Karen LeSage, a 57-year-old single mother in East Hartford, Connecticut, relies heavily on her car. It’s essential for getting to medical appointments for leg injuries and, crucially, for picking up her teenage daughter from school, especially when seizures occur. “I have to go pick her up,” LeSage explains, emphasizing the indispensable role of her vehicle, adding, “I wouldn’t be able to do that” without it. However, last year, LeSage faced the daunting prospect of auto repossession when she fell behind on payments. “For me, every penny counts and just to lose a couple of cents on gas is devastating sometimes,” she shares, highlighting the precarious financial situation many are facing. LeSage’s story is not unique. Across the United States, an increasing number of individuals are grappling with financial strain as the economy shows signs of slowing, leading to a critical question: are auto repos up? This trend is becoming a harsh reality for many Americans as economic pressures mount.
The U.S. Bureau of Economic Analysis recently reported a significant deceleration in economic growth, with the gross domestic product dropping to 1.1% in the first quarter, marking a nine-month low. This economic slowdown is directly impacting household finances. A recent Bankrate survey revealed that nearly half of U.S. adults have less savings than they did a year prior, with 10% reporting no savings at all. This financial squeeze is contributing to a concerning rise in severe financial outcomes for families, most notably, an increase in auto repossessions.
The Climbing Rate of Auto Repossessions
The data clearly indicates that auto repos are up. Fitch Ratings group highlights this trend, noting that U.S. auto loan delinquencies, particularly among subprime borrowers, have climbed back to pre-pandemic levels, rebounding from the historic lows seen in the summer of 2021. Margaret Rowe, a senior director at Fitch, points to the expiration of government stimulus measures and current economic headwinds as key factors driving this increase in delinquencies over the past several months.
This rise in auto repossessions mirrors a broader trend of increasing financial instability. While auto repossession rates provide a stark picture, they are not the only indicator of growing household financial distress. Home foreclosure filings are also surging, painting a comprehensive picture of the economic challenges many Americans are facing.
Foreclosures on the Rise: A Parallel Trend
Adding to the concern, home foreclosure filings are also on an upward trajectory. According to ATTOM, a property analytics firm, U.S. foreclosure filings reached 95,712 in the first quarter of 2023. This represents a 6% increase from the previous quarter and a significant 22% jump compared to the same period last year. March alone saw 36,617 U.S. properties in foreclosure, a 20% increase from February and 10% higher than the previous year. This marked the 23rd consecutive month of year-over-year increases in foreclosure activity, underscoring a sustained and growing trend of housing instability alongside the rise in auto repossessions.
Rob Barber, CEO of ATTOM, explained that part of this increase is due to lenders processing a backlog of foreclosures that accumulated during the pandemic-era federal moratorium, which ended in July 2021. By that time, an estimated 2 million homeowners had fallen behind on their mortgage payments due to job losses and other pandemic-related hardships.
However, Barber also points out that the increase hasn’t been as drastic as initially feared. The economic rebound following the pandemic, including a surge in home buying amid low interest rates and persistently low unemployment, has helped many homeowners catch up on payments. Furthermore, soaring home prices in recent years have boosted homeowner equity, providing an incentive for those facing delinquency to find ways to get current on their loans. ATTOM data indicates that 94% of homeowners with mortgages had equity in their properties in late 2022, with almost half considered “equity-rich.”
“More income, more equity and lower payments set the stage for a more modest rise in foreclosures than predicted,” Barber stated. Despite this, he cautions that the outlook for the remainder of the year remains uncertain due to the volatile housing market, rising mortgage interest rates, and persistent inflation. “It’s likely that foreclosure filings will keep rising, but nothing like we saw back when the bubble burst in 2008,” he added.
Personal Stories of Financial Hardship
The statistics on rising auto repos and foreclosures are brought into sharp focus by the personal stories of individuals facing these challenges. Rick Burrows, 61, from St. Charles, Missouri, nearly paid off his house when foreclosure proceedings began. After a severe two-month bout with Covid-19 in 2020, which led to unemployment and a credit score decline, Burrows faced further financial setbacks. In 2021, his car, essential for his job serving legal papers, was repossessed. “It seems like every time I turn around financially, just as I start to be able to get back on solid ground something else happens,” Burrows laments. Ongoing health issues from long-haul Covid further complicate his financial stability, with fluctuating income making it difficult to manage daily expenses and medical bills.
Similarly, Taqwetta Crawley, 43, from Hampton, Connecticut, lost her home to foreclosure in January after falling victim to a predatory loan and then facing financial devastation during the pandemic. Her mortgage payment skyrocketed, making it impossible to keep her home. Now living with her sister, Crawley expresses the emotional toll of her experience. “I’m literally living off the charity of other people,” she says. She also recounts being treated poorly by investors and scammers during her foreclosure process and hopes to raise awareness and compassion for others facing similar hardships. Crawley now aims to educate others about resources and options available to those at risk of foreclosure, wishing she had been better informed herself.
Seeking Help and Resources
For homeowners worried about foreclosure or auto repossession, resources are available. Sarah Bolling Mancini, a senior staff attorney at the National Consumer Law Center, recommends exploring programs like the Homeowners Assistance Fund, created to provide support during the Covid-era. She emphasizes the importance of proactive communication with lenders or mortgage servicers, as many offer forbearance programs that can provide crucial breathing room for struggling homeowners. “It’s important for consumers to reach out proactively,” Mancini advises.
Unfortunately, Mancini notes that rental assistance programs, which were more prevalent during the pandemic, have largely been depleted, leaving renters with fewer support options.
Crawley emphasizes the need for empathy and understanding for individuals facing foreclosure and eviction, urging people to recognize that “a foreclosure and eviction is not indicative of a person being untrustworthy, or a person that doesn’t deserve any sort of empathy or compassion.” She points out that unforeseen circumstances and lack of support systems can lead to these situations.
Burrows reflects on his experience, wishing he had saved more money as a financial cushion. “I would have tried to save more money, or try to find a way to put money back where I could at least have a cushion to fall on,” he says, highlighting the precariousness of living without a financial safety net in these uncertain economic times.
Conclusion: Navigating Rising Financial Distress
The evidence is clear: auto repos are up, and they are rising alongside other indicators of financial strain like home foreclosures. The current economic climate, marked by slowing growth and persistent inflation, is placing significant pressure on households across the country. While some factors, like increased homeowner equity, have mitigated the severity of the situation, the overall trend points towards increasing financial vulnerability for many Americans. It is crucial for individuals facing financial hardship to be aware of available resources and to proactively seek help from lenders and support organizations. Understanding the rise in auto repos and related financial challenges is the first step towards navigating these difficult economic times and seeking solutions for a more stable financial future.
