Banks have steadily slowed down the foreclosure process: The average homeowner in foreclosure now is an amazing 461 days behind in his payments. (You can see that last stat in this report, on page 13). Barry Ritholtz of financial blog The Big Picture calls banks’ reluctance to take over houses “strategic non-foreclosure.” Taking a leisurely path to repossession lets lenders avoid the costs of maintaining properties they can’t sell in a market that remains in free fall in much of the country.
However, there’s a limit: Lenders must eventually make good on the threat of repossession or face an epidemic of homeowners who stay in their houses without making payments. Many houses have been in foreclosure for so long that the banks have little choice but to act, and repossessions are rising. . . .
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Why are lenders only just now coming to this conclusion??
If we were to conceive a program to persuade borrowers to stick to their obligations and make every effort, no matter how unrealistic, to avoid foreclosure, we could hardly do better than HAMP. The program probably increases what lenders collect before they eventually foreclose — and may let those lenders slow the process enough to prop up prices as they sell off their inventory.
In this way, it may lead to a more orderly unwinding of the busted housing market. If so, HAMP might accomplish some part of its goal — just not the part that has to do with helping homeowners.
(emphasis added)
Oh, THAT’s the reason . . . at EVERYONE ELSE’s expense.
Excellent article, which tells it *exactly as it is.*
