Foreclosure Drags on for 25 Years!

This story is so bizarre that I felt the need to create a new category – Strange but True – just for this article.  Patsy Campbell from Okeechobee, Florida hasn’t made a mortgage payment since 1985!  Trying to figure out exactly who owns the mortgage is like a bad re-make of the movie Catch Me If You Can.  According to the Wall Street Journal, Ms. Campbell claims that

…at this point, no one owns her mortgage note, and that because of fraud and paperwork mistakes by the banks that transferred it over and over again in the 1990s, the debt has been made void.

Robert Summers is the attorney for the lender.  I sure hope he is on retainer for his efforts!  Quoting from the Journal, Mr. Summers

…calls this case “the foreclosure from hell.”  He says Ms. Campbell has appealed the case seven times since he took it on in 2000, and all of her arguments are just stalling tactics.

That may be true, but apparently these “stalling tactics” have been working for 2 and a half decades!  Humorous as it may be, this story is representative of lenders’ struggles nationwide to foreclose.  The amount of time it takes to foreclose on a home has been increasing steadily, with the recent moratorium on foreclosures only part of the problem.

Nationwide, there were 2.1 million mortgages in some stage of foreclosure as of October, according to research firm LPS Applied Analytics. The average loan in foreclosure—the process typically starts when a loan becomes 90 days past due and a bank files a complaint—had been in default for 492 days as of October, up from 289 days at the end of 2005, according to LPS. In Florida, one of the states where foreclosures are handled by courts, the average loan in foreclosure has been delinquent 596 days.

The long-term implications, other than a prolonged decrease in prices as foreclosures hit the market well later than they should, is that lenders will undoubtedly require higher fees going forward.  If loans cost so much to service and the time and costs of foreclosure continue to increase, it only seems logical that the cost of new loans, mortgage insurance, etc. will rise to offset the added risk.  But on the plus side, the longer it takes to foreclose, the more motivated a lender should be to negotiate a short sale…and in theory, there should be more time to get them done.

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