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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 70 May 2025 J O U R N A L pressure consumers across the country are feeling has become and will be the "new normal" for millions of Americans. "Bankruptcy inquiries hit the highest we've seen since early 2020, just before Americans' checkbooks were boosted by COVID checks from the government," said Matt Layton, LegalShield SVP of Consumer Analytics. "When you com- bine record debt, rising delinquencies, and prolonged financial stress, topped by price pressures driven by tariff uncer- tainty, the risk of a summer surge in bankruptcy filings becomes very real." Since its July 2024 peak, the CSLI has stayed high, leveling off marginally to end Q1 2025 at 65.3, down from 67.3 at the end of 2024. Relatively solid em- ployment figures and a sharp reduction in consumer finance inquiries during tax refund season may be hiding more serious issues, as bankruptcy and foreclosure inquiries rose prior to tariff announcements that rocked the markets. Based on more than 35 million re- quests for legal services from LegalShield members, the CSLI provides a unique, up-to-date perspective on the financial health of American households. What Does This Mean for Consumers? 1. Bankruptcy risk is rising rapidly. a. Index: 36.4 (up from 33.3 in Q4; 30.0 in Q1 2024) b. Insight: Record debt has buried many consumers. According to the Federal Reserve Bank of New York, at the end of 2024, the percentage of households that are 90+ days overdue on their auto loans and credit cards reached a 14-year high, and delinquencies are still rising. At $1.21 trillion, credit card balances reached a record high. 2. Mortgage pressure is intensifying for all Americans. a. Foreclosure Index: 41.3 (up from 40.1 in Q4; 36.2 in Q1 2024) b. Insight: Elevated mortgage rates and affordability constraints are stressing homeowners and freezing inventory. 3. Consumer finance concerns are mod- erating temporarily. a. Consumer Finance Index: 97.9 (down from 108.5 in Q4; 99.7 in Q1 2024) b. Insight: Tax refunds and strong job growth gave consumers a tempo- rary cushion—but risks remain as tariff-driven price increases are expected. 4. The housing market is signaling "softness." a. Housing Construction Index: 114.1 (down from 118.4 in Q4; 115.3 YoY) b. Housing Sales Index: 94.1 (down from 97.9 in Q4; slightly up from 92.3 YoY) c. Insight: Both buyer demand and builder activity are being stifled by higher material costs brought on by tariffs and higher mortgage rates. One of the best indicators of overall economic activity is the number of new housing starts. In addition to reducing future housing supply and driving up home prices, a decline in residential construction also hurts related businesses like labor mar- kets, durable products, and building materials. Overall, the first half of 2025 may represent a turning point for many American households as they cope with new tariffs, growing costs, more debt, and persistently high interest rates. By the end of 2024, U.S. bankruptcy filings increased 14.2% year over year, and ac- cording to data from LegalShield, filings may continue to increase. Note: LegalShield's Bankruptcy Index has historically been two quarters ahead of actual bankruptcy filings. THE STATE OF MORTGAGE DEFAULT RISK A ccording to Milliman, Inc.'s Q4 2024 results of the Milli- man Mortgage Default Index (MMDI), the lifetime significant delin- quency rate (for residences that are 180 days or more past due) for U.S.-backed Overall, the first half of 2025 may represent a turning point for many American households as they cope with new tariffs, growing costs, more debt, and persistently high interest rates.