Some homeowners have discovered that if they want to default on their mortgage payments and let their home fall into foreclosure, they might be able to do so and get away with it for years, according to a recent CNN Money report.
“Thanks to record long waits for foreclosure reviews this year, 40 percent of homeowners in default have been sitting pretty in their homes for the last two years without paying a dime," writes Business Insider.
The foreclosure process can take much longer depending on where you live. In Florida, the process averages 1,027 days -- nearly three years. In D.C., foreclosure averages 1,053 days and delinquent borrowers in New York often stay in their homes for an average of 906 days.
Nationwide, the average time it takes to process a foreclosure -- from the first missed payment to the final foreclosure auction -- has climbed to 674 days from 253 days just four years ago, according to LPS Applied Analytics.
"It is happening and it's happening more frequently," says Chantay Bridges, a senior real estate specialist with Clear Choice Realty & Associates. "[Homeowners] know they have a least a year [for the foreclosure to go through], at minimum, and people are taking advantage of it."
This isn't to say that all borrowers are defaulting. But still, nearly 40 percent of homeowners in default have not made a payment in at least two years, according to LPS.
Some market analysts are convinced homeowners are simply not paying because they're aware of how long it will take for the lender to foreclose. There is rarely a dispute over non-payment, said David Dunn, a partner at law firm Hogan Lovells in New York, who represents banks and other financial institutions in foreclosure cases.
"In my experience, they never say, 'I'm not delinquent' or 'I want to pay my bill but I'm confused over who to send it to,' or 'Oh my God, you mean I didn't pay my mortgage?' They're not in technical default. They're in default because they're not paying," he said.
Outside of the long wait time for the foreclosure to process, there are other tactics being employed by consumers. Filing bankruptcy, pushing back short sale dates and demanding that lenders produce more documentation, consumers have been able to delay the inevitable (but in most cases, the system itself drags on long enough that homeowners don’t even have to employ any of the tactics mentioned in the above).
Business Insider explains how it works:
The loan modification process alone can take a year or longer and often consumers won't bother making mortgage payments in the process. After all, if you show banks you can afford you monthly mortgage, why would they consider modifying your loan?
The key here is to keep in touch with lenders throughout the modification process. Once you're in, they won't contact your creditors about missed payments.
Walking away from a home that costs more than it's worth could be the best option for some consumers desperate to downsize and start fresh.
Should you decide to stall the process because of a desire or inability to make your payments, there are websites like YouWalkAway.com designed to help you through the process.
Although lenders can choose to pursue late payments, it’s a rarity. Trying to force late payments out of a borrower costs time and money--two things the lenders can't really afford in this enviroment.
"You don't often see [lenders] standing in a court of law taking mom and dad to court," Bridges says. "They're going to try to resell the home or something along those lines."
But there are some who take exception to the claim that some homeowners are "gaming the system."
"Most people do everything in their power to maintain these homes," said David Berenbaum of the National Community Reinvestment Coalition. "They take in relatives, get second jobs and even rent out rooms."
What really needs to be done, he said, is for lenders to work harder to find solutions that allow delinquent borrowers who can afford to make reasonable mortgage payments to keep their homes.