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In this episode of The Consumer Finance Podcast, host Chris Willis is joined by partners Erin Edwards, Jason Manning, and Joe DeFazio, along with special guest Matt Brooks, a partner in Troutman Pepper Locke's Bankruptcy + Restructuring practice, to talk about the resurgence of both residential and commercial foreclosures in 2026 and what it means for financial services companies.
Erin kicks things off by addressing why foreclosure activity is concentrating in Rust Belt and Mid-Atlantic markets like Dayton, Pittsburgh, Baltimore, and Philadelphia. She also covers the compliance challenges of servicing across states with widely divergent procedural regimes and the looming "FHA forbearance cliff," expected to drive a surge in short sales through 2026 and 2027. Jason then walks through the private litigation risks rising alongside foreclosure volume, including anti-dual-tracking violations, single point of contact failures, and successor in interest missteps, then explains how reduced federal enforcement has shifted regulatory risk toward active state attorneys general and plaintiffs' counsel.
On the commercial side, Matt details how workout dynamics differ by lender type, be it commercial banks, private credit, or CMBS servicers, against a backdrop of a multitrillion-dollar apartment loan maturity wave, rising CMBS delinquencies, and increasing bankruptcy filings, then discusses when "bad boy guarantee" carve-outs are actually getting triggered in this cycle. Joe closes by connecting the residential and commercial threads, explaining how overlapping foreclosure activity strains court systems, depresses property values, activates municipal ordinances, and creates reputational risk, and he offers practical preparation steps for lenders and servicers on both sides of the business.
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