To add to the delays, now some non-judicial states are seeing a big jump in backlogs due to new state laws that while attempting to safeguard borrowers, are delaying the foreclosure process in general.
Nevada instituted a new law criminalizing faulty foreclosures. Banks are taking a big breather there, resulting in the foreclosure backlog doubling in the last 8 months. Massachusetts, a non-judicial state, saw a similar jump after new state foreclosure legislation, and California's Homeowner Bill of Rights, modeled on Nevada's law, went into effect in January 2013, so it too will likely see a slowdown in the clearing of distressed loans.
It all brings into question the recent jump in home values, which is being caused by a huge drop in supply of distressed homes.
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Sale prices of homes jumped nearly 10 percent in January, according to CoreLogic. Even with the price surge, inventories continue to drop dramatically across the nation, perhaps because would-be sellers want to see just how high prices will go before testing the waters.
Housing bulls seem unconcerned about the so-called "shadow inventory" of distressed properties, but perhaps they should be. Of the loans that were in foreclosure in January 2012, 42 percent still are, according to LPS. Just 33 percent moved to bank repossession or other forms of liquidation.
In addition, while new mortgage delinquencies are falling in non-judicial states, they are increasing almost 20 percent in judicial states, according to Lender Processing Services.
"The line that we would draw goes through home prices," Blecher speculated. "If those back logs are having any impact on home prices that could drive new problem loans as well."
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