Please Foreclose On My House!by Tim Manni
While it sounds improbable, some American homeowners are pleading with their lenders to ‘hurry up and foreclose already!’ Homeowners who have fallen months behind on their mortgage payments sit idle, ready to move on with their lives but are unable, just waiting for their lender to make the next move.
While this “financial limbo” has brought great reprieve to some delinquent borrowers who have benefited from the “rent-free” living, for others, the limbo is a time of added stress, emotional pain, and financial liability. But the limbo not only financially hampers borrowers and investors, it poses a threat to future recovery:
The overhang of homes in limbo means that foreclosure rates are likely to increase dramatically during the second half of this year and into 2010 as lenders work through the backlog, said Bob Bellack, chairman of Zetabid, which auctions foreclosed properties.
More than ever, foreclosure has become an unattractive outcome for lenders.
This could in turn put renewed stress on financial firms that carry mortgages or mortgage-backed securities on their books. As a general policy, many firms have been marking down the value of those assets as the loans become delinquent. But once the homes go into foreclosure and are sold, their value could decline even more, prompting another round of losses at financial companies.
However, lenders have become so swamped with foreclosure filings that they’re having a truly difficult time keeping up. Moreover, our nation’s dedication to foreclosure-prevention programs has redirected a lot of lenders’ and servicers’ attention away from repossessing homes to refinancing rates and modifying loans:
“Lenders are having an immensely difficult time handling the capacity. They are torn between loan modification, short sales, foreclosures, and they are finding they can’t do all these things at once, and do them well, so we’re seeing a lot of things falling through the cracks,” said Howard Glaser, a housing industry consultant and a housing official during the Clinton administration.
Those cracks must be pretty big. According to NeighborWorks America, a large housing counseling group, 60% of homeowners who miss more than four payments before seeking help will end up in foreclosure.
Is a swift foreclosure process the most clear-cut way to speed up the housing recovery? Or has delayed foreclosures (including moratoriums) helped ease the devastating impact foreclosures have on the market?
For more on the subject, read “Mortgage Moratorium Prolongs Housing Crisis.”