High Default Rate Means Some Banks Are Waiting to Foreclose
- Apr 04, 2008
Washington, D.C.–Banks are so affected by the U.S. housing crisis that many are beginning to delay reacting to homeowners mortgage defaults, according to Bloomberg. The amount of borrowers at least 90 days late on their loans hit its highest level in at least five years, increasing to 3.6 percent at the end of December, according to the Mortgage Bankers Association in Washington, D.C. For the first time, that amount is almost double the amount of homes that have entered foreclosure.But banks aren’t anxious to take over vacant homes. Lenders face a number of headaches with foreclosed properties, including legal fees, property maintenance and mortgage, insurance and tax costs, which can add up to 15 percent of a home’s value. In addition, it can take months for the legal aspect of a foreclosure to be completed.However, lenders who let owners remain in their homes are warping the record foreclosure rate–and delaying the housing decline by pushing the number of delinquencies and, eventually, the foreclosure rate, even higher, according to Mark Zandi, chief economist at Moody’s Economy.com.