The Federal Reserve Bank of Cleveland released a report earlier this month finding that adoption of a fast-track foreclosure process for abandoned properties in the states of Ohio and Pennsylvania would save the states at least $24 million annually.
A fast-track foreclosure process streamlines the foreclosure process in judicial foreclosure states—states in which residential foreclosures must be approved by the Circuit Court. The foreclosure process has a longer timeline for judicial foreclosure states. Illinois foreclosures, for example, took an average of 815 days to complete the process in 2013.
“All the signs in the housing market seem to be pointing the right way, except the amount of time loans are spending in the foreclosure process.”
The report notes that fast-track foreclosure processes are meant to address the additional costs associated with a foreclosed property that sits vacant, including:
- Accelerated depreciation of the value of the foreclosed property
- Depreciated value of surrounding homes, a problem documented in Woodstock’s 2005 report, “There Goes the Neighborhood: The Effect of Single-Family Mortgage Foreclosures on Property Values”
- Loss of property taxes by taxing authorities due to the loss in property values
Speeding up the foreclosure process minimizes these costs, removes ambiguity in the responsibility for the property’s maintenance, and allows the property to return to productive use.
Illinois’ fast-track foreclosure process went into effect on June 1, 2013, and shortens the foreclosure process to as little as 90 days. While it’s too early to say what kind of effect the policy has had, it is expected to reduce the average length of the foreclosure process for confirmed abandoned properties by 18 months.