Over the past few weeks, hints at a recovery in the housing market have been scrolled across daily newspapers and nightly newscasts. The restrained optimism has been just that as industry professionals and politicians alike do not wish to be premature on calling for a victory parade. The message has remained the same: “We are improving, but there is a long way yet to go.”
One aspect of the housing market that is continuously tracked, analyzed, and referenced is the foreclosure rate. As has been reported on this blog and news sources across the country, the number of homes entering foreclosure has decreased over the past few months. But, as also been reported, this is not the entire story. The reality is that properties are still being foreclosed upon, borrowers are still delinquent on their mortgage payments, and lenders still have a myriad of unsold Real Estate Owned Properties (REOs) on their books. To say that foreclosures are disappearing would be a misnomer; to say that foreclosures have slowed is a more accurate evaluation.
The slowing of the rate of foreclosure and the near stalemate in the courts has offered some in foreclosure hope that they might escape repossession. With time to improve individual financial situations, the willingness of courts to thoroughly examine all foreclosure documents, and the push to modify loan terms, a once grim outlook has become a bit brighter for some homeowners facing default. Though the consequences of foreclosure are still very real and apparent, it does not appear as dire as even a few years ago.
The New York Times, in an article published on June 19, 2011, under the title “Backlog of Cases Gives a Reprieve on Foreclosures,” offers some of the real numbers related to foreclosures in some of the 50 states. The actual amount of properties in foreclosure is not as stifling as the amount of time needed to process the claims in the books. According to the article, “it would take lenders 62 years at their current pace, the longest timeframe in the nation, to repossess the 213,000 houses now in severe default of foreclosure” in the state of New York. Similarly, in states like New Jersey, Florida, Massachusetts, and Illinois-who all handle foreclosures through the courts-it would take anywhere from 49 years in New Jersey, to approximately 10 years in the remaining three. States that do not handle foreclosures through the courts see a more timely turnaround, but it is still measured in years rather than months.
Add to this scenario the controversy that arose last fall over the so-called “robo-signing” of foreclosure documents by some of the country’s largest lenders, the call by the Comptroller of Currency for lenders to develop new foreclosure procedures, and the current inventory, which all adds up to a long wait. Realizing the scale and the time commitment this will take and the need for policies and procedures to be crafted in a manner that prevents another crisis, the Office of the Comptroller of Currency granted a 30-day extension for lenders to enact the reforms.
Currently, there are approximately two million homes (with about another two million waiting) in the United States that are going through the foreclosure process, in and out of the courts.