Banks want to unload foreclosures as fast as possible
TEXT OF STORY
Kai Ryssdal: Whichever way the elections do turn out tomorrow, there’s at least one point of economic agreement between businesses and the White House. Both the financial industry and the Obama Administration want to move past the current mortgage paperwork mess. They want to get all those home foreclosures out of the system. The housing market has been stuck the past couple of weeks because banks cut corners with their foreclosure filings. Foreclosure sales have stalled because nobody’s sure who owns what.
Today, Fitch Ratings reported that because of the voluntary suspensions banks have imposed to review bad paperwork, banks could be taking three to six months longer than normal to sell distressed homes. The White House wants foreclosures taken care of on the theory that that’ll help the wider economy recover. But why do banks want to move so fast on foreclosures?
Marketplace’s Jennifer Collins has the answers.
Jennifer Collins: First, no bank wants to be a landlord — especially when it’s taking over the ownership of a distressed home.
Brian Battle follows banks for Performance Trust Capital Partners.
Brian Battle: If you live in a house and you’re not paying for it, you’re not going to fix the gutters. So all those expenses build up.
And the bank has to fix those gutters and pay the property taxes, not to mention legal fees. Rick Sharga of RealtyTrac says that can cost $1,000 day.
Rick Sharga: It’s actually a lot more expensive in a lot of cases for a bank to own a property than it is for the average home owner.
And when houses aren’t selling, no one knows how much they’ll be worth. Jack De Gan of Harbor Advisory says that means uncertainty for the banks.
Jack De Gan: They don’t want assets that they’re not used to dealing with and have a difficult time valuing. And real estate is both.
With nearly a year’s backlog of unsold homes, adding hundreds of thousands of foreclosed homes to the market may not seem like its in the banks’ best interest. Even so, Brian Battle says the banks’ strategy is to…
Brian Battle: Sell it as fast as possible because it seems like housing is a declining market. So you’d rather sell it today than a year from now when prices are generally declining.
Fitch Ratings expects home prices to decline another 10 percent over the next two years, but the damage could be worse depending on how quickly foreclosures are sold. RealtyTrac expects new foreclosures to stay high through next year.
I’m Jennifer Collins for Marketplace.
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