Mortgage Servicers Warn Foreclosure Volume Likely To Increase Over The Next 12 Months

Pandemic-related protections have helped keep people in their homes, but a number of mortgage servicers warn that tide may be turning. 

A new survey out from Auction.com found that most of the company’s clients expect a gradual increase in foreclosures over the next 12 months, with 23 percent of seriously delinquent (SDQ) mortgages as of June 2022 expected to go to foreclosure auction over that period. That’s the big headlines according to Auction.com’s 2022 Seller Insights Report, based on a survey of some 50 clients, including private-sector mortgage servicers and government-sponsored enterprises.

The survey found that nine in 10 mortgage servicers expect their foreclosure volume to increase over the next 12 months—with 74 percent anticipating a “slight increase,” and 15 percent projecting a “substantial increase.”

“Now that most pandemic-era foreclosure protections have expired or are winding down, it’s clear that the proactive response to the pandemic by policymakers and mortgage servicers helped to avoid a feared foreclosure wave triggered by the crisis,” said Jason Allnutt, auction.com CEO. “While our clients expect to see foreclosures gradually increase over the next year, they are expecting a higher percentage of delinquent mortgages to avoid foreclosure than the historical average prior to the pandemic.” 

The report also shows that a backlog of distressed mortgages from the pandemic is expected to have the most impact on distressed disposition volumes over the next 12 months, beating out regulatory intervention, a recession, home equity and interest rates. 

Some 20 percent of clients surveyed expect more than 30 percent  of their SDQ inventory to wind up in foreclosure over the next 12 months.