Massachusetts foreclosures seem to be moving through the system more quickly, according to an analysis by Banker & Tradesman of data provided by its parent company, The Warren Group.
Banker & Tradesman examined the number of days between when a property enters the foreclosure process and when it is scheduled for auction. A property enters the foreclosure process when a lender files a petition to foreclose in Massachusetts Land Court. Foreclosure auctions are advertised, usually in a newspaper. It is possible for a foreclosure auction to be canceled or delayed without a public record being registered.
As the foreclosure crisis began to heat up two years ago, the processing time for foreclosures began to increase. It took an average of 234 days, or almost eight months, for properties for which a petition was filed in March 2008 to go to auction.
The processing lag spiked to its highest levels in June (9.5 months) and October (9.2 months) of 2008. In early 2009, when foreclosure petition filings had risen again, lag times were still averaging more than 8.5 months.
But by November of last year, the time between petitions to foreclose and auctions was down to 4.6 months, a 53 percent drop from the beginning of the year.
Real estate experts say that the lifting of foreclosure moratoriums, some of them instituted voluntarily by large banks in early 2009, helped speed the process up.
It’s too early to tell for sure whether petitions filed in 2010 have continued the trend, but real estate professionals who deal with borrowers and banks say they are beginning to see somewhat smoother processing of delinquent loans as banks adjust to new federal loan modification programs.
Such figures suggest that the tangled web of distressed properties may finally be unraveling.
“[The banks] have a process now, so everyone’s sort of getting onto the same page. Once it gets to the point of foreclosure it’s just moving right along,” said Linda Kody broker/owner of Kody & Co. in North Andover, a real estate agency that specialized in REO property.
“From our point of view, what’s gotten better is the closing of it after they’ve resold it. They seem to have cleaned up that process so that they can provide title on time,” she said.
Linda Hale, a real estate agent based in Oxford who specializes in listing bank-owned properties, said more REO listings are coming her way.
“Activity had definitely increased this past month. Everything was held up before for several months and now they’re starting to release them.” she said. “They’ve had this shadow inventory for quite a while, and now they’re starting to process it.”
Non-profit and community outreach counselors who work with delinquent homeowners say that though the process is still complex and often confusing to borrowers, they are slowly starting to see some improvements in bringing loans to resolution.
Amelia Hill, a foreclosure prevention specialist with Nuestra Comunidad Development Corp. in Roxbury, who works with borrowers facing foreclosure, says she has seen some recent improvements to foreclosure processing.
In Massachusetts, the foreclosure process was further complicated by a Massachusetts Land Court decision last year that invalidated two foreclosures in Springfield because ownership of the mortgages was not clear at the time the properties were sold.
Though that case had initially caused significant disruption to the foreclosure process, “because of that, we’re seeing lenders are much more careful now in documenting [chain of title],” Hill said. And Hill said applying for a home loan modification has become more “streamlined” although it’s still a lengthy a process.
Earlier this spring, “we were seeing a sudden spike [in auction dates issue],” said Smita Das, regional manger for foreclosure prevention and financial literacy with Neighborhood of Affordable Housing in Boston. “It seemed like they had been delayed a lot of last year.”
Neighborhood of Affordable Housing in Boston is still running into problems with errors and lost paperwork when borrowers are seeking a loan modification. But “as bad as it was, we have seen a small improvement. On our side, we’ve made some individual contacts that have sped up the process,” said Das.
The group has also seen an increase in denials of modifications. “We had a meeting with about 10 different servicers [in April],” she said. “[The servicers said] they were trying to clean up a lot of their systems. They had a lot of people in the pipeline, and they were just trying to give an answer yes or no.”
But though banks may be getting a bit quicker in working through some of the foreclosures, there remain other roadblocks to the process, which extend the overall time from when a borrower becomes delinquent until the property has come off a bank’s books.
Prior to 2008, banks could initiate the foreclosure process in Massachusetts after the borrower was 30 days delinquent. But a change in state law, known as the 90-day right to cure law, now requires banks to send a letter to the borrower informing that they will be foreclosed on. The letter must also outline options available to the homeowner, obligations and resources for modification, and lenders must wait a full 90 days from the date of the letter before a filing the petition.
John Davis, founder of Stanton & Davis and a real estate lawyer with decades of experience in handling foreclosure filings, said delays in the land court’s foreclosure processing remain a significant hurdle.
With the extended notice time, the backlog in the courts, and eviction difficulties, the whole process can still take over a year. “My thinking, because I’ve been involved in this a long time, the [overall] timeline has actually doubled from what it used to be,” he said.
“I can tell you flat out—would banks like to do it faster? Time is money,” said Davis. “The sooner that process gets handled from a business point of view, I’m sure the bank feels that’s fine.”
