Foreclosure Watch: It’s Not as Bad as You Think

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As the U.S.’s foreclosure crisis plays out, homeowners are slowly catching up on paying their mortgages.

Looking for some more tidbits of positive news after yesterday’s bad housing numbers? Well, last week’s Mortgage Bankers’ Association’s National Delinquency Survey, which tracks the lateness of mortgage loans, showed that the number of loans that were 90+ days delinquent dropped for the fifth straight quarter.

A drop in these “serious delinquencies,” as they’re known, can come in one of two ways: one is that some loans are cleared out by foreclosures being completed, and they’re not being quickly replaced by new foreclosures. The other, and even happier, possibility is that homeowners who are late on their payments are curing their delinquencies by paying their mortgages.

In other words, we may be seeing a smidgen of recovery. [time-link title=”(Read about whether the foreclosure crisis could be ending)” url=]

How will we know which it is? Well, Jay Brinkmann, the chief economist of the MBA, argues that if you skim off the data from the hardest-hit states, you see recovery. “A market on the mend” was his statement to Bloomberg TV.

But how can we weigh the assertions of someone who works for the real estate industry? (Disclosure here: While I’ve been a business journalist for two decades, including a stint at Fortune, I’m also a realtor.)

One answer is to take a closer look at the numbers. Of course national foreclosure stats are, for lack of a better word, lumpy. There are huge discrepancies between states. Part of that has to do with economic conditions — Rust-Belt Michigan got hit harder by the recession than North Carolina’s Research Triangle.

Still another part has to do with how foreclosures are handled: in states that require a “judicial process” — where the foreclosure process takes place via legal filings — foreclosures are tending to snail, rather than snake, their way through the courts.

For example, the average time to process a foreclosure in New Jersey, a judicial foreclosure state, is now more than 900 days, according to Realty Trac.

So the most interesting data to me is what’s coming out of Florida. That’s the hardest-hit state in terms of the housing crisis — home, if you will, to nearly one-quarter of the foreclosures in the country.

Also, Florida is a judicial foreclosure state, so it’s got a long timeline for clearance. As of the first quarter, it was taking an average of 619 days to process Florida foreclosures.

And yet the great news from Florida is that serious delinquencies (which are down in Arizona, California, Michigan, and New Jersey) are down there, too. I think homeowners have a moral imperative to pay their mortgages. But practically, if you lived in a state where you could get away without making a house payment for nearly two years — well, the temptation might be strong to forget to mail the check. [time-link title:”Read another reason why foreclosures are dropping: banks are taking longer to process them” url=]

Yet, that’s not the picture that came through in the latest housing report. The fact is, the number of 90-day+ delinquencies in Florida declined. Finally, a little bit of sunshine coming in from a state that’s been a poster child for the housing crisis.