Reforms in the processing of foreclosures that have been put in place in the wake of the Robogate scandal are slowing the foreclosure timeline and extending the corrosive effects of large numbers of foreclosures on local markets.
RealtyTrac reported this week that for the first quarter of 2011, foreclosure filings decreased 15 percent decrease from the previous quarter and a 27 percent from the first quarter of 2010.
Last November, when several large processors involved with the robosignings scandal halted all processing, foreclosure timelines reached more than 500 days in five judicial states, where foreclosures require a court order, New York, Florida, New Jersey, Hawaii and Maine. Before the Foreclosure Era began in 2006, foreclosures typically took about half that long.
Currently, according to LPS Applied Analytics, the average borrower in foreclosure spends about 17 months in the foreclosure process, up six months from 2009’s 11 months due to huge volumes of defaulted mortgages, time-consuming reviews for loan modifications and additional delays that followed revelations late last year about improperly filed foreclosure documents.
Slow processing has contributed to record foreclosure inventories. In February, Lender Processing Services reported an enormous backlog of foreclosures with overhang at every level. As of the end of February, foreclosure inventory levels stood at more than 30 times monthly foreclosure sales volume, indicating this backlog will continue for quite some time. Ultimately, these foreclosures will most likely reenter the market as REO properties, putting even more downward pressure on U.S. home values.
Timelines are slowing and inventories are rising in many states already saturated with foreclosures.
ForeclosureRadar reports that in Arizona, time-to-foreclose last month rose 20.4 percent from February to 189 days. Also of note is that notice of trustee sale filings in the state were essentially flat, remaining at the lowest point since the firm began tracking Arizona filings in August 2009.
The foreclosure timeline in California increased 4.1 percent to an average of 302 days in March. That represents a jump of 83.4 percent from the state’s timeline a year earlier and sets a new record. In Nevada the average time-to-foreclose rose to 322 days in March, up 16.3 percent from the prior month. The average time-to-foreclose in Oregon is now 188 days, up 2.7 percent from February. The foreclosure timeline in Washington state rose to 120 days last month, an increase of 6.2 percent from February.
“The one thing that remains clear is that while the process has slowed, there remains no consensus on a viable solution other than foreclosure to eliminate the excess mortgage debt that has left millions underwater and continues to hinder the broader economy,” said Sean O’Toole, chief executive of Foreclosure Radar.