For some borrowers, foreclosure can't come soon enough
While homeowners with delinquent mortgages wait for the foreclosure process to begin, they're also stuck taking care of the property until the bank takes over -- and it could be a long wait.
The rate at which foreclosures are hitting homeowners throughout the nation is apparently too fast for banks to keep up.
According to an article in The Washington Post, Guy Cecala of Inside Mortgage Finance says it now can take up to nine months for the foreclosure process to begin, when it once started about three months after a homeowner had missed payments for 90 days.
Even though a delayed foreclosure can be a blessing for some troubled homeowners, for others, it simply prolongs the financial distress, leaving them on the hook for the condition of the property. Even if they move out, they cannot move on.
The article tells the story of Charlotte Jensen, who still owns the mortgage on the Glen Allen, Va., home she stopped paying for a year ago. Because the home is still in her name, Jensen checks up on the property weekly, on the lookout for vandals and squatters, and pays to have the yard taken care of.
A moratorium on foreclosures by some lenders, including Fannie Mae and Freddie Mac, certainly isn't speeding the process. As a matter of fact, the point is to prolong it to help as many people as possible. The extra time is supposed to give delinquent borrowers a better chance to qualify for the government's loan-modification program and, while they're potentially living for free, possibly enough time to get back on track financially.
But with so many homeowners severely behind on their mortgage payments, too many aren't getting the help they need in time to save their homes. In The Washington Post story:
"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.
Meanwhile, we're seeing both sides of the spectrum. As foreclosures are driving down the median price of home sales, some cities are fighting back, such as Cleveland, where an effort is under way to raze vacant buildings and build new residential and commercial property, according to the story "Reclaiming blighted neighborhoods" on MSNBC.com.
And the bottom line is that the mounting foreclosures will only drive the economy further in the hole, even as some areas are slowly starting to rebound. BusinessWeek has an idea: Banks need to hire more loan officers. And with the nation's rate of unemployment expected to rise to 9.6% this month, I'm sure they'll find plenty of people to hire.