Lenders, Struggling Under the Weight Of Too Many Defaults, Begin Stretching Out Foreclosure Timelines

Bloomberg is reporting that mortgage lenders are so swamped with foreclosures that they are stalling their own foreclosure cases.

The Mortgage Bankers Association notes that the number of borrowers at least 90 days late on their home loans rose to 3.6 percent at the end of December, the highest in at least five years. Lenders, however, took an average of 61 days to foreclose on a property last year, up from 37 days in the year earlier, according to RealtyTrac Inc., a foreclosure database in Irvine, California.

Good news? Maybe not. Mark Zandi, chief economist at Moody’s Economy.com, notes that lenders who allow owners to stay in their homes are distorting the record foreclosure rate and delaying the worst of the housing decline. “We don’t have a sense of the magnitude of what’s really going on because the whole process is being delayed,” says Zandi. “Looking at the data, we see the problems, but they are probably measurably greater than we think.”