Current state of foreclosures
In the last year, foreclosures have dropped nearly 30% with pundits singing the industry’s praises and news anchors claiming real estate is about to rebound, but what those individuals are not taking into account is the core reason foreclosures have slowed which is intermittent foreclosure freezes at the bank level mandated by state attorneys general, federal agencies and various judges as investigations repeatedly reveal illegal foreclosures.
Because of the investigations and various government agencies attempting to rectify the wrongful foreclosures, banks have slowed dramatically as the agencies try to come together to punish the misdeeds. The robo-signing scandal is the primary reason for investigations, as major banks used software to process foreclosures and failed to have any human manual review, leading to foreclosures that violated local and federal laws (for example Bank of America foreclosed on a home that never even had a mortgage on it, having paid in cash).
David Streitfeld of the New York Times noted that “In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure,” and “Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.”
“62 years at their current pace”
Looking at the infographic above it is easy to see that there is a major disparity not only regionally but locally. Courts do not play a role in 27 states and in those locations, foreclosure proceedings are much faster but even in those states, the high volume of cases continues, given a slowed economy and unemployment impacting a greater portion of our population.
This year, banks have laid off employees, primarily those set to alleviate the foreclosure backlog, so we foresee another wave of slowed volume.
There are many factors that have an impact on the foreclosure backlog including the number of struggling homeowners that don’t have the option to pay, the continued rise in people walking away thanks in part to infomercial style companies that “help” homeowners skip, mortgage layoffs reducing the capacity to process foreclosures, government investigations diverting staff attention, repeated lawsuits for illegal foreclosures, and whether or not courts are involved in the foreclosure process.
How will the banks respond? Imagine if there was a way that the process could be automated so that a computer program reviews all foreclosure documents when a borrower is behind, and lines everything up so that staff isn’t necessarily needed… oh wait, that’s what got banks here in the first place…