Mortgage trends » What delays a mortgage foreclosure
Six hundred days. That's how long, on average, mortgage loans in the foreclosure process in New York have been delinquent.
That's the longest average in the nation, but not by much, according to LPS Applied Analytics, in Jacksonville, Fla. Loans in foreclosure in Florida, New Jersey, Hawaii and Maine have been delinquent more than 500 days, on average, while home loans in California and Nevada have been delinquent 461 and 427 days, respectively. In the two speediest states, Nebraska and Wyoming, loans in the foreclosure process are delinquent by an average of 358 days.
Those statistics raise a question: Why do foreclosures take so long?
The courtsSome states use a judicial process. The causes of delays in judicial foreclosure states include backlogged courts, antiquated systems and judges' schedules, says Shari Olefson, an attorney with Fowler White Boggs in Fort Lauderdale, Fla., and author of "Foreclosure Nation," a book about the subprime mortgage crisis.
In one case, Olefson says, "We went down for the hearing and the judge said, that morning, you are moved to (another) judge, and we went to that judge, and the earliest hearing date he has is April."
The problem may be most severe in Florida, which has the highest number of foreclosures in the country, according to Rick Sharga, senior vice president at RealtyTrac, a foreclosure information service in Irvine, Calif. The backlog in Florida has been so severe that the state has set up separate courts and brought in retired judges to handle foreclosure cases.
Government officials and agencies cause delays through temporary moratoriums, mandatory mediation sessions and loan modification or assistance programs such as the federal Home Affordable Modification Program, or HAMP.
The servicersMortgage servicers -- the companies that process monthly payments -- have been equally ill-equipped to handle the large volume of foreclosures. While it may seem counterintuitive, they have reasons to drag their feet:
- Servicers' philosophies and directives are "constantly in flux," Olefson says. One may need to raise cash to meet regulatory guidelines, while another may have too much inventory of unsold real estate on its books. Staid corporate cultures and high staff turnover contribute to slow decision-making.
- Servicers don't want to take on the legal and financial responsibilities of owning more homes. As soon as the foreclosure is completed, the lender "immediately assumes liability and carrying costs," Sharga says. Examples of such costs include property taxes, casualty insurance, repairs and maintenance, and homeowner association dues.
- Lenders are loath to write off losses on unpaid loans.
"Foreclosure typically isn't making a profit, it's minimizing a loss. It's hard to get the (investors) who own the notes excited about spending more money to execute a foreclosure," Sharga says. "Ironically, the longer these things take, the more it costs."