According to a story at Housingwire, a recent study by research firm Corelogic concludes that those states with more cumbersome and lengthy foreclosure processes impose "hidden costs" on homebuyers.
"Extended disposition timelines impose operational costs on servicers, carrying costs on investors in the mortgages, and in some cases, significant legal risk and compliance costs," said Mark Fleming, chief economist for CoreLogic.
"The likely result is more expensive mortgages and possibly increased rationing of credit based on the additional costs of disposition, which may vary dramatically by local foreclosure process requirements," he added.
In the short run, however, all the homes tied up in foreclosure restricts supply and, for the immediate future, stablizes or actually increases home prices. In some states and regions (California, the South and the Southwest), a steep drop in REO, due to investor demand, has also helped housing prices.
Unfortunately, over the long run, in addition to the possible increase in borrowing costs in long-foreclosure states, the results are not favorable. An earlier Housingwire piece that addressed a study by LPS, claimed that judicial foreclosure states were lagging in recovery versus non-judicial foreclosure states. These studies support Housingwire's publisher Paul Jackson's long-asserted contention that housing markets would have recovered more quickly than they have if foreclosure was allowed to run its course and inventory was cleared more quickly. In other words, the desire to "do good" over the short term may be prolonging the pain and adding new pain to the residential housing market.