Financially strapped homeowners are moving beyond online searches for foreclosure information to seeking legal assistance. LegalShield, a legal subscription service, reports that foreclosure-related legal requests surged in the first quarter of 2024, reaching their highest level since March 2020.
LegalShield’s Foreclosure Index jumped 13.4% in March 2024 alone and is up 20.3% over the past year, according to the company. This pace reflects households transitioning from financial worry to legal action. The index is a proprietary measure of consumer legal behavior, built on over 150,000 attorney calls per month.
This spike in foreclosure inquiries signals a broader pattern of mounting financial distress. LegalShield’s Consumer Stress Legal Index (CSLI), which aggregates legal activity across foreclosure, bankruptcy, and consumer finance, remains at an elevated 72.9, an 11.6% increase year-over-year.
The CSLI declined 1.9% from the previous quarter, a dip LegalShield attributes to tax refund season temporarily easing consumer finance calls. This quarterly decline aligns with a pattern observed every first quarter since 2021, where temporary tax refunds consistently produce a short-term drop in consumer finance legal calls before activity rebounds in the subsequent quarter.
“Tax refunds are acting as a short-term pressure release valve, not a solution,” said Chris Peoples, a LegalShield provider lawyer in Lawrence, Kansas. Peoples noted that based on calls his firm receives, individuals use refunds to stabilize their finances, but the underlying cash-flow problems reassert themselves within three to six weeks. Consumers are also using refunds to fund legal interventions that, while necessary, introduce new ongoing financial obligations.
Furthermore, the Bankruptcy Index, a historically reliable leading indicator of actual court filings, has more than doubled since the Federal Reserve began raising rates in 2022 and rose again in the first quarter of 2024.
LegalShield states that these indexes collectively depict households under pressure from multiple directions. This includes insurance and tax-driven payment shock on the housing side, alongside persistent debt stress. The rise in foreclosure inquiries coincides with Google Trends data for “help with mortgage,” which hit an all-time high in the first quarter of 2024. While Google searches indicate consumers in the research phase, the CSLI tracks the moment households seek professional legal help.
“That behavioral shift is exactly what our data captures,” said Matt Layton, senior vice president of consumer analytics for LegalShield. “Google searches tell you people are worried. Our Foreclosure Index tells you they’ve decided to act. Right now, both signals are elevated simultaneously. Historically, when legal calls reach this level, court filings follow within two quarters.”
On the housing side, financial pressure primarily stems from rising insurance and escrow increases. However, broader financial pressures are also mounting. The Bankruptcy Index rose 2% in the first quarter of 2024 to 39.3 and is up 8% over March 2023. The index has climbed steadily for four years, driven by elevated interest rates, persistent inflation, and household debt loads. As a forward-looking indicator, the Bankruptcy Index suggests that bankruptcy filings should rise meaningfully through mid-year, according to LegalShield.
