It's been about seven years now since the housing market crash. Since then millions of properties have been foreclosed on. Now the housing market is recovering and foreclosure rates are declining. Some of the hardest hit areas however are still struggling to fully recover from the housing market crash. Currently New Jersey has the highest share of foreclosures that are either delinquent or in foreclosure. Florida comes in second and New York comes in thirds. While a high foreclosure rate typically viewed as a bad thing, it could be indicative of a state's way of handling foreclosures rather than the strength of that state's economy.
Two ways to handle foreclosures
It's up to each state to decide how to handle foreclosed properties. While there are a lot of little differences among all the states, there are two basic ways to handle foreclosures. States either handle foreclosures relatively fast, or they require a judge's approval and the process is relatively slow. There's a lot of debate as to which way is best for the housing market.
Faster foreclosures
A lot of people are in favor of the faster foreclosure process. Consider that the three states with the most mortgages in delinquency or foreclosure have the longest foreclosure process. Because of the bottleneck in the process, there are typically more foreclosures in the pipeline at any given time. Proponents of the faster foreclosure process are quick to point out that economies are strongest when assets are owned by people who can use them productively.
A major advantage for states that have a faster foreclosure process is that foreclosed properties end up in the hands of new owners before they can fall into disrepair.
Slower foreclosures
While a faster foreclosure process is ideal when the housing market is recovering, there is plenty of evidence to suggest that the opposite is true when the housing market is crashing. When the housing market first crashed, the hardest hit states were those with the fastest foreclosure process. With so many homes suddenly on the market, housing prices fell dramatically and many homeowners found themselves underwater on their mortgages.
Which is best?
Unfortunately, there isn't an easy answer to this question since their effectiveness seems to depend a lot on other circumstances. Some states have changed their foreclosure process during the crisis to adapt as needed. For instance, New York and New Jersey initially had a slower foreclosure process. When the market began to recover and they were not recovering as quickly, they sped up the process. Perhaps the best approach is to be flexible with the foreclosure process as needed
The right way to handle foreclosures
Re: The right way to handle foreclosures
