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Hold on to your checkbooks: A tsunami of foreclosures could be about to hit the market.
Although we’ve heard these rumors before, this time could be different. That’s because President Donald Trump has just ended a major Biden-era foreclosure protection program that was designed to help struggling homeowners stay in their homes.
The steady rise in foreclosures could be a bellwether of what’s to come. For small landlords and flippers boxed out of the market by corporations, interest rates, and high prices, it could mark the start of a very different landscape for acquisitions.
What Just Changed in Washington—and Why it Matters
A federal subsidy that allowed distressed homeowners to reduce or temporarily cover mortgage payments has been wound down, the Wall Street Journal reported. Introduced during the Biden administration in the wake of the COVID-19 crisis, the subsidy served as a backstop to prevent repossessions. Experts predict that a wave of foreclosures is set to follow.
“The story here is that people have been distressed over the last five years, but loss mitigation prevented the natural clearing cycle,” John Comiskey, founder of Reverse Engineering Finance, who tracks the performance of 7 million out of the 8 million outstanding FHA loans captured in Ginnie Mae’s mortgage-backed securities data, told the Journal. “The flood behind the dam has to be released.”
Foreclosures Are At Their Highest Level in Six Years
That release may have already started. The Journal reports that foreclosure filings have reached their highest level in six years, with nearly 119,000 properties receiving some kind of foreclosure notice in the first quarter of 2026, according to data and analytics provider ATTOM, which shows foreclosures up by 26% year over year.
A confluence of factors has been driving up the stats, including high property taxes and insurance, as well as other non-mortgage-related factors associated with the cost-of-living crisis.
“Foreclosure activity increased in the first quarter, with both starts and completed foreclosures posting solid year-over-year gains,” Rob Barber, CEO of ATTOM, told Realtor.com. Although foreclosure levels remain around pre-pandemic levels, that is not expected to continue for long, the Journal reports.
“While volumes remain below historical peaks, the continued rise, especially in starts and bank repossessions, suggests financial pressure may be building for some homeowners and could signal shifting housing market dynamics,” Barber added.
Where Foreclosures Are Hitting the Hardest
Unlike the financial crash of 2008, where overleveraged homes in Sunbelt cities such as Las Vegas, Florida, and Atlanta made foreclosure headlines, the Midwest is also seeing REO activity, with Indiana currently experiencing the highest foreclosure rate in the country. There, 1 in every 739 housing units received a filing in the first quarter (nationally, it is 1 in every 1,211 units), followed by South Carolina and Florida.
According to ATTOM, completed foreclosures (REOs) are up 45% year over year as of the first quarter, suggesting more properties are moving all the way through the foreclosure process to be repossessed. The bad news for flippers or BRRRR investors looking to refinance is that the deeper the foreclosure trough, the lower home values might fall.
Realtor.com’s January 2026 Housing report showed price declines in 30 of the 50 biggest housing markets from May 2025’s numbers, though the declines were not specifically attributed to foreclosures but rather to affordability, which is causing homes to stay on the market longer. The downward trend could accelerate once additional REO properties are added to the mix.
“The thing to keep in mind about these foreclosure rates is that foreclosures were kept artificially low throughout the pandemic,” housing market analyst Jeff Ostrowski at Bankrate told Scripps News. “Foreclosure is definitely financially devastating for the homeowner who’s going through it. But it’s also just a normal and healthy part of the housing market.”
Another 2008-Style Housing Crash Could Be in the Cards
Experts fear that the drop in home prices will continue throughout 2026 until an affordability equilibrium is reached, with devastating consequences.
“We’re going to correct all the way to a point where household median income matches the median home price. And so that is going to be worse than 2008,” housing analyst Melody Wright told Yahoo! Finance.
With the government ban on large investors buying up swathes of bank-owned properties, as happened in the aftermath of the 2008 collapse, an opportunity could await smaller investors over the next few years.
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Wright told Newsweek in November 2025:
“I see it happening over several years, with the potential to deteriorate faster than in the last cycle. For instance, prices did not bottom until 2012 during the last cycle. I believe we could get started in earnest next year on the price decline and see a rather large drop, historically speaking, but still think it could take several years to bottom.”
Rising Mortgage Debt Adds to Homeowner Woes
Another factor, intrinsically linked to the impending increase in foreclosures, is the growing mortgage debt that homeowners are saddled with. Interestingly, debt is accruing at the highest rates in more “affordable” states such as Alaska, Delaware, Maine, Kentucky, Arkansas, and Alabama, rather than in pricier coastal hubs, according to an analysis of WalletHub data by Newsweek and Realtor.com, indicating where the next foreclosure hot spots might be.
WalletHub editor John Kiernan said in the report:
“Mortgage rates are the highest they’ve been in around a decade, and home prices have seen a meteoric rise in recent years as well. Even small increases in home prices can lead to thousands of dollars in extra mortgage interest costs for homeowners, so it’s important to choose wisely when deciding where and when to buy a house.”
Small Landlords Are Also Being Affected by Government Cuts to Federal Programs
The Trump administration’s latest budget proposal, which includes reductions to rental assistance programs and other HUD funding lines, could hurt landlords reliant on Section 8 vouchers and renters, adding to the possible foreclosure pileup.
In a July 2025 letter to the leadership of the House and Senate Appropriations Subcommittees on Transportation, Housing, and Urban Development, the National Association of Realtors (NAR) requested full funding for the Housing Choice Voucher Program, the Fair Housing Initiatives Program, and the Fair Housing Assistance Program, as well as adequate staffing of HUD’s Office of Fair Housing. Additional housing programs, NAR contends, help leverage private sector investment.
Final Thoughts: How Small Investors Can Position Themselves
The devil’s in the details—and in this case, the details are the data. As foreclosures rise, investors should analyze which markets are most affected based on actual foreclosures filed, rising ownership costs, and ballooning mortgage debt. Cross-referencing these areas—mostly in the Midwest and South—is where you’re likely to see an increase in foreclosures.
Foreclosures don’t happen in isolation. There is usually a string of people involved—bank loss mitigation departments, lawyers, REO real estate agents and brokers, and even clean-out crews.
The standard approach would be to contact REO agents first. If you can prove you can close fast on one of their deals, more are likely to follow. Being known as an operator who delivers will get people talking, with bankruptcy and foreclosure attorneys more likely to take your call and possibly give you a heads-up about upcoming deals.
In addition, “We Buy Houses” bandit signs, door-knocking (based on preforeclosure filings), and all the usual skip-tracing methods for reaching property owners in peril will apply now as they did in 2008—along with a slew of new AI-augmented search tools to speed up the process.
