The blog of the Urban Institute
May 9, 2012

In the foreclosure crisis, finding balance between speed and equity is critical

May 9, 2012

Rates of serious mortgage delinquency are rebounding in the 100 largest U.S. metro areas, after a downward trend between December 2009 and June 2011. Ultimately, two key factors drive this indicator: the number of homes entering the foreclosure process and the speed at which the delinquencies can be resolved or properties can be returned to the market for sale.

Roughly half (46) of the 100 largest metros are in judicial foreclosure states, where a court makes the final decision about a property before it can exit foreclosure. Metros in judicial states—such as Florida, New York, Illinois, and Ohio—tend to have higher serious delinquency rates than states that do not require court action.

States enact judicial foreclosure laws to ensure due process and provide the opportunity for the borrowers to negotiate with the lender—but this process also means delinquencies take longer to resolve.

States face a tension between speed and equity because borrowers need time to navigate the complex legal system and loan modification process to save their homes, if possible. On the other hand, properties in foreclosure for too long are more likely to become vacant and hinder a neighborhood’s ability to recover from the crisis quickly. Finding the balance between speed and equity is a difficult, but nonetheless critical, task to restoring the health of housing markets.


As an organization, the Urban Institute does not take positions on issues. Experts are independent and empowered to share their evidence-based views and recommendations shaped by research.


I agree that there needs to be balance between the speed at which processes allow for foreclosed property to re-enter the market and time taken to assist owners. However, if one is to defer to one option over another, it has to be to the modification process. The housing stock in most metros currently is so oversaturated that additional properties added does not help the market. It is more beneficial to communities that homes sold before the housing crash stay out of the market to avoid negative impact on the appraisal values of existing stock, to reduce buyer options and to level the floor established by stimulus programs. Banks have to accept, forceably if necessary, that they have to work to keep new foreclosures from happening-even at a lost. Everyone is loosing during these times and private industry exception is becoming to risky an endeavor to the health of the country to continue.