This may be the last New Year's that Courtney Scott, 65, a retired nurse, gets to celebrate in her modest suburban Atlanta home.
Two days before Christmas, as her quest for an affordable mortgage entered its fifth year, Bank of America sent her another foreclosure notice—her fourth.
Though the housing market continues its halting recovery, thousands of homeowners such as Scott are still struggling in the aftermath of the worst financial collapse since the Great Depression. Even as the overall foreclosure level has retreated to pre-2006 levels, the average length of cases already in the pipeline has increased.
But that may be changing.
As the recovery in housing prices has helped lenders whittle down a glut of seized homes, they've begun moving more properties to auction and selling them more quickly. In states with the biggest backlogs—those where judges review all home seizures—the pace of new auctions has risen steadily since last July, according to Daren Blomquist, who follows foreclosures at RealtyTrac.
"Lenders know there's now a much better chance they can get those properties sold, so they're moving to do that," he said.
Though the number of new foreclosures entering the pipeline continues to slow, the pace of cases proceeding to auction has picked up in 19 states, including Oregon, Massachusetts, Utah, Connecticut, Delaware and New York. Many of those cases have been grinding through a legal morass for years. The average foreclosure takes 1,037 days in New York, 929 days in Florida and 828 days in Illinois.
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In many of the longest-running foreclosures, the paper trail was scrambled amid the housing frenzy and original documents weren't properly executed. Other cases remain gridlocked by multiple mortgages, unpaid tax bills or an unclear chain of ownership. Tangled in legal limbo for years, they are among the thorniest to resolve.
"The easier ones tend to get done sooner," said Mark Fleming, chief economist at CoreLogic. "It gets harder and harder to fix the remaining foreclosures."
During the peak of the crisis, with buyers on the sidelines and prices falling, lenders' inventories of unsold homes swelled. That meant many of them had little to gain by speeding up the foreclosure process and adding to a glut of empty houses that had to be maintained.
"In some cities, there are fines against the lender if the foreclosed property is not taken care of ... that can add up very quickly," Blomquist said. "If the lender can't take on that property and maintain it property, it may benefit them to allow the homeowner to live there and not foreclose until they're ready to [take possession]."
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But as prices have recovered, the backlog of bank-owned homes—which peaked at more than 1 million in September 2010—has been more than cut in half. Many lenders are increasingly confident about moving seized houses into the marketplace, Blomquist said.
Lenders trying to manage the flow of new seizures can't predict how long conditions will remain favorable. Housing prices have rebounded in most markets, but not to their pre-2007 peaks.The strength of pricing improvement and of demand is unclear. And record low mortgage rates, which helped revive the moribund market last year, appear to have bottomed.
In many markets, supplies of homes for sale were tight because many underwater homeowners couldn't list their properties if it meant selling for less than the value of their mortgage. More of them are coming to market now, competing with lender inventories.
Some foreclosed homes may never sell. Some of the longest cases involve properties that have been all but abandoned and may never find another owner.
"There are lien issues, or mold or asbestos, or all kinds of things that make it a challenge to sell it—that may be part of the reason they ended up in foreclosure in the first place," said Fleming at CoreLogic. "These are often the homes that end up given back to the municipality and bulldozed."
More of the remaining foreclosures are in judicial states, where a judge must review all foreclosures. After widespread reports two years ago of sloppy paperwork and document fraud, many of those judges began giving the process closer scrutiny.
Those abusive practices were supposed to have ended then, when 49 states, as well as Bank of America and other lenders, agreed to a series of sweeping new guidelines. But in his latest review, in December, the monitor assigned by the court to enforce the agreement reported that the banks were still not fully in compliance.
The monitor, Joseph Smith, added four guidelines to help address the failures. They include loan modifications, billing accuracy and the requirement that borrowers be given a single point of contact.
"The banks still have additional work to do in their efforts to fully comply with the National Mortgage Settlement and to regain their customers' trust," Smith said in a statement
Bank of America was among those cited for not complying with rules covering the kind of loan modification Scott has been pursuing.
Following Smith's report, the company issued a statement saying that it "has worked diligently to comply with more than 300 servicing standards set out in the national mortgage settlement, and to ensure that our customers in need of assistance know they are being treated fairly and receiving timely and accurate decisions with respect to any relief they are seeking."
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But the government's response to the crisis—from federal loan modification programs to state laws aimed at slowing the process—has largely run its course. Some states, including Florida, Illinois and New Jersey, have recently reversed course with "fast-track" legislation designed to speed up foreclosures.
"We're close to that tipping point where policymakers and people in the industry—as well as the homeowners—realize that foreclosure may be the only way to deal with these unresolved cases," Blomquist said.
With five years invested in her foreclosure odyssey, Scott said she's determined to see it through to the end—one way or the other.
"I have been in it so long," she said. "I'm not willing to throw in the towel."