Non-Judicial States Foreclose in Half the Time

March 7, 2011 (Jeff Alan)
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Recent research by credit rating agency Standard & Poor reveals that states that use a non-judicial foreclosure process do so in half the time than states that use a judicial foreclosure process. On average, lenders need 13 months to foreclose in a judicial state, more than twice the six months it takes in a non-judicial state.

The longer timelines have become even more pronounced since the current foreclosure crisis and the recent “robo-signing” controversy.

“In both judicial and non-judicial states, the foreclosure timeline has increased above historical levels over the past two years. In particular, the relationship between the length of the foreclosure process in judicial and non-judicial states has generally remained constant at approximately twice as long on average,” S&P analysts said. “However, in absolute terms, the difference in foreclosure timelines has become more pronounced.”

The research showed that from 2002 through 2008, the average foreclosure took approximately eight months in judicial states compared to four months in non-judicial states. The timelines became even more pronounced at the onset of the foreclosure crisis as did the backlog of homes in foreclosure.

New York, which uses the judicial foreclosure process, has the highest percentage of mortgages that are in some stage of foreclosure for 18 months at about 58 percent. Arizona, which is a non-judicial state, has the lowest percentage of mortgages in foreclosure for 18 months at 11 percent.

The report reveals that the amount of homes in some stage of foreclosure in judicial states at 18 months is more than three times higher than non-judicial states.

“This (difference) could be due to the strict mediation required before a foreclosure can proceed in New York,” Standard & Poor’s said.

The report also finds that so far there has been no evidence to support the claim that judicial states that require mediation have produced significantly more loan modifications.

“On an issuance-adjusted basis, loan modifications in judicial states were only slightly more common than in non-judicial ones,” analysts said. “For the more recent vintages, which have seen most of the loan modifications, we consider the difference minimal.”

Tags: Standard & Poor, non-judicial state, judicial states, foreclosure process, robo-signing controversy, foreclosure timeline, mediation, loan modifications