Time needed to sell all Md.'s foreclosures: 21 years
At the rate homes are going on the foreclosure block in Maryland these days, it would take 21 years -- yes, years -- before the current "pipeline" of homes in danger of foreclosure are all sold.
That's according to industry consultant LPS Applied Analytics, which shows a dramatic drop in the number of Maryland foreclosure sales (repossessions or other involuntary transfers) after the robo-signing revelations last fall. That's pushed the state's time-to-sell figure skyward to the fourth-highest nationwide.
This seems poised to change, with warnings of impending Maryland foreclosure cases spiking in November. But here's how things stood as of September:
LPS Applied Analytics says the owners of about 105,000 Maryland homes were at least 90 days behind on their payments, including those with foreclosure cases filed against them. That number hadn't grown much over the year. But foreclosure sales dropped 80 percent -- from an average of about 2,000 a month statewide to about 400.
Why? Foreclosures went from flood to trickle after news that mortgage-servicer employees were signing foreclosure documents for courts assembly-line-style, without having any idea if the information was accurate -- and that some foreclosure attorneys were outsourcing the signing of their names to other people, among other alleged problems. States where foreclosure is a court case, not a non-judicial affair, have seen their collective time-to-sell pipeline double since then.
But Maryland's rose fivefold, from about four years in 2010. Perhaps some state-specific reactions to robo-signing made mortgage servicers more cautious about filing cases:
Maryland's highest court, appalled that local attorneys were counted among the "sign all this for me" group, passed emergency rules last fall designed to allow for large-scale document checks and to send the message that judges should feel free to haul offenders in to explain themselves.
Baltimore-based Civil Justice, meanwhile, filed motions to get foreclosure suits thrown out, arguing that the only way to keep title from being fatally flawed and hurting buyers downstream was to start the cases again and do it right this time. GMAC Mortgage decided to drop 250 cases in Maryland and said it was not taking similar actions elsewhere.
But several other states have a higher pipeline of potential future bank-owned homes. No. 1: New York, where judges have put the mortgage industry and their lawyers in the hot seat and the state attorney general is investigating mortgage securitization.
Here are the states with the 10 largest pipelines measured in years needed to sell, according to LPS Applied Analytics:
|Average monthly FC sales||Pipeline (90+ and FC)||Years needed to sell off that pipeline|
The firm's parent, Lender Processing Services, has been accused of robo-signing too as its employees handled documentation for mortgage servicers. A Nevada grand jury just indicted two people who worked for Lender Processing Services during the housing bubble in connection with an allegedly "massive" robo-signing scheme.
Nevada, by the way, is non-judicial, and its time-to-sell has actually been lower this year than it was in 2010 -- just under two years rather than just over two. That's one of the lowest figures in the country, behind only Arizona and Wyoming (both under a year and a half).
Ronald Deutsch of Cohn, Goldberg and Deutsch, a Towson law firm that handles foreclosure cases for the mortgage industry, said servicers have ratcheted back dramatically for the past year to year and a half in Maryland and a variety of other East Coast states as they work to retool their systems.
"There is a tremendous backlog now of files that need to move through the system, unfortunately," he said. "There are a lot of people who have not made payments on houses in this state for two years, three years. It's reached the point of, I don’t know if criticalness is overblown, but it's reached a crescendo at this point for sure. At least one and maybe more servicers are starting now to get it flowing again."
That means the effect of foreclosures on the housing market in 2012 could be far different than what we had in 2011.