Why are homeowners in foreclosure staying put?

More lenders are allowing homeowners in default to stay in their homes longer.  Some are even negotiating special arrangements with them, such as the lender paying the home insurance if the homeowner pays the utility costs.  Surprising, right?!  Why the postponement? Banks simply don’t want the cost of maintaining more homes on their books anymore. Many municipalities are forcing banks to better maintain foreclosed homes, which has been adding to the costs.  That makes the short-term a bit more expensive, but in the long-term it will help stabilize property values.  By the end of January, more than 644,458 homes were under bank ownership; and now about 710,725 are in the foreclosure process, waiting to add to that number.  Typically, under these circumstances, the banks would cover the cost of maintenance, upkeep and property taxes by just reselling the property, but in these desperate times banks are resorting to somewhat desperate measures. Because property values have come down over the past few years, banks are having trouble recouping all of these costs when they resell the property…if they can resell it!  In 2007, the average national time it took to complete a foreclosure was four months. By the end of 2011, that stretched to a whole year. In Florida, the slowdown is even more pronounced, where defaulting homeowners often stay put for more than TWO YEARS!!!!  A recent Florida initiative that failed was HB 213/SB 1890 Rep. Kathleen Passidomo (R-Naples) and Sen. Jack Latvala (R-St. Petersburg), which sought to speed up Florida’s judicial foreclosure process. The bills also contained language to reduce the amount of time lenders have to request a deficiency decree from five years to one.   For now, everyone just keeps waiting…

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Posted on May 3, 2012, in Real Estate and tagged , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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