Foreclosures and a fresh cup of coffee – what could be better?
For the eighth episode of our popular #CoffeeWithCasey webinar series, we discussed the latest need-to-know information about foreclosures. According to a recent market report
, with interest rates on the rise, foreclosure filings may reach levels that haven’t been seen since before the pandemic. If rates continue to climb and more loans go into default, it’s critical for lenders to know their rights and proper action steps.
Shareholder, Chicago office managing attorney, and host Casey Hicks
can help you navigate these uncertain waters. She sat down with attorney Ricardo Johnstone
from Weltman’s Cincinnati office to break down a few key topics, including:
- The connection between rising interest rates and foreclosures
- Increases in loss mitigation applications
- How to partner with Weltman and utilize our foreclosure forwarding program
Are higher interest rates impacting foreclosures?
The U.S. Prime Rate
has significantly increased from 3.25% in March 2020 to 8.5% today. The increase means the interest charges on any given mortgage will go up by hundreds, if not thousands, of dollars per month. It can be a major jump for borrowers, especially those who carry a variable rate versus fixed rate.
It’s clear that there is a correlation between the increased interest rates and rising foreclosures.
Not only has there been a rise in housing market foreclosures in the third quarter of 2023, but also year over year.
What is the average timeline for a foreclosure?
Every state handles the foreclosure process differently. In Ohio and Kentucky, the majority of county courtrooms process foreclosures in roughly 7-12 months.
The biggest delay in these two states tends to be service (i.e., trying to get the party served with the foreclosure notice). Once they are served, the debtor has a period (20 days for Kentucky and 28 days for Ohio) to file a response. After this point, you can proceed with a motion for summary or default. Depending on the county, it can take anywhere from one week to nearly seven weeks to rule a judgment. Indiana is often a bit shorter, with foreclosures taking roughly 6-8 months. Again, every state and county handles it differently.
According to Casey, Illinois, and Wisconsin foreclosure cases take an average of about 18 months. However, the case length in these states varies from county to county. While some counties have mandatory mediation programs or case management hearing requirements, others are required to offer personal service.
How should loss mitigation applications be handled?
It’s important for lenders to be prepared for the increase in loss mitigation applications due to the requirements of RESPA Regulation X
Loss mitigation is the process of borrowers and lenders working together to avoid a foreclosure. The procedures are implemented by servicers who must comply with RESPA Regulation X. The procedures include:
- Informing borrowers of the documents and information they must provide to complete the application;
- Providing borrowers with a reasonable date to submit documents; and
- Within five days of receipt, servicers must provide a written notice receipt of a loss mitigation application and clear information on whether the application is complete or incomplete.
If a servicer does receive the loss mitigation application more than 37 days before a foreclosure sale, then, within 30 days of receiving the application, a servicer shall:
- Evaluate the borrower for all loss mitigation options available to the borrower; and
- Provide the borrower with a notice in writing stating the servicer’s determination of which loss mitigation options, if any, it will offer to the borrower. The servicer shall include in this notice the amount of time the borrower has to accept or reject an offer of a loss mitigation program. If applicable, the borrower has the right to appeal the denial of any loan modification option as well as the amount of time they have to file such an appeal and any other requirements for making an appeal.
The most common forms of loss mitigation are loan modifications, forbearance agreements, and deed-in-lieu of foreclosure.
Our team is constantly monitoring the world of foreclosures and is happy to connect with you. You can contact Casey
at any time.
This blog is not a solicitation for business, and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.