Getting into a sealed box with wet clothes is water ingress isn't it?
The HVAC set up in a car is such that the air coming into the HVAC whether from the outside or recirculated will pass through the chiller matrix which will extract by means of condensing it and also pass the air through the heater matrix. If the AC button is selected then the AC system will circulate the refrigerant through the chiller matrix collecting heat and cooling the air. The refrigerant then goes to the heat exchanger at the front of the car positioned in front of the coolent radiator. There is also a large cooling fan there to blow air through the Heat Exchanger if the car is stationary or the AC is working hard. The Refrigerant to go round the circuit needs a compressor pump. When the car is stationary turn on the AC and after about 30 seconds you'll hear a pump droning away. It is normal for this to stop and start again at intervals depending on the external temperature. If you turn the heater to a warmer setting then you still hear the compressor pump stopping and starting because it is chilling and dehumidifying the air passing through it. The normal arrangement is that the chilled air then passes through the heating matrix (or depending on the car an electric resistive heater) to warm the air coming into the cabin.
However, When the air coming into the heater is very cold the AC part isn't very effective if at all at extracting moisture i.e. dehumidifying and so many systems disable the system as it would also be prone to icing up the chiller matrix and blocking the airflow. AC systems cutoff is usually around 5C to 7C. One workaround of this problem is to have the air first pass through the heater element and then the chiller which prevents icing, although this can make it difficult to set the temperature you want, others add in a small electric heater to prevent defrosting. Done correctly if you have the heater on warm on a rainy day the vet temperature will rise as the AC kick in.
What I have found is that if you have recirculated on windows will quickly mist up but turn on the AC and they will quickly clear even when the outside temperature is low because the air drawn into the HVAC is warmer than the outside air so the AC cooling matrix isn't so prone to icing.