By Mike Colpitts
Homeowners facing foreclosure in default on mortgage payments are living longer in their homes without making loan payments than ever before, according to foreclosure firm RealtyTrac. The lengthy foreclosure process is good news for homeowners in desperate straits able to live in their homes for free, many of whom are unemployed or underemployed.
The foreclosure pipeline is so clogged that bank servicing companies are having major problems handling foreclosures in most areas of the country overburdened by troubled home loans. U.S. residential properties foreclosed in the second quarter of the year took an average of 378 days from the initial foreclosure notice to formally take back. That’s an 8-day increase from the first quarter of the year.
The foreclosure crisis spells major problems for most large banks, including Bank of America, JP Morgan Chase and CitiGroup, which are all offering incentives to homeowners in default to sell their homes as short sales. JP Morgan is offering up to $30,000 as a cash incentive. BofA is offering a similar “cooperative” program.
Despite, the average time to foreclose increasing across the country, the timeline dropped in some of the states with the longest foreclosure timelines, including New York state, where the averaged dropped 55 days from the first quarter to 1,001 days. New York foreclosures take the longest as a result of legal delays caused by clogged court rooms in the state with a massive back-log of foreclosures.
The average also declined 3% in New Jersey, the state with the second highest foreclosure timeline, and slipped 1% in Pennsylvania, which maintained the seventh longest foreclosure time.
Homes that had already been foreclosed by lenders sold in the second quarter took an average of 195 days to sell after they were foreclosed. REOs took the longest to sell in New York, averaging 430 days, evidence that lenders are getting smart cutting their losses on many homes in the state, selling off their interests in homes for others to formally foreclose.
Short sales took an average of 319 days to sell from the time homeowners were first put on notice that the property was being foreclosed. Homeowners have been complaining for months about how long lenders are taking to get back to them regarding whether they will accept an offer to purchase a home as a short sale. A new law that went into effect June 1st requires lenders handling Freddie Mac backed mortgages to respond to contracted offers to purchase a home as a short sale within 60 days.