Banks and mortgage servicers are taking more time to foreclose on defaulting
home owners--a process that can take up to 2 years now. A backlog in
foreclosures has occurred within a number of the nationâ€™s banks, triggered by
the large number of home owners defaulting on loans, a lengthy review process
for loan modifications, and recent lawsuits that have accused banks of
improperly filing foreclosure documents .
Meanwhile, defaulting home owners
are being allowed to stay in their homes longer. In December 2010, the average
borrower in foreclosure went 507 days without making a mortgage payment,
according to LPS Applied Analytics. (Prior to the housing crash, the norm was
considered 250 days in default.)
Diane Pendley, managing director of Fitch
Ratings, estimates that delinquent borrowers stay in their homes an average of
19 to 20 months before they're evicted. She expects that average to grow to 22
to 23 months by the end of the year--the longest on record.
The delays in the
foreclosure process are expected to lead to less inventory of foreclosed homes
for sale and higher prices for these homes, in some markets, experts note.
However, the longer wait also means foreclosures could weigh on the real estate
market much longer, they say.
Source: â€œHome Loans in Default Drag On,â€ USA