The foreclosure pipeline in Massachusetts remains clogged nearly nine months after last fall’s robo-signing scandal brought a screeching halt to foreclosures across the nation.
Banker & Tradesman analyzed foreclosure data through April – the most recent month for which complete, statewide figures were available – provided by its publisher The Warren Group. In April, there were 518 foreclosures deeds filed in the state, less than half the number issued during April 2010, when there were 1,375. Foreclosure deeds represent the last step in the foreclosure process. For each of the first four months of the year, completed foreclosures have been less than half what they were at the same time last year.
Normally, a drop in the number of foreclosures would be a good thing. But in the absence of other signs of a recovery in the housing market, instead it appears to suggest that the foreclosure process is simply being dragged out.
According to The Warren Group, over the first four months of 2010 it took an average of 330 days to go from the initial petition to foreclose – the first step in Massachusetts’ foreclosure process – to completed foreclosure deed.
In the first four months of this year, that process has been stretched to more than 403 days, on average.
No Let-Up
The more than 50 percent drop in foreclosures doesn’t seem to reflect a comparable drop in the number of people actually in trouble with their mortgages. According to the Mortgage Bankers Association, the delinquency rate for mortgage loans on residential properties in Massachusetts – the percentage of total mortgage loans at least 30 days past due but which have yet to enter the foreclosure process – stood at 7.46 percent at the end of the first quarter, only a slight drop from approximately 7.56 percent at the same time last year.
Housing counselors, too, aren’t seeing a let-up in the number of people seeking help.
“There’s still demand for housing services. I think there’s a lot of [loans] in the process of a modification – in terms of new cases, it might have slowed somewhat,” said Aaron Gornstein, executive director of the Citizens’ Housing and Planning Association, which works with housing agencies across the state. “But no one has said to me they’re seeing a precipitous drop-off in new cases.”
Another potential cause of delay is the extension of the right-to-cure period in Massachusetts. A law which took effect last August requires lenders to allow up to six months for borrowers to catch up on payments before a foreclosure can be completed. Foreclosures which were in process when the law took effect had to wait until the new time limit expired, which lenders say accounts for some of the decline in foreclosure deeds. But any in-process foreclosures affected by the delay would have passed the new deadline in February, and subsequent months have not seen a return to previous foreclosure rates.
Documented Failures
Continuing problems with loan documents appear to be part of what’s plaguing the system. In neighboring Connecticut, Attorney General George Jepsen wrote a letter to Bank of America, the largest servicer in the state, warning that his office “continued to receive numerous complaints from consumers whose loans are serviced by Bank of America.” Jepsen also questioned whether the bank’s announced plans to provide help to borrowers were sufficient to cope with demand.
Susan Kinsman, director of communications for Jepsen, confirmed that Bank of America was still “in the process of reviewing and replacing defective affidavits so they can move for judgment in pending foreclosure actions,” in that state. Bank of America did not return calls for comment.
The delays are affecting all stages of the foreclosure process, including REO sales.
“It’s part of the issue, why we can’t get anything closed, because of issues with the affidavits and [power of attorney],” said Linda Kody, broker/owner of Kody & Co. in North Andover, and a REO specialist. “Some banks are better than others, but they’re all taking a lot of time, post-foreclosure, to make sure the documents are done properly.”
National efforts to help resolve some of the issues have also faltered of late. The 50 states attorneys general have been locked in negotiations for months with 14 of the 15 largest national mortgage servicers, but have been unable to reach an agreement. In recent weeks, the attorneys general of California, New York and Illinois have opened separate investigations into various aspects of the servicing process.
In addition, state courts in Oregon, Maine and New York have issued decisions questioning the legality of the Mortgage Electronic Registration System (MERS), an entity devised by the mortgage industry to help make filing documents at local registries associated with the mortgage securitization process easier and less expensive for lenders. With more than two-thirds of U.S. mortgages registered through MERS, problems with paperwork registered under its system may have far-reaching effects.
