Surge in Foreclosures and Bankruptcy Inquiries Amid Financial Strain
Foreclosure inquiries have surged for the third consecutive quarter, hitting their highest levels since March 2020, according to a recent LegalShield report. The company's foreclosure index, a key indicator of upcoming residential foreclosure filings, noted an annual increase of 12.2% and a quarterly rise of 5.6%, reaching 52.5 in Q2. The index peaked at 54.7 in May, before slightly decreasing the following month.
Matt Layton, LegalShield's Senior Vice President of Consumer Analytics, highlighted the growing foreclosure pressures in a press release, noting that homeowner requests for legal advice are at a peak not seen in years. This trend, combined with a sharp rise in bankruptcy inquiries, indicates that many consumers are struggling with managing their financial obligations.
The rise in foreclosure activity is partially linked to Federal Housing Administration (FHA) loans, with the serious delinquency rate reaching 11.5% in late 2025, a stark contrast to conventional loan rates. This situation aligns with the end of pandemic-era FHA relief measures last September and the introduction of new trial-payment protocols.
Layton explained that foreclosure-related calls have been increasing since the expiration of these FHA relief measures three quarters ago. He pointed out that a marked rise in their foreclosure index often precedes actual foreclosure filings.
LegalShield has also observed an uptick in borrower inquiries regarding unexpected escalations in escrow payments, typically driven by rising taxes and property insurance costs. LendingTree data shows that property taxes and homeowners insurance constitute nearly 22% of the average monthly housing expense. Additionally, home insurance premiums rose by 6% in 2025 and are projected to grow by about 8% this year, outpacing inflation as noted by Cotality.
The company's bankruptcy index, which predicts actual consumer bankruptcy filings with a two-quarter lead, steadily climbed each month in the second quarter, from 39.4 in April to 41.3 in June. This marks a significant yearly jump of 28.7%, the highest among the three indices tracked.
John Saltarelli, a LegalShield provider attorney, emphasized the growing number of bankruptcy inquiries from middle-aged and older individuals facing challenges meeting mortgage, automobile, and credit card payments. Economic factors, inflation, and job market issues, such as layoffs or reduced wages, are intensifying these financial difficulties.
The report's regional analysis revealed that the Southern U.S. is experiencing the most pronounced stress with the highest foreclosure and bankruptcy indices. In contrast, the Midwest saw the largest annual increase in its foreclosure index at 44.1%, despite a 10.1% reduction in its bankruptcy index. Meanwhile, the Northeast experienced a 31.5% drop in foreclosure inquiries.