Housing recovery sparks pickup in home seizures

The foreclosure process has sped up again in many states, as lenders clear out their backlog.

By MSN Real Estate partner Jan 3, 2014 9:15AM

© Associated PressBy John W. Schoen, CNBC

 

This may have been the last New Year's that Courtney Scott, 65, a retired nurse, gets to celebrate in her modest suburban Atlanta home.

 

Two days before Christmas, as her quest for an affordable mortgage entered its fifth year, Bank of America sent her another foreclosure notice — her fourth.

 

Though the housing market continues its halting recovery, thousands of homeowners such as Scott are still struggling in the aftermath of the worst financial collapse since the Great Depression. Even as the overall foreclosure level has retreated to pre-2006 levels, the average length of cases already in the pipeline has increased.

 

But that may be changing.

 

As the recovery in housing prices has helped lenders whittle down a glut of seized homes, they've begun moving more properties to auction and selling them more quickly. In states with the biggest backlogs — those where judges review all home seizures — the pace of new auctions has risen steadily since last July, according to Daren Blomquist, who follows foreclosures at RealtyTrac.

"Lenders know there's now a much better chance they can get those properties sold, so they're moving to do that," he said.


Though the number of new foreclosures entering the pipeline continues to slow, the pace of cases proceeding to auction has picked up in 19 states, including Oregon, Massachusetts, Utah, Connecticut, Delaware and New York. Many of those cases have been grinding through a legal morass for years. The average foreclosure takes 1,037 days in New York, 929 days in Florida and 828 days in Illinois.

In many of the longest-running foreclosures, the paper trail was scrambled amid the housing frenzy and original documents weren't properly executed. Other cases remain gridlocked by multiple mortgages, unpaid tax bills or an unclear chain of ownership. Tangled in legal limbo for years, they are among the thorniest to resolve.

 

"The easier ones tend to get done sooner," said Mark Fleming, chief economist at CoreLogic. "It gets harder and harder to fix the remaining foreclosures."

 

During the peak of the crisis, with buyers on the sidelines and prices falling, lenders' inventories of unsold homes swelled. That meant many of them had little to gain by speeding up the foreclosure process and adding to a glut of empty houses that had to be maintained.

"In some cities, there are fines against the lender if the foreclosed property is not taken care of ... that can add up very quickly," Blomquist said. "If the lender can't take on that property and maintain it property, it may benefit them to allow the homeowner to live there and not foreclose until they're ready to [take possession]."

 

But as prices have recovered, the backlog of bank-owned homes — which peaked at more than 1 million in September 2010 — has been more than cut in half. Many lenders are increasingly confident about moving seized houses into the marketplace, Blomquist said.

 

Lenders trying to manage the flow of new seizures can't predict how long conditions will remain favorable. Housing prices have rebounded in most markets but not to their pre-2007 peaks.The strength of pricing improvement and of demand is unclear. And-record low mortgage rates, which helped revive the moribund market last year, appear to have bottomed.

In many markets, supplies of homes for sale were tight because many underwater homeowners couldn't list their properties if it meant selling for less than the value of their mortgage. More of them are coming to market now, competing with lender inventories.

 

Some foreclosed homes may never sell. Some of the longest cases involve properties that have been all but abandoned and may never find another owner.

 

"There are lien issues, or mold or asbestos, or all kinds of things that make it a challenge to sell it — that may be part of the reason they ended up in foreclosure in the first place," said Fleming at CoreLogic. "These are often the homes that end up given back to the municipality and bulldozed."

 

More of the remaining foreclosures are in judicial states, where a judge must review all foreclosures. After widespread reports two years ago of sloppy paperwork and document fraud, many of those judges began giving the process closer scrutiny.

Those abusive practices were supposed to have ended then, when 49 states, as well as Bank of America and other lenders, agreed to a series of sweeping new guidelines. But in his latest review, in December, the monitor assigned by the court to enforce the agreement reported that the banks were still not fully in compliance.

 

The monitor, Joseph Smith, added four guidelines to help address the failures. They include loan modifications, billing accuracy and the requirement that borrowers be given a single point of contact.

 

"The banks still have additional work to do in their efforts to fully comply with the National Mortgage Settlement and to regain their customers' trust," Smith said in a statement

 

Bank of America was among those cited for not complying with rules covering the kind of loan modification Scott has been pursuing.

 

Following Smith's report, the company issued a statement saying that it "has worked diligently to comply with more than 300 servicing standards set out in the national mortgage settlement, and to ensure that our customers in need of assistance know they are being treated fairly and receiving timely and accurate decisions with respect to any relief they are seeking."

But the government's response to the crisis — from federal loan-modification programs to state laws aimed at slowing the process — has largely run its course. Some states, including Florida, Illinois and New Jersey, have recently reversed course with "fast-track" legislation designed to speed up foreclosures.

 

"We're close to that tipping point where policymakers and people in the industry — as well as the homeowners — realize that foreclosure may be the only way to deal with these unresolved cases," Blomquist said.

 

With five years invested in her foreclosure odyssey, Scott said she's determined to see it through to the end — one way or the other.

 

"I have been in it so long," she said. "I'm not willing to throw in the towel."

 

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76Comments
Jan 7, 2014 3:14PM
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Somersetskey -  I have had the two mortgages for 10 years and 5 years, how am I screwing myself when the 2nd mortgage is 8.19% and the first one is 6%.  Yes, I was planning on trying to eliminate the 8.19% interest 2nd mortgage and combine it with the first.  I have seen other avenues to take, but thanks for your expert advice about me screwing myself.  Try and be a little more helpful in your responses so people can have a better idea to throw around before making any moves.  Thanks just for your time.
Jan 6, 2014 12:23PM
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So why is it ok to give the banks billions upon billions for the bad investments they made? Are the banks not entities just like people? At least that is what the Supreme Court says...

Wake up people, large corporations buying politicians and politicians on the "take" are what is killing this country - it is called Human Nature. Human nature is greedy and very few are above it.

Without term limits for the criminals in elected positions and curbs on lobbying things will never change. It matters not which party, Dems and Repubs are both just as crooked. They just have different advertising schemes. 
Jan 6, 2014 10:28AM
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Seize, foreclose, repossess, different words for the same thing. Means the repoman or law is coming to get your home, car, boat, computer, diamond ring, etc.............whatever you purchased and failed to pay for. So pay up or give it up or back.

Jan 6, 2014 9:52AM
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why do you blame the bank for loaning you money?  why do you blame the bank for expecting you to pay the loan back?
Jan 6, 2014 9:19AM
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People need to stand up for those who are being wronged by Bank of America. Anytime banks take advantage of people, people watching this happen to others who bank there should take their money out of that bank. If people don't stand up to banks because of their actions and bank fee's banks will always take people for granted. Pull your money out and spread the word. 
Jan 6, 2014 8:22AM
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I seen the same thing Big Va Dog, I work with a guy from Kenya who has his mortgage mostly paid for through a state program here in MA. He's a foreigner with a work visa and along with tax payers paying a huge chunk of his mortgage, his college tuition fee is paid for 100 percent by the tax payers.

The middleclass who qualifies for no freebees, and asks for no freebees, has inherited the worst of both worlds from both the Democratic party and the Republican party.

Jan 6, 2014 8:14AM
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Obamaville - should we blame this on Bush or do we call out the racists on this one?

Jan 6, 2014 8:14AM
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Everything is done by design and for a purpose.
Jan 6, 2014 7:37AM
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A guy I work with, he is from Ghana . he and his wife bought a nice house here , she works for the world bank and pays no income taxes . He works partime where I do and fulltime at Costco ,he make preety good money there for a man with no education . His house went up at the peak he borrowed against it, took that moneu and had a big house built in Ghana for when he retires . His house here wnet down below what he now owed on it after he refinanced and got cash out . Then he stopped making the payments on his house , and told me his mortgage payments where $2,700 a month , He said it would take them 10 months to get him out , but he said by saing the $2,700 a month he would in 10 months have $27,000 that he could use to prepay for an aparment if they were now worried that he was a credit risk . At the end of that time he would retire and move back to Ghana to a house with no mortgage . The bank called him , and he told them he could not afford the new payments . They told he to please not move and they would work with him. They lowered his payment by $900 a month   he agredd to begin paying again , now that house has gone back up to over what he owed, so he is sitting prettty
Jan 6, 2014 7:29AM
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cad44124:
A great deal of the comments are written by right wing trolls that bring Obama into every conversation.
You are the reason that there are fewer and fewer solutions to what ails America.

One person finally wrote how our problems are on the demand side not the supply side.
Companies need to onshore jobs back to the US and increase the quality of its goods.
This will be a slow process as our standard of living goes down and China workers earn more.

Congress created laws that promote off-shoring jobs to China. I was in China 1 month a year for
factory start-ups in the mids 90s. I know the cultural problems that have resulted in inferior goods.

Many people who bought homes that had inflated prices simply had the bad luck on timing. Not
all people who are underwater in the mortgages took out excessive equity in their homes.
But remember a homeowner can be one diagnosis away from bankruptcy without proper healthcare
and a loss of a job.

That said, it is better to live beneath your means and buy a cheaper house than in your dreams.
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Bless this countrys oligarchy and plutocracy

the american dream, because you have to be asleep..to believe it...


Or if your NOT privileged and had everything handed to you (BUSH, ROMNEY 75% OF THE RICH TODAY)

JUST LIE, CHEAT AND STEAL LIKE THEY DO!
Jan 6, 2014 7:17AM
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If the tentacles of today's mega banks which also own real estate companies had many tax loopholes closed perhaps this problem would not be so severe. Taking houses is quite a lucrative business and banks which confiscate property often pay little or no taxes on confiscated property thanks to very creative accounting and laws changed to assist them.

Between the banks and tax hungry cities and towns, where folks just cannot afford to upkeep their property, property is being condemned at a rate unseen in our history. I fear that the rate where hard working folks shall be losing their property at a much faster rate as peoples savings continue to decline.

Jan 6, 2014 7:13AM
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I am locked into a 9.5 % mortgage on my home , and the bank will not allow me to lower it , because they say my credit is not good enough. Well if I can afford 9.5% then I could more easily afford 5% and I am sure then my credit would improve if I was not shackled to 9.5% . I guess one good thing is I get a higher interest deduction on my taxes , big wow
Jan 6, 2014 7:02AM
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Bank of America keeps armed guards in front of there doors now wonder why? then again it's really the bank of china.
Jan 6, 2014 6:56AM
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The REAL unemployment is at about 12%. It's only lower because the rest of the people are denied on continuing unemployment benefits. The govt could have spent that $85 Billion/mo on unemployment benefits for ALL 12%. At least this way, the people are helped more directly AND people can continue spending $ and driving the economy. 

People buying stuff is what drives demand. 
Demand is what causes companies to increase supply. 
Increasing supply is what causes companies to increase production. 
Increasing production is what causes companies to hire more. 
Hiring more people is what causes wages to increase. 
Increased wages is what draws people back into the work forces. 
People working again is what causes unemployment to go down.

BUT the govt instead chose to bail out the rich and the economy STILL hasn't recovered!
Jan 6, 2014 6:37AM
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This must have been written by a left-wing socialist like Obama.....'Home Seizures'? ......What? A family that is current on their mortgage payments and bills are sitting around having a peaceful dinner when a S.W.A.T. team breaks in and forces them out at gun-point and then nails the doors closed???? Or do you mean 'foreclosure' or 'repossession' do to non-payment of an agreed upon loan with the home as collateral???...What kind of a childish minded buffoon uses this inflammatory and prejudicial terminology?
Jan 6, 2014 6:27AM
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I feel most sorrow for the poor people who are losing their homes because of medical problems, especially those brought on by the whitecoats and legal drug dealers.  We all know those who are given junk FDA crap that addicts and kills them.  Worse are those who are left unable to funtion and when that happens the whitecoats sometimes just stop seeing them and leave their damage for someone else to deal with.  It is my prayer that any whitecoat and all legal drug dealers suffer for every harm they cause.  I would like to see them lose their most precious loved ones to the crap they put out for other people for money.  May God's will be done to each of them.
Jan 6, 2014 6:16AM
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Wow, so now that they can unload these houses the banks are really speeding up the process.  Hope and Change?  I don't think so.
Jan 6, 2014 6:04AM
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"Home Seizures Increase," the teaser said.

Unless you are Walter White, this does not happen if you pay your mortgage. Teaser tagline should read:

"Mortgage Defaults Increase."

But that doesn't sound like the lender is to blame. If they said that, they'd have to explain that the unending unemployment caused by the ecObamy is to blame.

Jan 6, 2014 5:17AM
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So now it's seizures instead of foreclosures?
Next time you need a loan to buy a new house,  you can claim your old house had a seizure and died.

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