Foreclosure Timeline Up Half A Year
February 21st, 2011
According to LPS Applied Analytics, the average borrower in foreclosure spends 17 months in the foreclosure process, up six months from 2009’s 11 months. Furthermore, this is probably not the end of the extension process, said Herb Blecher, senior vice president of LPS, citing “huge volumes of defaulted mortgages,” “time-consuming reviews for loan modifications and additional delays that followed revelations late last year about improperly filed foreclosure documents”[1]. Before the housing crash and subsequent foreclosure crisis, the average foreclosure took about 250 days. Now, says Blecher, “loans are spending longer in the process.”
Interestingly, this constantly-extending delay could artificially inflate prices in some markets as local inventories shrink, removing the massive foreclosure glut from the equation – temporarily. However, emphasize experts, this is nothing but a trade-off for improvement now and more pain later since “ultimately, these units have to be foreclosed” and when they are, they will weigh on the housing market when they become available, says Beacon Economics analyst Christopher Thornberg. Additionally, some lenders may be deliberately slowing foreclosures to keep their books balanced and avoid tanking delicate local markets.
To make matters even more confusing, many experts and analysts – and now government officials as well – fear that the current administration’s strategies for dealing with the foreclosure problem are “broken.” Neil Barofsky, special inspector general for the TARP bailout program, has announced that he will be stepping down from his post in March 2011 at least in part because “many of the people it’s [Home Affordable Modification Program] supposed to be helping are now in a far worse place than they would have been had this program not existed”[2]. While many people have been saying this literally since the inception of the program, if it is eliminated (which seems unlikely) banks will once again have to revisit the entire foreclosure and modification process and homeowners and investors will once again face uncertainty as they wait for the “new rules” of foreclosure.
Do you think longer foreclosure timelines are a good thing for the market? For homeowners? How can lenders appropriately handle this issue?
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[1] http://www.usatoday.com/money/economy/housing/2011-02-21-unpaidmortgages21_ST_N.htm
[2] http://www.npr.org/2011/02/18/133839730/tarp-watchdog-says-foreclosure-plan-is-failing
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