Delays to the Foreclosure Process: A Growing Problem for Lenders

Since the foreclosure rate spiked in 2008, the average length of the process has gone from nine to 15 months on average. Excessive delays, which are essentially a breach of contract, overwhelm lender plaintiffs with higher costs and overburden already strained civil court dockets. Moreover, the delays double the stock of delinquent mortgages — and even adversely affect the employment rate of mortgagors, who are able to stay out of the workforce longer while the foreclosure process plays out.

Here are some of the more common tactics used to delay the foreclosure process.

  • Claiming a frivolous or inapplicable affirmative defense.

Homeowners often cite violations of RESPA or the Truth in Lending Act, creating a window of more time for document review or pushing the case on to the court docket.

  • Filing last-minute motions to amend the borrower’s affirmative defense.

Last-minute motions take advantage of the liberal policy regarding pleading amendments — the plaintiff can move for summary judgment only when the pleadings are closed — and are a common stalling tactic used throughout the civil court system.

  • Filing for last-minute bankruptcy protection.

Filing for Chapter 7 bankruptcy can delay foreclosure proceedings several months because the lender has to file a motion with the bankruptcy court in order to lift the stay or move to dismiss the bankruptcy petition on the grounds of bad faith.

  • Inundating the court with bad faith petitions.

However absurd the petition a defendant files, the court must address it before the foreclosure case is able to proceed. Because that involves oral arguments before the court, the court must schedule a hearing. In some jurisdictions, just getting a date can take months.

  • Seeking unnecessary discovery requests or depositions. 

A good example would be the mortgagor who complies with the hearing date that is set, only to cancel and file an emergency motion at the very last minute, delaying the foreclosure sale at auction.

The image ingrained in the public’s mind following the collapse of the housing market is that of a gullible, unsuspecting family who signed documents that were deceptive. That is a romantic notion that portrays homeowners as hapless victims.

In reality, many mortgagors also act deceptively, using the legal system to stall the foreclosure process in order to profit from months of living freely in a residence or deliberately defaulting in order to force a beneficial loan restructuring. Their actions translate into higher fees and declining property values for the market as a whole.

About Peak Foreclosure Services

Peak Foreclosure Services, Inc. offers a wide range of default servicing solutions, including in-house judicial foreclosure assistance,  post foreclosure services, and loss mitigation. They work for a diverse range of lenders and mortgage servicers in eight states — Arizona, California, Idaho, Montana, Nevada, North Carolina, Texas, and Washington. With each member of their team specializing in a specific real estate area, and a technological and detail-oriented approach, Peak delivers fast, customized, expert service second to none.