While the housing market continues its recovery and overall foreclosures have retreated to pre-2006 levels, the average length of cases already in the court system has steadily continued to increase, with the average foreclosure taking 929 days in Florida. However, there are increasing signs that this trend may start to shift in 2014.
Why might this trend change in the coming year?
Well, just as the recovery in housing prices has helped some underwater homeowners, it has also helped lenders dispose of large numbers of previously seized homes. Some lenders have even turned to online auction to liquidate properties even quicker than by conventional means.
This is a big change for most of the major lenders who, during the peak of the housing crisis with buyers on the sidelines and prices falling, accumulated large numbers of properties, so called “shadow inventory,” on their books. Already having seized large numbers of properties, lenders had little, if any, incentive to speed up the foreclosure process and add additional inventory to their books. But as prices have recovered and the backlog of REOs has steadily decreased; lenders will likely start to work towards bringing finality to those cases that are currently in the legal system, while home prices are heading up.
This is significant for Florida, since most of its backlogged foreclosures are in judicial states, where a judge must review all foreclosures. After the well documented episodes of sloppy paperwork, document fraud and notary fraud known as “robo-signing,” many judges began giving not only the process but the lenders’ paperwork closer scrutiny. However, over time this initial response to the crisis has largely run its course, as both lenders and judges have learned from previous mistakes. Finally, some states, Florida among them, have enacted so called “fast-track” legislation designed to speed up the foreclosure process and avoid the delays which have previously hampered the system.
If this trend does start to shift towards speedier foreclosures and repossessions with the new year, it is likely that we will start to see an increase in REOs and short sales as properties which have been mired in the legal system since 2006 move more steadily towards conclusion and lenders continue to liquidate the inventory they have accumulated over the years.
If you are a lender, mortgage broker, realtor, buyer, seller, or investor in the South Florida real estate market and have any questions regarding the acquisition or disposition of real estate or are in need of a skilled attorney to handle your closing, please do not hesitate to contact Brian Abelow, Esq. with Benson Mucci & Weiss PL & Weiss PL and All Property Title & Escrow to discuss your specific situation.