The average loan in foreclosure now has been delinquent a record 631 days, a record-setting processing time, according to a report by Florida-based Lender Processing Services.
The aftershocks of the robosigning foreclosure paperwork controversy, now more than a year old, is still plaguing states that require such cases to go before a judge. The differences in processing times are clear when you compare judicial versus non-judicial states. Non-judicial state foreclosures inventories are less than half those of judicial states, and foreclosure sale rates in non-judicial states are four to five times that of judicial states. Judges are starting to ramp up the process.
Bank repossessions surged in October in many judicial states, up 48% in New Jersey and up 73% in Indiana on a monthly basis, according to RealtyTrac. But the backlog is large with overall foreclosure inventory at an all-time high, 4.29% of all active loans, according to LPS.
"The discrepancy will go on in perpetuity, as there always has been a difference between judicial and non-judicial timelines," said Kyle Lundstedt, managing director of LPS Applied Analytics. "Even prior to the worst of the crisis, loans were four to five months more delinquent in judicial states at time of foreclosure sale. The number today is more like eight months, but will return to the four to five month difference depending on when and how fast foreclosure sales occur.
The large volume of distressed properties will sell at a deep discount, likely bringing down the prices of surrounding homes. They also will add to already historically high existing home inventories, while demand is still weak. While there is considerable investor demand for distressed properties, new foreclosures are still outnumbering foreclosure sales by over 3:1.
Along with the robosigning delays, the housing industry is now feeling the impact of problematic loan modifications. Repeat foreclosures made up nearly 45% of new foreclosures in October. Of the 2.1 million modifications since the start of 2008 more than 10% were in foreclosure with another 27.4% delinquent 30 or more days, as of the end of the third quarter of this year, according to the Office of the Comptroller of the Currency.
