And the Answer Is...

Question: How many days can you go without paying your mortgage before you lose your home?

Answer: 492

That’s according to the latest data released by Lender Processing Services for October 2010.  And that number is just the average. In some states, particularly those with judicial foreclosures, that number is over 500.

Consider this. In January of this year, the average days in default before foreclosure was 410. That’s about a 20% increase and we’re not even all the way through 2010. Even more depressing? The average days in default in January 2008 was 251—which means that time-frame has essentially DOUBLED in a little over two years!

All indicators are that this number will continue growing in the near future. While no one is happy about going into foreclosure—homeowners, Realtors or banks—it’s mind-boggling that some people can loyally pay their mortgages month after month while others can live mortgage-free for nearly a year and a half before receiving repercussions. I don’t know anyone on the planet who would not like to skip paying their mortgage for more than a year! It’s astounding to me, especially in light of this recent robo-signing scandal, that it takes the banks and mortgage servicers this long.

It’s kind of reminding me of the “just wait until your father gets home” threats of childhood. The longer the gap between getting busted and actually receiving the consequences, the less meaningful the impact. What’s worse, this could actually cause borrowers in default more than 90 days, but not yet officially in foreclosure, to just stay in default and take the foreclosure hit. Or basically encourage borrowers barely scraping buy (or significantly upside down on their loan) to choose default as well. The way the system is currently set up, it’s almost asking for hundreds of thousands of additional foreclosures.

The mega banks claim to have thousands on staff to deal with those in default and yet, clearly, they are still overwhelmed by the sheer volume. Until a solution is created and implemented—even if it’s just to fast-track all the foreclosures in the hopes of cleansing the system—real estate and the economy will continue to be broken.