Why Is It Taking Mortgage Companies So Long to Foreclose on Houses?

This is a question that many people are asking these days, why is it taking the mortgage companies so long to foreclose?  As bankruptcy lawyers we deal a lot with people who are trying to save their homes as they enter the foreclosure process. So knowing how long it takes until a home enters into the foreclosure process is important for many of our clients. There are several reasons for the delay in foreclosures.

Needless to say, the slow-down in the economy has resulted in the loss of numerous jobs throughout the country.  For those lucky enough to keep their job, deep pay cuts have often occurred.  Add predatory lending practices from a few years ago and it all spells disaster for countless Americans and the lending institutions or mortgage companies.

Unfortunately, many Americans found they could no longer afford the American dream of a home.  With no way to make their mortgage payments, many people began defaulting on their mortgage loans and lending institutions began the process of foreclosing on many homes.  As the economy has continued to suffer, the sheer number of foreclosures has increased to a point that mortgage companies are simply overwhelmed by the volume.

As you may have read or heard in the media, mortgage companies have been heavily scrutinized regarding their foreclosure practices over the past few years.  The practice referred to as “robo signings”, where mortgage company officials signed off on foreclosure proceedings without fully investigating the accuracy of the documents they signed, has been investigated by federal regulators as well as state attorney general’s from all 50 states.  In several cases, bank officials admitted to signing foreclosure documents without reviewing them or verifying their accuracy.  Although this practice is not condoned, most of us understand how this may have happened.  The officials signing the documents may have believed their signature was merely a formality, and that the documents had already been verified for accuracy before reaching their desk.  So with a pen in hand, and a huge stack of foreclosures on their desk, the robo-signing began.

The investigation into robo-signing foreclosures disclosed many disturbing scenarios.  There were cases where homeowners were actually not behind on their mortgage payments but were facing foreclosure due to errors in paperwork.  In other cases, the homeowners were in the process of or had recently completed loan modifications with the mortgage companies while on a parallel path to foreclosure.  Needless to say these practices outranged many people.  The outcry resulted in the government’s investigation into the foreclosure process and then a self-imposed moratorium by many mortgage companies.

If you are like most homeowners, your mortgage company has changed at least once since you obtained your loan.  In many cases, the loan has changed hands two, three and even four times.  As a result, paperwork has often been misplaced or simply lost during the process.  These issues may delay the foreclosure process, since the legal documents needed to complete the foreclosure cannot be located.

As a result of these issues and others, most mortgage companies and lending institutions are completely overwhelmed with the sheer volume of foreclosure files.  As a result, it is taking some mortgage companies a year or more to foreclose on a home.  Obviously the timeframe varies, so there is no guarantee it will take the mortgage company that long to foreclose on your home!