Financial Institutions I OCTOBER 26, 2023

Rising Foreclosure Rates

Our banking and regulatory attorneys at Howard & Howard, along with our exceptional analytical staff, have worked hard to remain on the forefront of banking industry trends in the wake of the PPP Program and other economic, social, and political indicators affecting the rotation of the industry pendulum. We are now predicting and advising our Illinois clients that a significant resurgence of loan workouts and foreclosures looms closely on our horizon. We believe we can expect heavy increases in this area as regulators re-ignite their on-site examinations through Q4 of 2023 and enter into Q1 of 2024.

ATTOM, a property data analytics company, released its Q3 2023 U.S. Foreclosure Report, which shows national foreclosure filings, defined as pending default notices, scheduled auctions, and bank repossessions, are up 28% from Q2 of this year and up 34% from Q3 of last year. The report indicates that lenders started the foreclosure process on 68,961 U.S properties in Q3 2023. This is a profound increase from one year ago. In short, the national level of new foreclosure filings is beginning to approach pre-pandemic levels.

The change in number of foreclosures in Illinois, however, is only 3.55% above Q2 2023 of this year and only 13.53% above Q3 from last year. We anticipate that Illinois foreclosure rates will soon increase dramatically to coincide with the national foreclosure trend. This increase in foreclosure rates is likely attributable to bank regulator examinations and current market conditions, to which Illinois will be no exception in the coming weeks. Either way, it appears that a considerable uptick in foreclosures and workout procedures in Illinois is now inevitable, and preparation for an increase in Creditor’s Rights and collection activity will be prudent for Illinois lenders.

For more information, please contact Joseph VanFleet and Dennis Merkley, Lead Lender and Regulatory Counsel at Howard & Howard.