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Servicing

Lengthy foreclosure timelines carry hidden costs for homebuyers

Foreclosure timelines across the U.S. continue to vary, but they remain significantly higher in both judicial and non-judicial foreclosure states, CoreLogic (CLGX) said.

In non-judicial foreclosure states, the average foreclosure timeline rose from seven months to 24 months in the past decade. And in judicial states, timelines increased to 35 months on average, the Irvine, Calif.-based research firm concluded in its March MarketPulse report.

These longer foreclosure timelines come with a hidden cost to consumers, CoreLogic suggested.

"Extended disposition timelines impose operational costs on servicers, carrying costs on investors in the mortgages, and in some cases, significant legal risk and compliance costs," said Mark Fleming, chief economist for CoreLogic.

"The likely result is more expensive mortgages and possibly increased rationing of credit based on the additional costs of disposition, which may vary dramatically by local foreclosure process requirements," he added.

CoreLogic suggests it now takes five times longer to complete a non-judicial foreclosure when comparing today’s default process to 2003 levels.

The increased timelines are the direct result of capacity constraints, more difficult disposition processes and numerous legal and regulatory challenges.

CoreLogic claims the long process "actually benefits the housing markets" in the short run since it constrains the "supply of the most deleterious assets."

Another notable trend is the drop in REO inventory as investors increase demand for assets in specific markets. While Midwestern and Northeastern markets continue to struggle with high REO inventory levels, investors picked up their demand for REOs in the South or Southwest, creating substantial drops in bank-owned inventory levels.

California, in particular, experienced sharp declines in REOs.

Las Vegas, Atlanta and Phoenix also experienced steep drops in REOs as investors comb through those markets looking for assets.

kpanchuk@housingwire.com

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