Cleveland Federal Reserve Bank Examines Benefits of Fast-Track Foreclosure

Foreclosure REO

On March 6, the Federal Reserve Bank of Cleveland published a staff commentary that examines how the implementation of a fast-track foreclosure process in Ohio and Pennsylvania would affect the housing markets in those states. The researchers explain that the current foreclosure laws in Ohio and Pennsylvania create “deadweight losses” for those state’s economies, i.e. costs without corresponding benefits, associated with vacant, foreclosed homes. Specifically, the researchers estimated for those two states: (i) the number of foreclosures that sit vacant; (ii) the amount of deadweight loss associated with vacant homes; and (iii) annual savings under a fast-tracking framework that eliminates deadweight losses. Their findings suggest that fast-tracking foreclosures would “shave between 8 and 43 days off the average duration” of vacant homes in Ohio, and between 9 and 20 days in Pennsylvania, eliminating an estimated $24 to $129 million of deadweight loss in Ohio, and $24 to $54 million in Pennsylvania.