Following the multi-state mortgage settlement announced February 09, 2012, local markets will perhaps not to be flooded by the waves of foreclosure. Entering the markets slowly will be the huge inventory of one to two million foreclosures.
Expecting that after new processing standards are placed in the succeeding months as the product of the agreement, leading housing economists and experts who follow foreclosures closely said servicers will initiate processing properties that have been in limbo but will avoid distracting local real estate markets.
The chief executive officer of Pro-Teck Valuation Services in Waltham, MA, Tom O’Grady stated, “Right now the drain is still clogged and I think the market will move sideways after the agreement takes effect. Some places, like many Florida markets, have bottomed out. Elsewhere, there are so many variables I don’t see foreclosures all hitting at once. Rather, it will be a flat economy with foreclosures siphoned into markets over an extended period of time.” Pro-Teck’s recent analysis said that it is how the inventory of distressed real estate affects the path to recovery and the “new normal” for the housing market, being one of the principal queries on the present housing crisis,.
The analysis detailed, “A possible headline of the current crisis is that the stage after foreclosure has taken place and properties are awaiting transition back to the market via an REO (real estate owned sale) has become a critical ingredient in any forecast on the pace of the housing recovery and the return to the “new normal”. The rise in the prominence of this dimension of the broader distressed inventory stems from the unprecedented growth in the number of foreclosures and the slow and uneven pace at which they are placed on the market to ultimately become REO sales,”
The chief economist of CoreLogic, a firm that approximates the size of the inventory at 1.6 million properties, Mark Fleming said that a 4.1 percent fall of home prices happened last year, but if all distressed sales, foreclosures, short sales and deed in lieu transactions are put out of the picture, by 1 percent, prices would have dropped.
Fleming, as he speaks at a Capitol Hill briefing subsidized by Radian Guaranty on February 08, 2012, he mentioned that the agreement will “create a set of certainties in the servicing world” and prior to the said agreement servicers were anxious to do anything that might put them in danger. They wouldn’t want to do anything that would interrupt prices in the present. Fleming, while pointing out that approximately half of the foreclosures are owned by Fannie Mae and Freddie Mac who just made public a pilot project to sell bulked foreclosures to inventors as rental properties, proposed that Fannie and Freddie that to decrease REO inventory processed after the agreement, they might do more even rental or lease-to-purchase bulk sales.
The executive director of the Hope Now Alliance, Hope Schwartz, approved and that to cut their inventory without affecting local housing values, private sector servicers might also do rental-to-own or bulk rental transactions. She also noted that Consumer Financial Protection Bureau’s development of new standards will aid in decreasing foreclosures among at-risk buyers. Lenders providing a single point of contract to consumers are required by this one essential change.
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