S&P Study Finds Residential Foreclosures Are State Issues
ByExplanation of judicial and non-judicial foreclosure process:
http://www.all-foreclosure.com/help/judicial.htm
Here is a report written by Carrie Bay. Great information about how the foreclosures are being affected by the States laws.
Standard and Poors (S&P) has released a study that delves deep into the nuances of foreclosure at the state level, namely how timelines and loan losses vary between judicial and non-judicial systems.
The ratings agency notes that differences in foreclosure proceedings by state have taken center stage as of late, particularly with the affidavit issues that came to light last fall and prompted foreclosure suspensions by several major servicers in judicial states.
Bank of America was the only servicer to also temporarily freeze foreclosures in non-judicial jurisdictions, however most servicers examined both judicial and non-judicial cases when conducting their internal reviews into robo-signing allegations.
S&P’s analysis found that foreclosure timelines are approximately twice as long in judicial states versus non-judicial states.
When comparing the average time before foreclosure begins and the average time a property spends in REO, the empirical data shows little difference between judicial and non-judicial states, S&P notes. That leads the agency to conclude that the difference in the duration of the foreclosure process between judicial and non-judicial states is primarily attributable to the nature of the foreclosure proceedings.
According to S&P, roll-rate analysis shows that approximately three times as many homes remain in foreclosure in judicial states when compared with non-judicial states 18 months after foreclosure has been initiated.
Currently, the total percentage of outstanding loans in foreclosure in judicial states is more than double the percentage of foreclosures in non-judicial states, according to S&P’s report.
While foreclosure differences vary greatly between the two groups, S&P found no meaningful difference in the number of loan modifications between judicial and non-judicial states. That’s despite the fact that lenders in judicial states may have a greater incentive to pursue a restructuring or loan modification instead of foreclosure relative to lenders in non-judicial states, according to S&P.
“Theoretically speaking, the increase in time, cost, and potentially higher loss severities associated with the foreclosure process in judicial states may make loan modifications more efficient with respect to maximizing a loan’s value,” S&P explained in its report.
The agency’s study did conclude that loan loss severities are typically lower in non-judicial states, and S&P says recent data suggests that the difference in loan loss severities between judicial and non-judicial states is widening.
“In our view, all else equal, RMBS [residential mortgage-backed securities] bonds with exposure to asset pools with a higher concentration of loans in judicial states will likely have higher and more back-ended losses relative to pools with a higher exposure to non-judicial states,” S&P stated in its report.
The agency says, however, that recent court cases involving foreclosures may have a greater effect on foreclosure timelines and loan loss severities in non-judicial states than in judicial ones, which could narrow the differences between the two groups.
For the purposes of S&P’s study, the agency used the Mortgage Bankers Association’s list of judicial and non-judicial states, and used a non-judicial classification for states listed as both judicial and non-judicial.
S&P’s judicial bucket consists of 21 states and the District of Columbia. Most of the judicial states are in the East and Midwest, and most of the Western states fall into the non-judicial bucket.
Sphere: Related Content
