Thursday, January 12, 2012

A little rain on the foreclosure-data parade

by Laura Williams, Center for Housing Policy

It’s been making the rounds this morning that foreclosures have dropped to their lowest levels since 2007. Unfortunately, as RealtyTrac points out, this is not so much a sign that the housing crisis is getting better but instead that the foreclosure process is simply dysfunctional.

Problems first unearthed en masse in 2010, such as improper filings and “robo-signing”, continue to cause huge delays in the foreclosure pipeline; the national average time for the process increased to 348 days – nearly one year – from start to finish. In New York and Florida, foreclosures took almost three years to complete. While losing a home to foreclosure is a terrible thing for a family, a long period of uncertainty about their home’s stability is also bad (as we documented in “Should I Stay or Should I Go?”).

As the Federal Reserve noted in a recent white paper, clearing the inventory of foreclosed, vacant, and underwater homes is a key step towards housing and broader economic recovery. Years of effort have shown some promising solutions that should be scaled up: foreclosure alternatives such as loan modifications, shared appreciation mortgages, rent-back programs, and structured short sales are some. Better oversight and management of the foreclosure process could certainly help, too. That will take bipartisan, forward-looking focus on housing and a real commitment from private sector participants.

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