Mortgage defaults ease to start second half of 2025

Mortgage performance improved in July, signaling overall strength for the typical U.S. homeowner, but pockets of troubled borrowers are evident in the latest data, according to an Intercontinental Exchange report.

The national delinquency rate came in at 3.27% in July, equivalent to 1.79 million loans, and fell 8 basis points from the previous month, ICE Mortgage Technology said. On a year-over-year basis, the share of mortgage past due dropped 9 basis points.

"If you are looking for signs of a faltering economy, you won't find them in July's mortgage performance data," said Andy Walden, head of mortgage and housing market research at ICE, in a press release. 

With new delinquencies down, the national rate improved on an annual basis for the second consecutive month, breaking what had been a 13-month streak of deteriorating performance, Walden added. 

As data has shown throughout much of this year, Federal Housing Administration-backed loans are behind much of 2025's distress rate. While the FHA-delinquency share pulled back 5 basis points from June, it remained 15 basis points higher compared to July 2024. 

FHA-backed mortgages now account for over half of serious delinquencies, loans 90 days or more late on payments, ICE also determined.

Late-stage stress and foreclosures tick up

ICE's findings appear to signify a continuation of March-to-June trends recently reported by the Mortgage Bankers Association, which found delinquencies declining across the country. At the same time most mortgage holders appear to be on solid footing, rising late-stage distress and foreclosures took some of the luster away from the data, MBA said.

ICE's numbers similarly saw a marginal uptick in late-stage defaults of more than 90 days, which grew by 30,000 year-over-year to approximately 466,000, but was flat compared to June.

Flatlining growth reflected the dissipating impact of early-year wildfires and 2024 hurricanes on mortgage performance, with the annual pace of increase the smallest since November, the company said. 

Foreclosure filings in July, though, climbed to 207,000 units, 10% higher compared to year-ago levels, but still 35% below pre-pandemic rates. New starts have risen for eight months in a row, while foreclosure sales increased for the fifth consecutive month. 

The recent upward trend in foreclosures comes as consumers express greater worries about their ability to make on-time payments on all types of debt. Calls for legal advice specifically pertaining to foreclosures also saw a sharp spike earlier this year. 

States with the best mortgage-borrower performance were clustered in the West, led by Idaho and Washington, where non-current loans only accounted for 1.95% and 1.99% of total outstanding volume, respectively. The three states rounding out the top five were Colorado, Montana and California with delinquency shares of 2.06%, 2.11% and 2.16%. 

On the other end of the spectrum, Mississippi and Louisiana led the country with the highest default rate, both clocking in with a 7.55% share.