Strategic Default Firm Warns of Foreclosure Backlog
Thanks to a 10% monthly increase in the S&P/Case-Shiller index – the first increase in seven months – and inventories of existing homes for sale falling to near-normal levels, some media outlets and market pundits are declaring an end to the housing crisis.
However, a San Diego-based firm that assists struggling homeowners with strategic defaults isn’t buying it. According to a recent survey of its 7,000 clients, YouWalkAway.com is reporting significant foreclosure backlogs that CEO Jon Maddux predicts will result in lower home values.
“Eighty-five percent of the homeowners we’re working with are in pre-foreclosure and have not made a mortgage payment for an average of 14 months,” Maddux said.
The survey suggests foreclosure problems are budding in states that haven’t yet grabbed headlines. For example, almost no YouWalkAway clients in Minnesota have received foreclosure notices, even though they haven’t made a house payment in 12 months on average, Maddux said.
In North Carolina and Maryland, 88% of clients have not received foreclosure notices, despite being an average of 13 months and 19 months delinquent, respectively. In Texas, YouWalkAway clients on average are 16 months past due, but 85% aren’t yet facing foreclosure.
Compare those numbers to Florida, where the average client is 17 months delinquent, but 55% are in foreclosure, Maddux said. In California, clients are 15 months delinquent on average with more than 40% already in foreclosure.
“Unfortunately, new homeowners and investors may see a significant devalue of their properties due to the substantial amount of shadow inventory,” Maddux said. “The longer it takes to begin the foreclosure and process the property through the system, the longer it will take for housing market recovery.”