Foreclosures in the U.S. are quietly trending upward. According to ATTOM’s April 2025 U.S. Foreclosure Market Report, 36,033 properties had foreclosure filings last month — a 13.9% increase year-over-year.
- Foreclosure starts rose 16.1%, totaling 25,265 new filings
- Completed foreclosures (REOs) jumped 23.3%, reaching 3,580 repossessed homes
While these numbers aren’t sounding alarms, they’re certainly signaling a shift. And for investors focused on mortgage note investing, they point to a window of opportunity.
Why Foreclosures Fuel the Mortgage Note Market
When loans go delinquent, banks and lenders have a few options. Managing non-performing loans internally is time-consuming and not core to most financial institutions’ business models. Holding defaulted loans affects balance sheets and regulatory capital requirements. That’s why, as defaults rise, lenders often choose to sell off these assets in bulk.
Because these loans are non-performing, they’re sold at a discount — often well below the unpaid balance. The longer a loan remains delinquent, the more costly it becomes for the lender to resolve. That discount reflects not just the risk of the asset, but also the time, effort, and cost required to recover it.
What Mortgage Note Investors Actually Do
This is where mortgage note funds come in. At 7e, we acquire these distressed assets at a discount and take over the loan. Our primary goal is to return the loan to performing status through a modified repayment plan.
We’re not buying property; we’re buying the debt. If we can rework that debt into a performing asset, we can generate predictable, real estate-backed monthly income for our investors.
If a resolution isn’t possible, the asset is still secured by real estate. The collateral gives us options, from foreclosure to short sale to deed-in-lieu, but these are secondary strategies. The primary path to value is through loan reperformance.
Foreclosure Activity is Rising & Why This Matters Now
When foreclosure activity is rising, more non-performing loans become available and pricing typically becomes more favorable. Banks and servicers looking to clean up their books are more likely to offload assets at deeper discounts. For mortgage note investors, that means more inventory and better entry points.
Unlike rental property investing, where asset prices are still inflated in many markets, mortgage notes offer a way to gain exposure to real estate without paying peak valuations. You’re investing in the paper, not the property.
The Bottom Line
Foreclosures are rising in 2025, and with them, the supply of distressed mortgage notes. These assets, often overlooked by traditional investors, offer compelling potential for those seeking income, downside protection, and real estate exposure without ownership headaches.
At 7e, we focus on acquiring these notes, resolving them efficiently, and generating consistent monthly returns, regardless of market cycles.
Want to learn how note funds perform in both growth and downturn cycles? [Join our next webinar] or [Book a call with our team].
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