Although the foreclosure pipeline is still jammed across the country, out west states are “digesting” their backlog more quickly than their eastern counterparts. In fact, in three of the hardest-hit states in the country, Arizona, California and Nevada, foreclosure rates dropped over the course of 2011. In New Jersey, Connecticut and New York, however, delinquencies and foreclosures rose as judicial procedures clogged the pipeline[1]. Herb Blecher, senior vice president at LPS Applied Analytics, said that it’s a tough call to say which scenario is better. When foreclosures stall due to judicial processes, there is a better chance for homeowners to ultimately stop repossession and keep their homes. However, when the foreclosure process is smooth and efficient, the housing market will likely recover faster.

Although delaying foreclosure does potentially help out homeowners, many abandon their homes long before the bank ever locks the doors. In these cases, slowing foreclosures down simply depresses property values by creating mass vacancies. Federal Reserve chairman Ben Bernanke recently described these empty homes as a “significant barrier” to economic recovery, and even suggested that Fannie Mae and Freddie Mac “assume losses on the homes to decrease supply”[2]. As more homeowners become aware of the massive delays in the foreclosure process, though, more are opting to stay in their homes and fight the process, sometimes even enlisting the help of organizations like local Occupy movements to protest their foreclosures.

Do you think that the foreclosure process takes too long? Not long enough? How can lenders best handle this issue to keep homeowners in their homes and heal the housing market?

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