Two recent reports have highlighted the unwanted yet very real link between foreclosure and homes with an underwater mortgage. One report found the foreclosure process is moving so slowly throughout half of the country, it could take decades to clear millions of delinquent and foreclosed homes. In the second separate report, the delayed foreclosure process was blamed for a sharp increase homeowners saddled with negative equity.
Backlogged Foreclosure Could Take Decades to Clear
New research conducted by LPS Applied Analytics, which collects data on nearly 40 million mortgage loans, revealed that it will take more than eight years on average to clear the nation’s 2.1 million homes in foreclosure or with seriously delinquent mortgages– and in some states, the backlog could last for decades.
The researchers say the time frame is nearly double what they would have estimated just one year ago before the mortgage industry fell victim to robo-signing scandals, which revealed mortgage servicers were illegally foreclosing homeowners without taking the proper filing procedures.
Shortly after the scandal was discovered a foreclosure freeze was implemented, creating a backlog. Since then, mortgage servicers have been forced to review millions of homes facing potentially improper foreclosure and possibly reimburse homeowners wrongfully foreclosed.
Servicers in court-required states like New York and New Jersey will now have to revisit former homes on foreclosures, creating a backlog which will take as many as 50 years to clear, according to researchers.
Increase in Underwater Mortgage Homes Blamed
A separate report released on Tuesday by Zillow, a real estate website, revealed that a significant 28.6 percent of homeowners were saddled with an underwater mortgage in the third quarter of this year. This is a dramatic increase from 26.8 percent in the second quarter.
According to the report, the rising percentage of underwater mortgages is due largely to how long the foreclosure sale process takes rather than home value fluctuations. It explained that while the negative equity rate was already high in 2010 (hovering around the 21 to 23 percent rate) the range changed to 26 to 28 percent after the robo-signing scandal came to light, and hasn’t moved.
With unemployment still resting at 9 percent and many underwater homeowners opting for “strategic default,” by simply choosing to turn in their keys rather than try to sell at a loss in the tough housing market, there are sure to be more homes to face foreclosure in the near future.
While the report says housing prices should bottom out by the end of 2012, market recovery is something we may not see anytime soon.
This is absurd. People are underwater from so many fraudclosures which banks and the gse have allowed to happen, also thanks to banks who approved loans to people who could never afford them (so banksters could get nice bonuses), and lets not forget the rating agencies who lied about the quality of all those cdo’s that mers(who may or may not be legal) sold off to investors. Thus we have a backlog of foreclosures thanks to banks, gses, and a government that refused to govern. You should spend your time trying to figure out how to come up with the money to provide all of the principal reduction that are on the way, last I checked it was at 700 billion and counting. But then again I wouldn’t expect the idiot bankers who used deregulation to absolutely sodomize this country and ruin its economic standing to be able to figure that one out.
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