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» VISIT US ONLINE @ DSNEWS.COM COVER STORY INSIDE THE BELTWAY INDUSTRY INSIGHT Doing More Harm Than Good INSIDE THE BELTWAY Drawn-out foreclosure time frames deliver zero benefit to the housing industry or the economy at large. By Corry Schiermeyer Longer foreclosure time frames are detrimental to the economy, to communities, and have no real difference in outcome than foreclosures with shorter time frames, as the majority of homeowners facing foreclosure still lose their homes, a recent study finds. The report was commissioned by the Five Star Institute in association with the membership of the Legal League 100, a leading trade association of attorneys. "Effect of Extended Foreclosure Timelines on Local Economies, Communities, and Home Values" finds longer foreclosure timelines are resulting in increased community blight, slower housing recovery rates, and decreased economic growth. Adam Codilis, chairman of the Legal League 100 government relations committee, summed up the report by saying, "While trying to keep people in their homes is an admirable goal, and something we should all strive for, the policy of extending foreclosure time frames is not cost efficient when taking into account the overall detrimental impact to the economy and communities. The correlation between prolonged timelines and depressed economic growth can no longer be ignored, and we must work to find balance between consumer protection regulations and accelerating foreclosure." The study finds, in addition to the negative economic impact, communities in states across the country with longer foreclosure time frames face increased crime rates, lower educational attainment, and increased housing vacancies. The housing economy is on the rise. In fact, one in seven housing markets has returned or surpassed pre-recession activity. However, in many states and communities where longer foreclosure timelines are allowed, the housing economy grew almost 20 percent more slowly than those states with shorter foreclosure time frames. For example, gross state product was lower in states with longer foreclosure time frames and lower than the national average of gross domestic product in the same time period. But states with shorter foreclosure time frames were growing at a faster rate than the nation as a whole. The trend remained constant even during the recession. The economies of states with shorter foreclosure time frames contracted at a much slower rate than those states with longer foreclosure time frames. In all, the economies in states with shorter foreclosure time frames have fared better than those with longer time frames. The same pertains to home values. In the years following the recession, home values in states with shorter foreclosure time frames rebounded at a higher rate than those in states with longer foreclosure time frames. By increasing property values at a higher rate, states were able to fare better across economic indicators, including consumer spending. This leads to a more positive impact on the overall economy. Lending decreases in states with longer foreclosure time frames, as well. When banks are uncertain about recovering their costs when borrowers fall into default, they are less willing to lend. Shrinking the amount of capital in the market leads to slower economic growth and a slower recovery. Longer foreclosure time frames also have a negative societal impact. With homes sitting vacant longer, coupled with a tightened lending market, communities experience increased crime, a reduction in educational attainment, and overall blight. In the months and years following the recession, policymakers were trying desperately to stop mass foreclosures and stabilize the housing market. However, by allowing increased foreclosure time frames, the same policymakers were slowing the economic recovery—and often exacerbating the decrease in home values, leading to slower economic growth, increased municipal expenditures, and a decreased quality of life in the communities. For the economy to grow, and for the housing market to flourish, states across this nation need housing policies that are based on sound economic principles that lead to economic growth and increased homeownership. Longer time frames for foreclosures have proven the opposite, slowing the economic recovery. Federal policymakers should work with the states to encourage a standardization in the treatment of foreclosures. By keeping foreclosure time frames on the shorter side, fewer than 540 days, the landscape in the market will not only benefit our state and national economies, but homeownership as well. Corry Schiermeyer is a public affairs professional with more than 20 years' experience, primarily in Washington, D.C., having worked on Capitol Hill and at the White House. For eight years, she served in various senior-level positions in the administration of President George W. Bush. She is currently the chief of staff for the Five Star Institute. 61

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