Jason Kopcak Comments: Foreclosures Of Expensive Homes Take Longer
August 11, 2011, USA Today
Foreclosures are taking longer for more-expensive homes than for less-expensive ones, giving those homeowners more time in homes without mortgage payments, new research analyzed for USA TODAY shows.
From January through May, almost 400,000 homes were repossessed by lenders or sold to others at foreclosure auctions. By the time they were repossessed or sold, mortgages on the more-expensive homes were delinquent an average of 647 days, almost four months longer than the less-expensive homes, data from national mortgage tracker LPS Applied Analytics indicate.
The longer time frames occurred in 45 states and ranged from days to months.
LPS broke the homes into categories of those valued under $417,000 and those from $417,000 to $999,999.
Longer foreclosure times may seem to favor owners of more-expensive homes, but banks say loan size "doesn't dictate the foreclosure process," says Wells Fargo spokesman Tom Goyda. Lenders aren't showing favoritism to wealthier people — they're just doing what makes the most business sense," says Sean O'Toole, CEO of foreclosure tracker ForeclosureRadar.
Industry analysts say other factors are likely affecting time lines, including the type of:
•Loan. Loans below $417,000 are generally owned by mortgage giants Freddie Mac and Fannie Mae. Their processes lead to quicker resolution than if loans are held by others. "It's a much simpler process," says Jason Kopcak, mortgage loan expert at Cantor Fitzgerald.
Bigger loans, often found on pricier homes, tend to be held by lenders or investors. Banks are "moving the stuff they don't own first," to satisfy others and limit litigation, says Paul Miller, analyst at FBR Capital Markets.
•Home. Lower-priced homes have a larger pool of buyers. More may be exiting foreclosure via short sale, says Kyle Lundstedt, LPS managing director. Short sales occur when lenders sell for less than what's owed on the home.
•Homeowner. Those who can buy expensive homes may have more resources to delay foreclosures, says Richard Bove, banking analyst with Rochdale Securities.
Lenders may also be delaying having to take bigger losses that tend to occur with pricier homes, O'Toole says. He recently assessed 155,000 California foreclosures and found that foreclosures took longer for loans over $417,000 than for smaller loans.
Miller says lenders are "not managing their losses that closely." Foreclosure time lines are mostly driven by investor owners and state laws, says Bank of America spokesman Dan Frahm.
In California, which led in foreclosure sales January through May, more-expensive homes averaged 78 more days delinquent than the others at the time of the sale, LPS' data shows. In Arizona, another big foreclosure state, the pricier homes were 65 more days delinquent at time of the sale. In Florida, that spread was 97 days.