Earlier this month, the Federal Reserve announced its biggest interest rate hike since 2008. This hike was made in an effort to combat inflation, even at the risk of a recession. Federal interest rate hikes often lead to more foreclosures on private and commercial properties. In fact, “lenders foreclosed on a total of 20,750 U.S. properties in the first six months of 2022, up 30 percent from the last half of 2021 and up 113 percent from the first half of 2020.” Lenders may need a foreclosure service to help their team handle the potential influx.
Why Does a Federal Interest Rate Hike Lead to More Foreclosures?
Mortgages tend to be the first area economists consider when inflation rises. This is because property is a major economic mover and the Federal Bank backs commercial banks and the lenders that create mortgages. Most mortgages have fixed interest rates, meaning that those already in mortgages will not see an interest rise, but lenders may struggle to create new mortgages, and borrowers may face increased spending overall, leading to increased defaults, and therefore, increased foreclosures.
For the past two years, the industry has been suspecting and waiting for a market correction. It is difficult to pinpoint when or how drastic of a turn it may be. However, an economic downturn tends to lead to increased foreclosure rates, and an increased Federal interest rate typically proceeds the beginning of a downturn.
In an environment of increasing inflation, some jurisdictions may enact protections for homeowners to stifle an increase in evictions from private residences in a particularly trying economic environment. There may be fewer protections for commercial properties. For lenders that create mortgages for commercial property, it may be helpful to have a foreclosure plan in place, such as the Total Lender Solutions Foreclosure Action Plan.
Should Lenders Hire a Foreclosure Service?
Lenders may suddenly need to enact multiple foreclosures if interest rates continue to go up. Foreclosures for commercial property can be complex and must follow strict compliance guidelines in each state. Navigating compliance laws can be tricky, but filing a foreclosure incorrectly may lead to delays or lawsuits.
A foreclosure service provider, like Total Lender Solutions, can aid lender teams in foreclosures by coming alongside your team. By letting Total Lender Solutions manage the foreclosure process, teams can focus on their customers while ensuring that they remain in compliance. Total Lender Solutions’ nonjudicial foreclosure services solve complex problems and recover large properties in a timely manner in case a borrower defaults. If your team is foreclosing a property in California, Nevada, Arizona, Texas, Missouri, Oregon, or Washington, having Total Lender Solutions by your side is the best way to avoid delays and complications.
Contact us today to create a custom foreclosure plan and to be prepared for the future.
