Foreclosure Time Lengthens- What To Do?
According to RealtyTrac® the leading online marketplace for foreclosure properties, foreclosures in April 2011 hit a 40 month low. There were 219,258 U.S. properties in April with default notices, scheduled auctions and bank repossessions. This is a 9 percent decrease from March and a 34 percent decrease from April 2010. When I first heard this I thought, “It sounds encouraging, perhaps we are seeing an end to the housing mess.” But wait! Here is what James J. Saccacio, chief executive officer of RealtyTrac (the online foreclosure data people) said.
“Foreclosure activity decreased on an annual basis for the seventh straight month in April, bringing foreclosure activity to a 40-month low. This slowdown continues to be largely the result of massive delays in processing foreclosures rather than the result of a housing recovery that is lifting people out of foreclosure.” What? It isn’t the economy or the housing market that is getting better but the banks and courts are getting slower. After the fiasco of rushing forclosures through and making mistakes, they have become more careful.
According to Saccacio here is how it works, “The first delay occurs between delinquency and foreclosure, when lenders and services are no longer automatically pushing loans that are more than 90 days delinquent into foreclosure but are waiting longer to allow for loan modifications, short sales and possibly other disposition alternatives. “Data from the Mortgage Bankers Association shows that about 3.7 million properties are in this seriously delinquent stage. The second delay occurs after foreclosure has started, when lenders are taking much longer than they were just a few years ago to complete the foreclosure process.”
During the first quarter of 2007, the average foreclosure in New York and New Jersey took 151 days. By 2010, the average forclosure in those states took 340 days from initial notice. In 2011 the average rate for the entire U.S. is now up to 400 days, while foreclosures in Florida are taking 619 days and New York and New Jersey are taking 900 days. 900 days is about 2 1/2 years. That is a long time for a foreclosure.
The Effect of a Long Foreclosure Process
With foreclosures taking so long to process home owners are staying in their homes longer and living rent-free for much longer. This is not good for banks but is one way of helping families burdened by debt to get back on their feet. In most households housing is a significant portion of monthly expenses. If you don’t have to pay that you can focus on paying down credit card debt and getting your finances back in order. So one perhaps unintentional benefit of the lengthening foreclosure process is more time for families to get back on track.
What To Do If You are Facing Foreclosure
If you are facing foreclosure the best thing you can do is try to negotiate with your bank. Perhaps you can arrange better terms, they know how long foreclosures are taking and they would rather move your loan from the “non-performing” column to the “performing” column. Also they would prefer not to have to deal with the possibility of a short sale (where they get back less than you owe because house values have declined). But if there is no way you can make your payment (perhaps because of a lost job or illness) you should stay in the house as long as possible and use that free rent time as an opportunity to reduce other debt. Pay off your credit cards, car loans, get out of debt and start saving.
If you are in the market for a home look at foreclosures, the banks have lots of them and are often willing to sell them below what is owed on them just to clear them off their books. A good source of information on foreclosures and a list of those available in your neighborhood is available from RealtyTrac.
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