The recent suspensions of foreclosures by four major companies that service mortgages compound a problem that had existed for years in states where foreclosures are handled by the courts.
In the 23 states in which foreclosures must be approved by a judge, the process takes longer than in states where courts are not involved, and some economists say it’s among the factors delaying a housing rebound.
In Florida, Palm Beach County Senior Judge Roger Colton at ‘rocket docket,’ proceedings where he can dispose of 30 foreclosure cases in one hour.
One comparison widely cited: In California, where judges don’t handle foreclosures, the housing market appears to have hit bottom a year ago and has been bouncing back. In Florida, where foreclosures go through the court system, prices keep falling, and foreclosure inventory continues to rise.
Bank of America Corp. has announced it would suspend foreclosure sales in all 50 states. That follows the bank’s earlier suspension of tens of thousands of foreclosures in the states that handle foreclosures through the court system, a move also taken by GMAC Home Mortgage, Inc., a unit of Ally Financial Inc., and J.P. Mortgage Chase & Co.’s home-loan unit.
Richard Cordray, Ohio’s attorney general, said Sunday that as many as 40 state attorneys general across the country intend to open an investigation of lenders and servicers to figure out the scope of the problems with foreclosure documents.
While it remains unclear how long the foreclosure process will be stalled, economists say any delay is bad for the housing market long-term. “Foreclosures are being delayed with good intentions, to protect consumers, but it’s really just delaying the inevitable,” says John Burns, a real estate consultant in Irvine, Ca. “They’re delaying the eventual housing recovery.”
A report released last month by RealtyTrac, which tracks foreclosures, found that foreclosures sales amounted to an average of 24% of all home sales during the second quarter of this year, which totaled about 248,000 homes. In Nevada, one of several western states that was hard hit by the housing downturn, foreclosure sales comprised 56% of all sales activity.
Portion of article by Jason Henry for the Wall Street Journal