Foreclosure Timelines Much Shorter in NonJudicial States

March 7, 2011 No Comments »

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Foreclosure timelines have widened in all states throughout the nation, but the increases are much more pronounced in judicial states, according to a new report from S&P’s Rating Service.

Judicial states, such as Florida, New York, and Ohio, which handle foreclosures via a court of law as opposed to a county recorder’s office, have seen foreclosure timelines shoot up thanks to issues surrounding the robosigning scandal.

This has created a huge foreclosure backlog, as evidenced by the fact that loans that were in foreclosure 18 months ago are nearly three times more likely to remain in foreclosure if they’re in judicial states.

“In theory, the judicial foreclosure process is intended to protect a borrower against unlawful or unjustified foreclosure attempts by a lender,” said S&P research analyst Zachary Wolf, in a release.

“With a judicial process in place, a delinquent borrower may be in a better position to negotiate some type of mortgage restructuring or modification due to the potential length and cost of the process.”

However, S&P found that there was no meaningful difference in loan modifications entered into in judicial versus nonjudicial states.

At the same time, it appears as if homeowners in judicial states have much more time to stay in their homes (free rent) after failing to make monthly mortgage payments.

But recent developments, including mandated mediation and litigation proceedings tied to the Mortgage Electronic Registration System (MERS), may increase foreclosure timelines in nonjudicial states and narrow the difference.

Wondering if your state is judicial or nonjudicial? RealtyTrac has summed it up nicely here.

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