RealtyTrac released a new report on the state of the country’s real estate market yesterday, and the news isn’t good. (You can read the full text of the RealtyTrac press release / midyear State of the Market here.)
According to this nationally-recognized expert on the real estate industry, the U.S. is still in a big mess due to foreclosures because banks and mortgage lenders have delayed foreclosure filings. One reason for this is that they are worried about liability from foreclosure fraud.
The banks that committed the bad acts, robo-signing and other acts of foreclosure fraud, are sitting on lots of foreclosures. The filing delays and existing bank inventory are preventing the real estate market from healing. They are just prolonging the illness.
RealtyTrac CEO James J. Saccacio has been quoted in various newspapers (CNN.com, Bloomberg) explaining “[That’s what is] pushing foreclosures further and further out — we estimate that as many as 1 million foreclosure actions that should have taken place in 2011 will now happen in 2012, or perhaps even later…. This casts an ominous shadow over the housing market where recovery is unlikely to happen until the current and forthcoming inventory of distressed properties can be whittled down to a manageable number.”
What’s Else is Going On? Why Else Are the Banks Acting This Way – and How Does This Help South Florida Homeowners?
Because banks already have a lot of homes on their books (“REO” properties) and they have to bear the costs of their upkeep (taxes and insurance, HOA and Condo fees) – they are dragging their feet about foreclosing on more homes. They don’t want to add to their already swelling inventory.
However, a bigger issue, as mentioned above, looks to be their concern about being liable for wrongful foreclosures. This concern is causing these lenders to take their sweet time about foreclosing on more properties. They are worried that each foreclosure just increases their own legal liability. Simply stated, they are worried about being sued, or counter-sued, so they are moving slow.
Right now, it’s taking 676 days to process a foreclosure in Florida. That’s almost two years.
For South Florida homeowners with underwater mortgages, or mortgages that are at risk of foreclosure or in default, this news may mean that banks will be more amenable to negotiating a deal with the homeowner. Loan negotiations, short sales, and restructuring of existing mortgages seem to be good ideas for banks to consider these days — so for savvy homeowners, the new Mid-Year report by RealtyTrac may be just the ticket to get the ball rolling on solving their mortgage problems.