Reprieve on Foreclosures for Millions of Homeowners

The immense backlog of foreclosure cases has given millions of distressed homeowners an unexpected reprieve. While borrowers are fighting to keep their houses and many lenders seem to be in no hurry to add repossessed houses to their books, the volume of foreclosure cases, about two million, plus another two million waiting in the wings, have overwhelmed many lenders and the courts.

At their current pace, it would take lenders in New York State 62 years, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a real estate data firm. Like New York, which handles foreclosures through the courts, clearing through all the foreclosures would take 49 years in New Jersey and 10 years in Florida, Massachusetts and Illinois.

The pace is much more brisk in the 27 states where the courts play no role in foreclosures, three years in California, two years in Nevada and Colorado, but the dynamic is the same.

“If you were in foreclosure four years ago, you were biting your nails, asking yourself, ‘When is the sheriff going to show up and put me on the street?’ ” said Herb Blecher, an LPS senior vice president. “Now you’re probably not losing any sleep.”

There are many reasons that foreclosure, which has been slowing ever since the housing bubble burst, has been further delayed in many states.

Last fall, after lenders admitted that they had tried to circumvent the time-intensive process of foreclosure by using “robo-signers” who mass-produced documents, and as a result had been illegally processing foreclosures by filing false court documents, lenders were forced to revisit hundreds of thousands of cases.

All of the major servicers agreed to institute reforms in their foreclosure procedures, but nothing is happening quickly. In April the Office of the Comptroller of the Currency and other regulators gave the banks 60 days to draw up their reform plan. When the comptroller’s deadline was reached last week, it was extended another month.

According to LPS, new foreclosure cases and repossessions are down nationally by about a third since last fall. The so-called foreclosure mills, law firms that handled many of the foreclosure cases for the banks, are in retreat under law enforcement pressure and judges these days are also more inclined to scrutinize requests for eviction rather than automatically approve them. Some analysts also suggest that banks are reluctant to take too many foreclosed houses onto their books at any one moment for fear of flooding a shaky market.

Most defaulting homeowners, over the last two years, have been people who have lost their jobs. Housing analysts say these homeowners are more likely to hire a lawyer and fight repossession than borrowers who had sub prime loans that swelled beyond their ability to pay, a move that can drastically slow down a case.