37% of Delinquent Borrowers Are 2 Years Behind in Payments (Or More!)

A CNN Money article posted online today states that of the roughly 2.2 million delinquent home loans,  34% of borrowers have not made a payment in 12 to 23 months while another 37% of the borrowers have not made a payment in 2 years or more. This means that nearly 3/4 of the borrowers in foreclosure have not made a house payment in over 1 year and the lender has still not foreclosed! I assume some of these borrowers are trying to sell their homes via a short sale and perhaps the lender has postponed the foreclosure. Some will be successful, therefore removing many of these homes from the foreclosure pool. How many, I do not know. However, the remainder of these borrowers are probably just waiting for the lender to record a Notice of Default or take some other action. They’re living “rent free” and biding their time. It’s reasonable to think that if a borrower is only 1 or 2 months behind, they can still catch up or be helped with a loan modification but if a borrower is 2 years behind, they’re too far gone. If they couldn’t afford their mortgage payment for the month, how are they going to come up with 24 months worth of payments?

Some experts argue that all the programs aimed at avoiding foreclosure are just delaying the inevitable and that the lenders should be accelerating foreclosures to clear the glut. Delaying foreclosure simply increases the number of delinquent homeowners who will never catch up. That’s certainly true, as many homeowners have no desire to keep a home that is underwater so they have no interest in pursuing a short sale or loan modification. Delaying the foreclosure simply allows them to remain in their home longer without making payments. I don’t know what the answer is but in my experience, the government programs like HAFA and HAMP have been dismal failures and they have not helped anyone I know avoid foreclosure.

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