According to recent reports by both RealtyTrac and Moody’s Investor Service, timelines for foreclosures are getting longer. In the fourth quarter of 2012, all loan servicers experienced an increase in foreclosure timelines, and judicial states in particular helped to drag down the average length of time. States like New Jersey, Florida, Pennsylvania, and Ohio are continuing to work through a significant backlog of foreclosures, and were some of the slowest states during the fourth quarter according to Moody’s.
Bank of America did experience an improvement in their foreclosure timelines, which Moody’s credits to their transfer of non-performing loans. GMAC logged the longest foreclosure timeline in all categories of loans, due in part to their high concentration of foreclosures in judicial states. For residential mortgage-backed securities, their report also shed light on the importance of net present value (NPV) models in the loss mitigation process.
Moody’s focused on the role of NPVs in the current market, saying, “The NPV model and related assumptions used by mortgage loan servicers play a critical role in a servicer’s decisions about defaulted loans.” They say that NPVs can vary in accuracy though, and as such, they have advised servicers to “update their model inputs according to the most recent reliable information available.”
Timelines for REOs remained relatively unchanged in the fourth quarter, although Moody’s did cite shorter timelines in both California and Florida, two states that were hit especially hard during the real estate market crash. Moody’s said, “We expect REO liquidation timelines to improve at a slow and steady pace going forward as the broader housing market improves as well.”