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The pair dated earlier this year, but Foden dumped her in April, saying her world was too "mad".
He subsequently branded her desperate and needy, and was accused by her friends of using her for fame. However, Katona is now said to be house hunting near his home in Warrington after the romance got back on track.
"Kerry is infatuated with Dan. She's in contact with him non-stop and is convinced it will work this time," a source told the News of the World.
"But he's already sold a story on her and we don't believe he is genuine. He wants to be famous and is toying with her emotions. Kerry will never learn."
Last week, Katona claimed that she was about to become homeless after leaving manager Claire Powell, who provided her with accommodation. New manager Max Clifford has since confirmed that she now has an extra month to find somewhere to live.
Meanwhile, Powell is said to be preparing to write off the £350,000 Katona owes her. "Claire has given up on getting her money back," a source added. "Kerry has lawyers involved who are making things very difficult and Claire feels it might be best for them to all just move on."
