Yearly Foreclosure Follies

Did you know that mortgage lenders make a point to step up foreclosure filings in the fall each year, so they can take a break from it during the holidays?

Nobody wants to be the villainous character knocking on the door, demanding money and threatening eviction. But the classic scenario is even more reprehensible during the weeks from Thanksgiving through New Year’s Day. It’s simply unconscionable to bring such bad news during the holidays.

So, lenders often start foreclosures and intentionally push foreclosures in process in October so they can take a break from it all in December.

The trend is reflected in the October 2015 foreclosure statistics this year. Diana Olick reported on CNBC.com, “Newly started foreclosures rose 12 percent in October from September, according to a new report from RealtyTrac, a foreclosure listing company. That is the largest monthly increase since August 2011, and more than twice the gain from September to October in the last five years.”
Olick also wrote, “In addition, bank repossessions, the final stage of foreclosure, jumped 31 percent in October compared with a year ago.”

I’m not saying it’s a bad thing to handle foreclosures this way, just taking note of a trend influencing the real estate statistics we read. Naturally, there’s usually a much deeper story going on beneath these statistics.

For example, statistics reflecting an average of all 50 states in the US don’t differentiate between homes in desirable or undesirable locations, homes valued under $100K or over $500K, or homes in livable or unlivable condition. Foreclosure statistics don’t reveal the gory details at all, and that’s what makes them a bit dangerous.

Even state or local statistics can be deceiving, because it’s no secret that some residential housing is difficult or even impossible to resell. There are areas where nobody wants to invest in a home, even if the previous owner had borrowed and defaulted on a mortgage in excess of $500K.

And there’s another big factor that doesn’t show up in raw statistics – timing. One commenter on Olick’s CNBC.com post said, “I knew a guy that had a new 3,000 sq ft home on 3 acres in NJ that stopped paying his mortgage in 2007. He finally moved out in 2012.”

Approximately 20 states require the determination of a judge to move a home through the legal foreclosure process. It’s called judicial foreclosure and it tends to slow down the process to some extent. Other states give lenders the option to use judicial or non-judicial foreclosure or require non-judicial only.

So, which type of legal foreclosure process is used is key to the time it takes from filing to repossession.

Many Decembers may come and go between the date a foreclosure is filed by the lender and the date the lender repossesses the home by default because it was not sold during the foreclosure process.