Mortgage Stress Remained Contained in May as Rates Cut Refinancing

The latest federal mortgage data point to contained but persistent stress—not a broad foreclosure surge—within the loans held by Fannie Mae and Freddie Mac. At the same time, higher interest rates sharply reduced refinancing activity, limiting one of the main ways homeowners can lower monthly payments.

The Federal Housing Finance Agency released its May 2026 Foreclosure Prevention, Refinance, and Federal Property Manager’s Report on August 20, 2026. The report covers the mortgage portfolios of Fannie Mae and Freddie Mac, known as the Enterprises. It is not a complete census of every mortgage in the United States.

Foreclosure indicators moved lower

Foreclosure starts declined 2.3% from April to 7,979 in May. Third-party and foreclosure sales fell 11.9% to 1,167.

Those figures show that foreclosure activity eased within the Enterprise portfolios during May. They should not be described as proof that foreclosures were falling nationwide, because many U.S. mortgages are outside the Fannie Mae and Freddie Mac books.

The measures also track different stages of the process. Foreclosure starts are newly initiated cases, while third-party and foreclosure sales are completed sales. Neither measure alone provides a forecast of what will happen later in 2026.

Early-stage delinquency bears watching

Serious delinquency held at 0.58% at the end of May. FHFA defines a seriously delinquent loan as one that is 90 or more days delinquent or in the process of foreclosure.

That stability is important, but another measure moved higher: the 30-to-59-day delinquency rate rose from 0.94% in April to 1.03% in May. The increase suggests some borrowers were entering early payment trouble even as the serious-delinquency rate remained unchanged.

For now, the Enterprise data show slower deterioration rather than a broad foreclosure wave in the covered portfolios. The early-stage delinquency figure is one of the measures to monitor in future reports.

Prevention actions remained substantial

Fannie Mae and Freddie Mac completed 15,855 foreclosure-prevention actions in May, including 6,616 permanent loan modifications. FHFA’s total includes home-retention actions such as modifications, repayment plans, forbearance plans and payment deferrals, as well as short sales and deeds-in-lieu of foreclosure.

Completed prevention actions are not directly comparable with new foreclosure starts. They reflect actions completed during the month, while foreclosure starts measure newly initiated cases.

The number of loans in forbearance increased slightly, from 37,517 at the end of April to 37,644 at the end of May. FHFA said that represented about 0.12% of the Enterprises’ single-family conventional book of business and 6.72% of their delinquent loans.

The figures show that tens of thousands of borrowers still needed temporary payment relief even while overall serious delinquency remained low within the covered portfolios.

Higher rates reduced refinancing

Refinancing became less common as mortgage rates moved higher. FHFA’s data show total refinance volume falling from 96,028 loans in April to 67,281 in May—a decline of about 30%.

The average 30-year fixed mortgage rate used in the FHFA comparison rose from 6.33% in April to 6.44% in May. In a separate weekly survey, Freddie Mac reported a national average of 6.66% for the week ending August 27, 2026, up from 6.65% the previous week.

The August weekly rate is a different period and dataset from the May FHFA report. It is also a benchmark, not a guaranteed quote. A borrower’s actual rate can vary based on credit history, loan type, down payment, points and lender.

Higher rates can reduce purchasing power and make it harder for homeowners to replace an existing loan with one carrying a lower payment. The Associated Press reported that mortgage rates generally follow movements in the 10-year Treasury yield, although inflation expectations, Federal Reserve policy and other market factors also affect pricing.

What homeowners should do

The May data do not show a broad foreclosure surge in the Fannie Mae and Freddie Mac portfolios, but they also do not prove that future stress is impossible. The report is a measure of conditions in the Enterprises’ books, not a final forecast for the entire U.S. housing market.

Borrowers who are falling behind should contact their mortgage servicer as soon as possible and ask about loss-mitigation options. Depending on the loan and the borrower’s circumstances, the servicer may discuss a loan modification, repayment plan, payment deferral or forbearance. Eligibility and terms vary, and borrowers should ask what documentation and deadlines apply to their situation.

Sources

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