Economy and the Foreclosure Process
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In the News
According to real estate news, there is some good news for the states who have been experiencing the highest foreclosure rates around the country. Five of the United States largest mortgage lenders have recently agreed to a $26 billion settlement with the U.S. Government for foreclosure abuses, and the states experiencing the highest foreclosure rates will benefit from the settlement the most. This bit of news provides a certain amount of economic optimism for those now facing foreclosure.
The settlement will come in the form of loan forgiveness and refinancing and should help some homeowners to avoid mortgage default and foreclosure. As optimistic as it may sound, some economists believe this is only a small step in the right direction.
Importance of Understanding the Foreclosure Process
Before you get too optimistic about improvement on home foreclosure, it is important you understand the foreclosure process. You must understand that state laws primarily drive the process.
In states that are required to use the court system in the foreclosure process, they have the longest process, and therefore, the highest foreclosure rates. That means states with the longest process are the states that have a glut of homes on the market waiting to be foreclosed. In those states, it has been hard to get loan modifications and economic optimism has been running very low.
The average length of time it takes for a foreclosure across the United States is 140 days. The average time it takes the top eleven states with the highest rates of foreclosure is 220 days. Nine out of the eleven states with the highest foreclosure rates use the judicial foreclosure process.
The Housing Market Condition Plays a Role in Economic Optimism
The housing market condition of a state appears to play a meaningful role in whether or not homeowners have any kind of economic confidence. According to statistics provided by Fisery Case-Shiller, home values in states the most worried about the economy fell from the third quarter of 2010 to the third quarter of 2011. States with the five worst housing markets were among the most pessimistic about the economy. The reverse can also be true. In states where home values are improving, as portrayed by a total of seven states in the same time frame, four out of the seven were among the most optimistic about the economy.
Other Factors Influencing Economic Optimism
Obviously, states that have experienced a lower unemployment rate, a lower poverty rate, and a positive increase in employment for the past year are a lot more optimistic about the economy. These states tend to have less foreclosures and maintain home values when their median income is higher than the median average of all the states in the country.
Conclusion
Considering only the foreclosure process to economic optimism can be too simple a measurement in determining any lasting relationship. When observing states with the highest foreclosure rates, some of the states with the highest rates like New York, Illinois, South Carolina, Indiana, and New Jersey, all in the top 11 foreclosure rates, are average in their economic optimism. Hawaii, also in the top 11, is above average in their economic optimism.
