From the Press of Atlantic City:
We have started to feel the consequences of the robo-signing controversy. There was nationwide concern that the expedited processing set up by lenders to handle record foreclosure volume does not meet normal standards and might result in an increase in unwarranted seizure of homes.
A few months ago, we were all aghast that foreclosure paperwork was being signed the same way consumers agree to the terms of service for software: without reading it and with the reasonably confident belief that everything’s OK in all that legal text.
The reaction to such robo-signing was predictable, and now has come true. The processing of foreclosures has slowed greatly, especially in states such as New Jersey where foreclosure has to go through courts.
Despite a media search for responsible homeowners unfairly evicted from their homes by shoddy paperwork, next to none have been found.
But while the backlash against lenders hasn’t yet turned up much harm to innocent homeowners, it has already managed substantial harm to the housing industry as well as the economy and homeowners in general.
By putting off the resolution of the foreclosure crisis and the return to a normal housing market, the robo-signing crisis has substantially extended how long housing will be a drag instead of a boost to the economy. Among builders, Realtors and analysts, the common guess I’ve heard is that the foreclosure mess will drag out an extra year now.
The results for New Jersey are shocking.
In the fourth quarter of 2007 — near the beginning of the housing crisis — the foreclosure process in New Jersey took an average 340 days.
“As of the fourth quarter 2010, it’s actually taking 849 days from that initial court filing to when the REO (property repossession) occurs,” he said.
And this is still the early days of the effects of the robo-signing slowdown. Not until mid-December did state Supreme Court Chief Justice Stuart Rabner order six lenders to demonstrate why the state shouldn’t suspend their foreclosure actions.
“There’s a lot of pressure to make sure foreclosures are not done improperly, as there should be, but it’s also harmful to the market to prolong these foreclosures for such a long time,” Blomquist said.
Another RealtyTrac number shows the magnitude of the problem: In New Jersey alone, there are more than 12,000 properties that already have been repossessed but have yet to sell.
Having a lot of distressed properties on the market pulls down prices, prompting potential buyers to wait for lower prices and keeping the housing industry at an artificially low level.