subject: Foreclosures: Dealing With The Crisis [print this page] Reports suggest by end of 2012 about 4.25 million properties would go through foreclosures. It is time to stop and analyze where exactly the problems lies and not blame only the lenders for the complete issue. Considering the whole issue holistically, it can be observed that a foreclosure that use to take 289 days to close about five years ago now takes 492 days and, in some cases, 600 days to close.
Even then, there are people who want the banks and courts to put a halt on foreclosures to avail more extended time. This lengthened time is not solving the problem instead would deteriorate the housing market situation even further in the long run. A question to consider here is, if a homeowner is staying in a particular house for more than a year, does he/she require more extension to sort out the issue? Lenders are trying to help borrowers through modifications, but not every homeowner can receive a modification and not every house can be saved from a foreclosure.
Recent reports state that extended time is only going to put the housing market through more troubled waters. In a study done by Robert M. Stanton, Michael Seiler, and Andy Collins, professors at Dominion University, they mention We find that the greater the time a foreclosed property is allowed to remain on the market, the greater the probability the market will fail.
The study also shows that a vacant house in the market leads to depreciation of neighboring properties. Another study done by Daniel Hartley states those houses in 300 feet proximity of a foreclosed home is likely to suffer the most before the auction of the delinquent house takes place.
Hartley also mentions The former homeowner will most likely rent or move in with family for a number of years and "the foreclosure will result in an additional home on the market, but no addition to the pool of potential buyers. Therefore, it is imperative to save houses from seizure, and to do this, more borrower protections need to be brought into practice.
In Virginia, there are many borrower protection available, hence making the market less vulnerable to the crisis. As an optimistic solution, although a bit unrealistic, Hartley suggests that owners have an equity stake in their homes, which can be achieved through principal write-downs or by a quick foreclosure process and sale of the property at the current market price to a buyer who will live in the home.
