By David Lee Matthews
July 19, 2012
The state’s drawn-out foreclosure process has gotten even longer.
It now takes lenders an average of 647 days to repossess a foreclosed home in Illinois, according to second-quarter data from Irvine, Calif.-based RealtyTrac Inc., an online listing firm for distressed properties. That’s up from an average of 628 days as of the first quarter and 504 a year earlier. Illinois’ is the fifth-longest time among the 50 states.
The longer wait is one reason many experts don’t expect the Illinois housing market to recover broadly anytime soon. With delinquent properties continuing to pile up amid an overwhelmed court system, the downward pressure on prices in hard-hit areas isn’t likely to ease.
“The thing the market hates the most is uncertainty,” said RealtyTrac Vice-president Daren Blomquist. “The longer you have that cloud of delinquent properties sitting there in limbo, the longer I think it will prolong the housing market slump.”
Foreclosures have taken longer nationwide as lenders suspended many cases while they negotiated a $25 billion settlement with government officials over loan servicing problems. The deal was reached in February.
Nationally, the average time between default notice and repossession rose to 378 days in the second quarter, compared to 318 days a year earlier, according to RealtyTrac.
It takes longer here because of the state’s legal system. Illinois is a so-called judicial state, where lenders must work through the courts to foreclose on properties. In non-judicial states, banks can avoid many of the time-consuming legal steps, like a sheriff’s sale, required in states like Illinois.
Yet the delay is good news for homeowners who face foreclosure, allowing them to live free in their homes for a long time. Based on the RealtyTrac data, the average homeowner hit with a foreclosure suit today won’t lose his house until April 26, 2014.
Some argue that the delay creates an incentive for struggling homeowners to default on mortgages on purpose. If they know they aren’t going to get kicked out for nearly two years, some may decide it makes more sense to pay credit-card bills or other debts than to keep making mortgage payments on a house worth less than its debt, the logic goes.
The number of Illinois homes entering the foreclosure process continues to increase. Foreclosure filings in the state rose 36 percent in June from a year earlier, though they were down 8 percent from May, according to RealtyTrac. The filings represent one in every 355 housing units in Illinois, the fifth-highest rate in the country.
The foreclosure wave “adds more cases to an already stressed court system, and at the same time it means there’s going to be a lot more volume of distressed properties coming on the market,” says Tom Feltner, vice-president of the Woodstock Institute, a Chicago-based research and advocacy organization.
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