Fisher on Stalled Foreclosures

Linda Fisher (Seton Hall) has posted Shadowed by the Shadow Inventory: A Newark, New Jersey Case Study of Stalled Foreclosures and Their Consequences (Irvine Law Review) on SSRN.  Here's the abstract:

This project tests the extent to which bank stalling has contributed to foreclosure delays and property vacancies in Newark, New Jersey. Previous studies uncovered considerable evidence of stalled or abandoned foreclosures in other areas of the country. Several found that abandoned foreclosures correlated positively with property vacancies. This is the first study to trace the disposition of each property in the sample through both public and private sources, allowing highly accurate conclusions to be drawn. I reach a similar conclusion to the previous studies: without legal excuse or ongoing workout efforts, banks frequently cease prosecuting foreclosures. The stalled foreclosures in my study, however, do not strongly correlate with property vacancies.

This study is small in scale, involving a random sample of one hundred foreclosures filed between 2007 and the first half of 2009 in a single neighborhood, but my results can be extrapolated to the City of Newark, and to some extent, similar lower-income urban neighborhoods in northeastern states with judicial foreclosure regimes. The national banks that securitized mortgages during the housing boom followed standard practices of targeting communities of color for the worst subprime loans. They also followed national servicing and foreclosure practices adapted to each state’s laws. Further research can confirm the applicability of this hypothesis to other areas of the country. Nonetheless, there is no disagreement that indefinitely stalling foreclosures — without notice to those affected — is poor policy.