Thursday, October 28, 2010
Wednesday, October 13, 2010
Here is a great Q & A from Sign On San Diego regarding the foreclosure moratoriums. If you're purchasing an REO or working with a buyer on an REO, check with your Title and Escrow Company on when they will allow you to close.
Q&A: What's going on with foreclosures?
Some voices call for nationwide halt, others warn of 'catastrophe'
Originally published October 11, 2010 at 5:44 p.m., updated October 11, 2010 at 5:44 p.m.
What's going on with foreclosures?
The White House will be meeting this week with officials from all the major federal banking regulators - including the Office of the Comptroller of the Currency and the Federal Resreve Bank - to mull over how to address growing questions over how to handle the nation's banks foreclosures.
Over the past two weeks, some of the nation's largest lenders have stopped seizing homes in 23 states, and Bank of America took the lead in imposing a nationwide moratorium until it holds an internal investigation on how the foreclosures were approved.
Senate Majority Leader Harry Reid has called for a nationwide halt to foreclosures and California Attorney General Jerry Brown - on the campaign trail for the governor's seat - has called for the seven biggest lenders to stop foreclosures in the state.
So far, the White House has balked at any nationwide moratorium, and the banking industry has warned that it would be "catastrophic" if such a shutdown occurred. An estimated 5 million to 7 million homes are currently pending foreclosures nationwide, compared to 200,000 foreclosures that have been affected by the 23-state moratoriums.
But after recent revelations about flaws in the foreclosure process, pressure is mounting to find a solution to what appears to be a wide-reaching problem. Here are answers to questions consumers might have about foreclosures.
Q: Why have banks started freezing some foreclosures?
A: The immediate problem comes from so-called “robo-signers,” who often signed thousands of foreclosure actions each month without checking to see that all the documents were in order. The banks insist that the vast majority of these homes have been in default for as long as 18 months and that a significant number of homes are investor-owned properties that have never been occupied. But critics charge that the banks have also foreclosed upon homeowners who were paying down their loans up to the moment they were told their homes would be seized.
Q. How did this problem take place?
A. Lenders say they were unprepared for the massive wave of defaults and foreclosures that occurred over the last few years. After cutting back workers during the early phase of the mortgage crisis, they were did not have the staff needed to adequately handle the foreclosures, so they started rubber-stamping them.
Q: How long will it take to resolve the robo-signer problem?
A: BofA - the only lender to have halted foreclosures in all 50 states - estimates that it could resolve the issue in as quickly as two or three weeks. Stan Humphries, an analyst with Zillow.com, an online real estate database, estimates that it could take 60 to 90 days for the entire industry to deal with the "robo-signer" problem. But Humphries adds that the process could take longer if political pressure mounts for a wider-reaching examination of foreclosures.
Q: What other problems have surfaced with foreclosures?
A: More than seven states are now investigating claims that lenders used forged documents to speed foreclosures. In addition, because of the way that mortgages have been outsourced over the past decade, it is sometimes unclear who has the right to foreclose - the lender or the loan-servicer. Bank analysts say that's a minor glitch, but it has been become the subject of several lawsuits.
Q: How have California mortgages been affected?
A: So far, BofA is the only lender with a moratorium that affects California. Other lenders, including Ally Financial and JP Morgan Chase, have halted foreclosures in the 23 states that require a court’s approval before a home can be seized. California is not one of those states. But Attorney General Brown has called for all banks to stop foreclosures until they can prove they’re complying with state law, which prohibits lenders from recording notices of default on any mortgages made from 2003 through 2007 unless the lender contacts or tries diligently to contact the borrowers to see if they qualify for a loan modification.
Q. What effect will this have on the housing market? And what does this mean to people who want to buy a foreclosed home?
A. Foreclosure sales currently account for 43 percent of the California market, according to RealtyTrac, a real estate data firm in Irvine. To the extent that these problems begin to show up in California, it could put a temporary roadblock in front of a sale. One problem: title insurance firms are shying away from any sale involving a questionable foreclosure. But real estate analysts say that as long as the problem is solved quickly - say, 60 to 90 days - it should have relatively little impact on the market. Rick Sharga, RealtyTrac's executive vice president, said he's noticed little impact from the moratoriums that have recently gone into effect.
In my opinion, this will not be a nationwide catastrophe as the news puts it, but rather a hiccup in the REO process and real estate market. The real estate economy is a must fix for the US government as it creates tons of revenue for local and federal governments. It also creates jobs in the form of contractors, builders, real estate professionals, title and escrow companies, appraisers, the list goes on and on.
To have a hiccup like this should only serve as a short lived stall in production.