Generally, yes. If it doesn't sell at auction (and even sometimes when it does) it will go back to the bank who will put it on as an REO. The time this takes can vary.
Are you talking about an auction on the courthouse steps wherein the bank is trying to auction off the house as part of a foreclosure?
Are you talking about an auction run by an auction company wherein the houses being sold are already bank owned? Often these houses have been listed with an agent and have failed to sell.
In any event, the bank will sell the houses eventually. Banks do not hold onto foreclosed properties forever.