In 2008, a national wave of bankruptcies began and reached its peak during 2010 when nearly 1.6 million bankruptcies were filed. The United States Courts reported that the year of 2016 saw the fewest amount of bankruptcies filed since 2006. The reported number of filings for the calendar year was 794,960 which is down nearly six percent (6%) from the 844,495 bankruptcies filed in 2015. The decrease marks the sixth consecutive calendar year that bankruptcy filings have decreased across the United States. While the decreasing number of filings looks promising, the number of filings showed the lowest rate of annual decline since 2011. But is the continued decrease of 2016 indicative of our economy recovering from the recession? Early 2017 reports say maybe not. The American Bankruptcy Institute reports that there was an increase in bankruptcies in January 2017 as compared to January 2016. Also, although the overall bankruptcies for 2016 were down, December 2016 recorded over 5% more filings than December 2015. The increased number of filings in December 2016 and January 2017 mark the first time there has been back-to-back monthly gains since 2010. So while bankruptcy filings declined last year to their lowest level since 2006, the early indication is that they may continue to grow into 2017. Experts are attributing the increase over the last two months to the increase in interest rates. Because of the increase in interest rates, the cost of borrowing rises, and businesses are looking to bankruptcy to shelter their assets. Alabama, Tennessee, Georgia, Arkansas, and Illinois topped the list of the states with the highest filings per capita. The State of California had the most filings overall with 5,253. There are several factors that can affect the amount of filings 2017 will see. First, many bankruptcies are filed in relation to medical expenses. While these are still very common, since the implementation of the Affordable Care Act, otherwise known as Obamacare, the number of filings has decreased. Potential reforms of the act may affect the filing rate going forward. Also, the strengthening of the national economy may keep bankruptcy levels low. On January 25, 2017, the Dow Jones industrial average broke 20,000 for the first time, rising about 150 points. With a stronger economy, less Americans will need to turn to bankruptcy to stay afloat financially. Lastly, the new administration has discussed rolling back some of the reporting and regulatory requirements under the Dodd-Frank financial reforms. The Dodd-Frank Act was passed after the 2008 mortgage crisis and placed onerous reporting and regulatory requirements on lenders. If the administration does roll back certain provisions, the business environment may become more friendly and help boost the economy further. Understanding the current trends in the economy are essential to navigating through the ever-changing compliance environment in the residential mortgage banking industry. Abrams Garfinkel Margolis Bergson, LLP (AGMB) is nationally recognized for representing residential lenders and brokers in all aspects of the residential mortgage banking industry. If you are seeking help in the residential mortgage banking industry contact Abrams, Garfinkel, Margolis & Bergson via email at info@agmblaw.com or by filling out the simple form here.
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