Getting Through The Foreclosure Process
Title Agency Coral Springs – Info On The Foreclosure Process
We in real estate often talk about foreclosures collectively as if they were a body of moving water. If a bank is processing a “stream” of foreclosures, and the “inflow” increases, they might have a logjam, a bottleneck, a clogged pipeline.
I think this metaphor is perfectly appropriate (and not just because the subprime mortgage crisis nearly drowned our economy!) Seriously, reading news about foreclosures is something like wading through a lazy river. For example, data aggregator RealtyTrac recently reported that foreclosure rates across the nation have been dropping. But you won’t find the cause of this drop in today’s news—economic trends surface months late in the foreclosure industry. You see them coming slowly from a mile away, and they are unavoidable.
Why so sluggish? Well, there are two main causes.
For one thing, a homeowner doesn’t default the very moment that economic trouble starts to brew. If a company begins seeing decreasing profits in January, they might not lay off Joe Homeowner until May. Then, Joe Homeowner might not default on his mortgage until September. This delay contributes to the foreclosure “lag.”
Secondly, the foreclosure process takes time. A lot of time. On average more than a year and a half after the original default, according to a recent report put out by Lender Processing Services. Here’s why: mortgage debts are often sold to third party trusts and traded on the market. Before a foreclosure can be authorized, lenders must submit an affidavit that testifies that the chain of the debt’s ownership has been accounted for and the homeowner has in fact defaulted. There has to be some accountability, right? We’re dealing with people’s houses here!
So, keeping these factors in mind, what explains the recent drop in the foreclosure rate?
After the subprime mortgage crisis late last decade, when homeowners began defaulting on mortgages in droves, banks suddenly had a huge amount of foreclosures to process—heaps and heaps of paperwork for attorneys to go over. However, many of these attorneys cut corners to expedite the process. Foreclosures were processed improperly, with incidences of falsified documents and signatures.
This practice was revealed in late 2010 to enormous public outcry. Now not only must each foreclosure be scrutinized in a time-intensive verification process, but lenders must also look backward, retroactively finding supporting documents for past foreclosures. The mess won’t sort itself out, right? Many states have also started requiring that judges review foreclosures before they are processed—an extra step.
So rather than indicating that fewer homeowners are defaulting, the drop in foreclosures is the result of an administrative bottleneck. But you know what? That’s a good thing. It’s good that this mess is being sorted out so we can move forward again. It’s good that the industry is taking accountability seriously, and taking the time to do the job right. We are still wading through the foreclosure pipeline: just a bit more slowly now, and a lot more carefully.
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