Mortgage strain pushes foreclosure inquiries up

Fears of falling behind on mortgage payments are driving a growing number of homeowners to seek legal help, with foreclosure concerns fueling the spike.

Foreclosure-related legal inquiries rose 13.3% from the first to the second quarter of 2025, according to data from legal services provider LegalShield.

Year over year, those inquiries surged 28.9% compared to the second quarter of 2024, LegalShield said.

Rising homeownership costs, spanning prices, mortgage rates, and insurance premiums, pushed LegalShield's foreclosure index to 46.8 at the end of Q2, up from 41.3 in Q1 and 36.3 a year earlier.

The steep acceleration of the queries is an indicator that banks and loan servicers may need to pay attention to as a sign of borrower distress spreading across lending channels, the company said. 

"Whether it's missed mortgage payments, maxed-out credit cards, or mounting buy-now-pay-later balances, debt-fueled household spending is forcing people to ask a lawyer for help," said Matt Layton, senior vice president of consumer analytics at LegalShield, in a press release.

The jump in foreclosure numbers also comes on the heels of the termination of a key federal loss-mitigation program earlier this year. The Veterans Administration Servicing Program, which expired May 1, served military borrowers and ended with no successor initiative in place. Until the end of 2024, VASP also included temporary foreclosure protection.  

The end of the moratorium led foreclosure filings on VA loans to surge almost immediately to a five-year high in the first months of 2025. 

How quickly debt concerns are rising 

Foreclosure queries also helped push Legalshield's overall consumer stress legal index to a five-year high at the end of the second quarter, when it finished with a score of 68.2. The reading increased 4.4% from the first quarter and 10.4% year over year to end up higher for the fourth consecutive month.

"In the coming weeks, we expect the next debt and foreclosure reports to reflect what calls to our provider lawyers are seeing," Layton said. 

At the same time, its consumer finance index rose to a reading of 106.4, indicating more households sought legal assistance to help with rising personal debt and payments. The consumer finance number was 8.7% higher on a quarterly basis and 4.6% above year-ago levels. 

Data from the Federal Reserve Bank New York showed U.S. household debt at $18.2 trillion at the end of the first quarter, an amount that has steadily grown since the end of the Great Financial Crisis. 

Delinquent loans now also account for 4.3% of total consumer debt, the largest share since 2020, New York Fed researchers reported. 

LegalShield's data adds to mounting evidence of borrower stress. Last month, VantageScore noted that early-stage mortgage delinquencies this spring grew faster than in other lending categories—an unusual trend, since consumers typically prioritize housing payments.

This growing debt strain follows credit bureaus' resumption of student loan default reporting at the end of 2024, a shift that may limit borrowers' access to credit. The Trump administration has also begun garnishing wages from delinquent federal student loan borrowers.