When a foreclosure takes three years

Source: Housingwire

The process of getting the home lending and servicing businesses readjusted in the wake of the financial crisis is well underway even if far from complete. But dealing with individual foreclosures remains a long and arduous process in some states. Just ask residents in New York, where according to data cited by MarketWatch reporter Amy Hoak, a foreclosure can take up to three years. The outcome of this slow-moving process is ongoing stress for troubled homeowners and the potential to create more risk for future homebuyers in certain states, MarketWatch suggested. Those risks, according to Hoak, come from a potential g-fee hike that could increase lending costs in certain states and lackluster home prices caused by a constant overhang of distressed properties.

How foreclosure backlogs could hurt home buyers
Amy Hoak's Home Economics Slow processing could keep prices down and mortgage rates up

CHICAGO (MarketWatch) — Backlogs in foreclosure processing are causing delays in home-price improvement and could wind up affecting the cost of a mortgage. The situation appears worst in New York, where it takes an average of nearly three years — 1,072 days, to be exact — for a home to go through the foreclosure process. It’s not much better in New Jersey, where it took an average of 931 days to foreclose on a home in the third quarter, according to statistics from RealtyTrac. Or in Florida, where it took about 858 days. See: How long a foreclosure takes in your state Nationwide, the average time for homes to spend in the foreclosure process, meanwhile, was just 382 days. That may seem better, but it’s actually still an extended stretch compared with the average of 336 days in the third quarter of last year — and only 140 days in the third quarter of 2007. At the current rate of processing, no wonder the volume of foreclosures in progress is still high, even as the economy is improving and fewer mortgages are becoming delinquent. And some experts think it’ll be 2015 before foreclosure inventories begin to approach normal levels. That could pose a problem. “As unpleasant as it is for everyone involved, when a borrower can’t — or decides not to — make payments, the more quickly you can move [the house] back into the inventory and get a new homeowner in it, the better it is for the community,” says Rick Sharga, executive vice president at Carrington Mortgage Holdings. Why foreclosure times are so long Processing times are generally longest in states with judicial foreclosure processes, where the courts are involved in finalizing the foreclosure. In New York, the courts are extremely backlogged, says Allison Schoenthal, a litigator with Hogan Lovells who represents banks and other financial institutions in contested litigation relating to foreclosures. The state requires settlement conferences for all foreclosure cases, and that adds more court appearances to the already bogged-down system, she says. Florida’s high documentation requirements and huge judicial backlog are also keeping completion times elevated, says Andra Ghent, assistant professor of real estate at Arizona State University. “They don’t have judges available, and they still have to give due process, even though in the vast majority of cases, there are few people who are being wrongfully foreclosed on,” Ghent says. In judicial states, it’s possible — though not certain yet — that a peak in the foreclosure inventory rate was reached this year, says Mike Fratantoni, the Mortgage Bankers Association’s vice president for research and economics. But the rate peaked back in 2009 in nonjudicial states and has been dropping rapidly since, he adds. “The differential between the [judicial and nonjudicial states] has really blown out through and after the crisis,” he says.

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