Peeling or blistering paint on a foundation wall is caused by water penetrating the concrete from outside the home. The water leaches into the concrete and lifts the paint from the concrete surface causing blistering or peeling. Such a condition will lead to a mold situation and possibly to a flooding situation. It is an indicator of a failing or non-existent drainage system. Puget Sound Waterproofing can help you determine your specific situation and suggest solutions.