Will Bank's Procrastination on Foreclosure Backfire?

The incredible flood of mortgage defaults has caused banks to foreclose slowly. This is either because they're just overwhelmed and doing the best they can, or because they're intentionally dragging out the process in the hopes that home prices will remain stable. But according to an article in American Banker, their procrastination is becoming quite obvious. And it could end up hurting them:

By postponing the date at which they lock in losses, banks and other investors positioned themselves to benefit from the slow mending of the real estate market. But now industry executives are questioning whether delaying foreclosures -- a strategy contrary to the industry adage that "the first loss is the best loss" -- is about to backfire. With home prices expected to fall as much as 10% further, the refusal to foreclose quickly on and sell distressed homes at inventory-clearing prices may be contributing to the stall of the overall market seen in July sales data. It also may increase the likelihood of more strategic defaults.

Read the full story at American Banker.