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Let’s build an express lane for handling foreclosures

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.

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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

Written By

I'm a Realtor in Southern Maryland. I grew up surrounded by the RE business, spent time as an actor, worked as a theatrical designer and technician, and took the road less traveled before settling down in real estate. I run my own local market website at https://www.somdexpert.com and when I'm not at the office or meeting clients, I can usually be found doing volunteer work, playing with my 3 rescued shelter dogs (Help your local Humane Society!), or in the garage restoring antique cars.

28 Comments

28 Comments

  1. Melissa Zavala

    November 29, 2010 at 7:41 pm

    Jonathan: This is a really thought-provoking post and your photo says it all. Whatever the government comes up with, it really does seem like the banks do not have the quality of staff required to really follow through. Without disagreeing, I am merely playing devil’s advocate and saying that even if the government mandates foreclosures, can the banks find enough qualified, intelligent employees who can use their critical thinking and organizational skills to get the job done quickly and efficiently? Based on what I have witnessed the last few years, I’m just sayin’ that it ain’t gonna happen.

  2. Benjamin Ficker

    November 29, 2010 at 7:43 pm

    You’re wrong. Completing a short-sale has, and will be the best option for the homeowner. We are on pace to close about 30 short sales this year, including 2 HAFA sales that will get $3k back in the homeowners pocket. I haven’t had one seller have to take a promissory note, bring cash to close, or worry about the bank pursuing deficiency afterwards. We are averaging 74 days from the time an offer is submitted to approval and we’re pushing that number closer to 60 days with every closing. We don’t need solutions that will get more vacant properties on the banks books. We need agents to be better educated on short sales and how to get them done quickly and efficiently, in the best interest of their client. The short sale articles on here are great, but add to that the information that Group 46:10 provide (free) daily on their ShortSalePowerHour.com videos and anything you can get from the guys at TheShortSaleGenius.com and we can then liquidate these properties into the hands of people that can afford them and help struggling homeowners walk out with the least amount of damage.

    • Jonathan Benya

      November 29, 2010 at 8:28 pm

      First and foremost, I’m not claiming foreclosure is a better option than short sale. But let’s be realistic. Please don’t take this personally, but I don’t care how many foreclosures you’ve closed, or or how well it ended up for your clients. Your experience is not typical. I’d love to see better short sale training, higher success rates, etc, but that’s not the world we live in.

      I’ve met Kevin and Fred over at group 46:10, had dinner with them, and learned a lot that I’ve been able to bring back to my own clients, but that doesn’t make their methods or success rates mainstream. For a distressed seller, getting an agent with a stellar short sale track record is very difficult. If it were easy, why do we only see 1 in 5 short sales make it to closing?

      Yes, completing a short sale would be the best option, IF, and only IF it actually gets to closing. We aren’t likely to see a major movement of suddenly stellar short sale completion records (training doesn’t really help, either. we all know plenty of crappy CDPE agents).

      I’m not suggesting forcing foreclosures to happen sooner. I AM suggesting creating an OPTION for homeowners to allow the foreclosure happen sooner rather than later.

      • Bob Wilson

        November 30, 2010 at 11:37 pm

        A faster option does exist for the homeowner – its called a deed in lieu.

        • Jennie Blackburn

          December 2, 2010 at 7:05 pm

          Whoooooaa there, Bob. A faster option? Maybe. Since Deed-In-Lieu is often a last resort after attempts at loan modification and short sale are unsuccessful, the bank may already have the paperwork they need from the homeowner, which could speed things up. However, not all homeowners qualify for Deed-In-Lieu (e.g., non-owner occupied homes or those with more than one loan). But the best option? Deed-In-Lieu is also known as a Friendly Foreclosure for a reason: It’s still a foreclosure (at least in Florida). There’s no guarantee the bank will forgive the unpaid balance of the mortgage.

  3. Jennie Blackburn

    December 2, 2010 at 7:18 pm

    Jonathan, great piece. Especially this: “The sooner they get out from under the mortgage, the sooner they can start the road to recovery.” Amen to that. But I don’t think we can blame the clogged up court system for this debacle any more. Actually, I wonder if that’s just an evil rumor started by the Banking Gods. I think Mortgage Servicing Companies like Bank of America, Wells Fargo, Ocwen, & Chase, among others, have a vested interest in keeping the road to foreclosure slodgy & congested.

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