Tens of thousands of squatters throughout the United States may soon find themselves thrown into the streets as a $26 billion mortgage settlement.
Under the settlement the nation’s five biggest mortgage lenders have agreed to speed up the foreclosure process for tens of thousands of homes by creating new strict guidelines that banks must follow when repossessing homes.
Included in the settlement are Bank of America, JPMorgan Chase, Citibank, Wells Fargo and Ally Financial.
Many previous homeowners have been able to stay in their homes since fall 2010 after the robo-signing scandal allowed bank employees to sign off on foreclosures without proper documentation. After that scandal broke banks put the brakes on the practice, slowing future foreclosures to a crawl.
Because of the slow down in foreclosures as banks and mortgage lenders reviewed their practices many people stayed in their homes for months and even years without making payments. Under current processing speeds the average home takes 370 days to foreclose compared to half that time five years ago.
Some squatters have fared better than others, in Florida the average time spent in a home is 861 days while New York residents have spent 1,056 days in their homes after being served a foreclosure notice.
With courts more likely to accept foreclosure filings under the new settlement rules foreclosure rates are picking up in many areas, especially in cities where banks were previously afraid to file some cases for fear that their documentation would be rejected by the judge.
In the meantime homeowners in states most affected by the increase in foreclosure rates could see the value of their homes fall even further as more homes enter the market. Home pricing provider Zillo estimates that home values could fall by 3.7% by the end of 2012 with a bottoming out effect in early 2013.
As I had previously reported it is believed that mortgage financing rates have bottomed out which means many of the homes entering the open market could stay there for long periods of time as banks and mortgage lenders struggle with increasing mortgage rates and a market that managed to slow even after rates dipped below 4% for new home and refinance options.