The average foreclosure takes over 400 days from the first missed payment to the sale at the courthouse steps. The exaggerated process involved in most states is disgusting, and the blame rests on spineless politicians who are more concerned with voter turnout than they are with American economic health.
If you’re a distressed homeowner reading this, I feel your pain. but think about what’s really happening to you here. Every month that goes by with another unpaid mortgage bill is additional debt placed on your shoulders. Months, in some cases years, of late fees are piling up and pushing you deeper into debt. Add in the market depreciation that’s deepening your negative equity, and you’re earning thousands of dollars in debt every single month you live there.
The messy judicial foreclosure process that has come under scrutiny has added to the time it takes to foreclose. The longer we wait to see these homes foreclose, the more debt people gain and the harder the road to recovery becomes. For every week added to the time a foreclosure takes, you can add two weeks to the time it will take to put this market behind us. There IS an option, however. Rather than create more futile programs to delay and prevent foreclosures, try taking a cue from the Texas death penalty system and put in a express lane.
Now, before you jump up and gnash your teeth in protest, think about what this could do. An opt-in system, where the foreclosure process is truncated with consent from the homeowner. The sooner they get out from under the mortgage, the sooner they can start the road to recovery.
But Jonathan, we already have a system in place, it’s called deed-in-lieu of foreclosure, right? Wrong. Deed-in-lieu prevents the bank from future recourse against the owner. That’s why so few deed-in-lieu’s actually happen. Mandate the lenders to offer the program, let the owner decide how quickly they want to move on with their lives, and let the foreclosure happen. Even if a very small portion of owners actually take the option, this sort of solution offers an opportunity for distressed owners to start rebuilding their credit faster than the 400+ days a foreclosure takes now.
It’s become apparent that trying to shore up prices through tax credits and stimulus packages has been a failure. Values will only be stabilized once the foreclosure crisis has passed, so why are we continuing to do everything in our power to delay the time it takes to foreclose? If we, as an industry, continue to try and treat the wound rather than amputate the problem, we may just end up curing the disease by killing the patient.
Photo by Keng Susumpow via Flickr CC