As the number of properties behind in mortgage payments has risen, the length of time it takes banks to begin the foreclosure process has also increased. From a time period of a little less than forty days to begin the process in 2005, lenders are now taking nearly seventy days to foreclose on a house. This would seem to indicate that homeowners are being given more time to find a solution to foreclosure, but it is more likely that the banks are simply falling further and further behind. There is also a reluctance to take back properties that have been devalued due to falling home values.
The result of this is a backlog with lenders and county governments of properties that are in some sort of housing crisis limbo, and a distortion of how many homes are actually in the various stages of foreclosure. There is a difference between a home being in default of payments and actually having the mortgage company begin the foreclosure process. With this process being delayed by the banks, the situation looks far better in the short term, but far more disturbing in the long run.
The homeowners, if they have not moved out of the home, may be able to keep living there far longer than they think. Even though state foreclosure law dictates the general time-frames for sheriff sale and eviction, banks that do not pursue these steps put the process on hold voluntarily. Even in homes that have been auctioned, the bank may be wary of taking possession of the house and incurring more costs to maintain the property. In this case, the sheriff may just never show up to evict the former owners.
As most homeowners are aware of, keeping up on the repairs and maintenance of the house is not inexpensive. Even if the mortgage is completely paid off, there is still a need to pay insurance and property taxes, in addition to any other housing expenses. When banks own homes, they have the same expenses, and may need to pay for repairs if the foreclosed homes are damaged or ransacked by vandals. It is easier and cheaper to let the owners keep living in the property, even if they are not attempting to stop foreclosure in any meaningful way.
Allowing homeowners to keep living in foreclosed properties also gives the local real estate market a false sense of lower inventories of properties for sale. Banks are able to keep home values higher by keeping these houses off of the market, as well as removing them as targets of theft or damage. Banks may have had very high loan amounts on these homes, and do not want to do even more to drag down the eventual price by offering many homes for sale at once.
Homeowners will not be able to live in properties mortgage free forever, but banks have apparently begun to realize how much more it will cost them to evict people and begin managing the homes. In response, although they may be taking the homes to auction or preparing to initiate foreclosure proceedings, the foreclosure victims are being allowed to remain until the market is ready to accept more properties listed for sale. Homeowners who are behind should have some exit strategy for leaving the home before they are evicted, but no news may be good news from foreclosing banks and indicate that they have more time than they think.