eCreditDaily |
“There is a considerably larger volume of loans in the foreclosure process in judicial states — where a judge presides — and that appears to be impeding home price recovery in those states.
An analysis by the Federal Reserve Bank of New York shows that the average number of days that a mortgage is 90-plus days delinquent at the time the foreclosure process is started is roughly comparable in judicial and non-judicial states.
But a key distinction is in the rate out of foreclosure, or put differently, the average number of days a loan or property remains in the foreclosure process.
“One potential explanation for this relationship is that potential homebuyers in the judicial states recognize that a large number of distressed sales have yet to occur, and this consideration has influenced the prices they are willing to offer for homes currently on the market,” writes analysts Diego Aragon, Richard Peach and Joseph Tracy.
Throughout the financial crisis, “the flow in and flow out” of foreclosures remained much closer in the non-judicial states, the analysis found. This explains why the judicial states continue to have a relatively high stock of properties in foreclosure.
In non-judicial states, key decisions are not processed through the courts, but rather are governed by statute.
Judicial states carried higher foreclosure rates in early 2013, a sign that these cases remain in flux much longer in these states than in the non-judicial regions.
“New York, New Jersey, and Florida (judicial states) stand out as the most extreme examples of this phenomenon,” the report said.”