Economist Selma Hepp pointed to a likely underlying cause for the rise in foreclosures.
"What I really think inventory may be coming from more meaningfully is investors, and not just mega investors, like small and medium sized investors as well," Hepp said.
She noted that during the pandemic, second home purchase activity boomed.
Since then, the holding costs for these owners have gone up in terms of property taxes and insurance. "It's not as cheap to hold on to properties as it was," Hepp said.
This shift affected those who bought second homes or as an investment short-term rentals. "That's where we are seeing pockets of inventory come up," she continued.
Cotality found in the March report 40 states reported annual increases in the delinquency rate.
Mississippi and Georgia had the largest gains at approximately 50 basis points over March 2025. The 5.7% rate for Mississippi tied neighboring Louisiana as the states with the highest share. Louisiana reported a 0.2 percentage point annual increase.
Alabama was next at 4.2%, followed by Georgia at 4.1%.
