Foreclosure Timelines Are Lengthening

Foreclosure Timelines Are Lengthening


Foreclosure timelines are getting longer, according to recent reports from Moody’s Investors Service and RealtyTrac. In addition to this trend, Moody’s highlighted the importance of net present value (NPV) models in the loss mitigation process for residential mortgage-backed securities.

Foreclosure timelines increased for all servicers in the fourth quarter, Moody’s reported in its most recent Servicer Dashboard. Judicial states, which continue to harbor large backlogs of foreclosures, are weighing heavily on the industry. New Jersey, Florida, Pennsylvania, and Ohio were particular weak spots during the fourth quarter, according to Moody’s.

GMAC had the longest foreclosure timelines across all categories of loans for the quarter. Moody’s attributes this to GMAC’s “high concentration of foreclosures in judicial states.”

Bank of America, on the other hand, experienced improvement in its foreclosure timelines, which Moody’s attributes to the bank’s transfers of its non-performing loans.

REO timelines were not much changed in the fourth quarter, but Moody’s did find shortened timelines in California and Florida. The firm pointed out Ocwen has a large presence in both these states.

“We expect REO liquidation timelines to improve at a slow and steady pace going forward as the broader housing market improves as well,” Moody’s said.

RealtyTrac reported the average time to foreclose went up in 39 states in the first quarter of this year compared to the previous quarter. The online foreclosure marketplace explained recent foreclosure prevention efforts in certain states have lengthened timelines. Overall, RealtyTrac found the number of days to complete a foreclosure increased from 414 days in the previous quarter to 477 days in the first quarter, the highest average seen since the first quarter of 2007.

Prompted by a recent lawsuit involving Nationstar, Moody’s also focused on the role of NPVs in the current market in its latest dashboard.

“The NPV model and related assumptions used by mortgage loan servicers play a critical role in a servicer’s decisions about defaulted loans,” said Bill Fricke, VP of Moody’s servicer quality team.

NPVs can vary in accuracy, according to Moody’s. Therefore, the firm advises servicers to “update their model inputs according to the most recent reliable information available.”

Property valuations, home price trends, REO discounts, and borrowers income and willingness to pay are all important factors in an NPV, according to Moody’s.

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