Foreclosures Drag on Longer Than Ever

The October 2011 issue of the Mortgage Monitor, a report from LPS Applied Analytics, indicated that the average loan in foreclosure has been delinquent for a record 631 days nationwide.

In Michigan, nearly 12 percent of homes are noncurrent, but they had declined 15 percent from last year.

Some of the age of this backlog is attributable to the sheer number of homes that have gone into foreclosure in the last couple of years. The main factor now appears to have been caused by lenders being much more cautious when filing foreclosure documentation.

Robo Signing Problems

Many foreclosures were stopped by courts due to "robo signing" of documents by the apparent holders of the mortgages.

Because of shoddy processing that had occurred during the origination of the loan and subsequent transfers to other loan servicers, combined with missing or fraudulent documentation prepared for the foreclosure, many cases had been dismissed or delayed.

Recently the Nevada legislature has made mortgage documentation fraud chargeable as a crime and Massachusetts has sued major banks for the fraudulent documentation.

Lenders and loan servicers have become much more careful in filling documents, which has slowed down the process.

Large Numbers Of Delinquent Mortgages

In some jurisdictions, there are still a substantial number of houses that have not entered foreclosure, but whose borrowers are delinquent on the loan. In Florida, for example, the number is almost a quarter of all mortgaged homes.

For borrowers who are hanging on to their home, this means that there remains considerable, downward pressure on home prices. If you are delinquent and underwater, there are at least two important questions to ask. One, do you want to stay in your home and two, does it financially make sense to stay?

The second question is important. Even if you can currently afford to make your payments, you need to make a thorough examination of the Michigan housing market and your own finances. Is the housing market likely to recover sufficiently such that your home's value will eventually rise to your loan value? Can you continue to afford your mortgage payments on a home that is underwater and may remain so for a number of years?

To help you determine the best option based on your financial circumstances, discuss your situation with a bankruptcy attorney. This is a complex question, and there is no one-size-fits-all answer, but with the most severe real estate crisis since the Great Depression, you need to consider carefully every step of the process.