WASHINGTON – Nov. 9, 2011 – Foreclosure sales are moving so slowly in half of the states that at the current pace, it will take more than eight years on average to clear the 2.1 million homes in foreclosure or with seriously delinquent mortgages, new research shows.
That’s twice as long as a year ago in states where foreclosures go through courts – before the mortgage industry was upended by disclosures that court papers in many foreclosure cases were improperly prepared. Since then, new checks have slowed the process.
The backlogs suggest that the fallout from the nation’s worst housing-market collapse is likely to weigh on real estate prices in many markets for years to come, and on some markets for longer than on others.
In New York and New Jersey, where courts imposed new rules last fall, it would take lenders more than 50 years at their current pace to clear pipelines of homes that are seriously delinquent or in the foreclosure process, according to LPS Applied Analytics, which collects data on 40 million mortgage loans.
The process is moving faster in the other states, where courts aren’t typically involved in foreclosures.
In those, the time to clear foreclosure pipelines has remained at just under three years, according to LPS.
California’s pipeline would take about three years to clear, LPS says. In Nevada and Arizona, less than two years.
In New York, foreclosure lawyers now must affirm that they reviewed documents and asked lenders to verify their accuracy. Since that rule took hold last fall, foreclosure filings have slid to about 750 a month from 3,500, according to the office of the chief administrative judge.
In New Jersey, foreclosure activity was curbed after a court requirement that lending companies prove that their foreclosure processes were sound. The companies were cleared this fall to resume foreclosures.
The longer time frames may support home prices by reducing the supply of distressed properties for sale. But they also delay recoveries because buyers may wait, fearing further price drops when distressed homes hit the market, says James Sacchio, RealtyTrac CEO.
“It’s a question of whether you rip the Band-Aid off quickly or slowly,” says Herb Blecher, LPS senior vice president.