Signup for our free newsletter:

Banks Too Busy to Foreclose

Written By Brian Hicks

Posted April 4, 2008





Here’s another story on the foreclosure crisis.

It has gotten so bad now in some areas that the banks simply just can’t keep up with them.

So in some cases they’ve begun to look the other way.

Crazy stuff.

Somehow I don’t feel sorry for them.  

From Bloomberg by Bob Ivry entitled:  Lenders Swamped By Foreclosures Let Homeowners Stay

Banks are so overwhelmed by the U.S. housing crisis they’ve started to look the other way when homeowners stop paying their mortgages.

The number of borrowers at least 90 days late on their home loans rose to 3.6 percent at the end of December, the highest in at least five years, according to the Mortgage Bankers Association in Washington. That figure, for the first time, is almost double the 2 percent who have been foreclosed on.

Lenders who allow owners to stay in their homes are distorting the record foreclosure rate and delaying the worst of the housing decline, said Mark Zandi, chief economist at Moody’s, a unit of New York-based Moody’s Corp. These borrowers will eventually push the number of delinquencies even higher and send more homes onto an already glutted market.

“We don’t have a sense of the magnitude of what’s really going on because the whole process is being delayed,” Zandi said in an interview. “Looking at the data, we see the problems, but they are probably measurably greater than we think.”

“Some people stay in their houses until someone comes to kick them out,” said Angel Gutierrez, owner of Dallas-based Metro Lending, which buys distressed mortgage debt. “Sometimes no one comes to kick them out.”

With home sales dropping and national inventories rising, the lenders have another reason to delay foreclosures, said Howard Fishman, a real estate investor based in Minneapolis.

“What are the banks going to do?” Fishman said. “They don’t want the house. They have a mortgage for $1 million and the house is worth $750,000.”