What a mess! Has everyone gone mad?
A lot of folks are asking me what this all means - especially to them!
First, what has been going on for a couple of weeks, is revelations that some of the banks have been putting people at a desk with a stack of papers and a pen, forging approval signatures on hundreds of unread papers a day. This could, and should, invalidate the foreclosure since the procedures have been faulty.
As a result, some of the banks stopped reselling the foreclosed properties they have in their REO (Real Estate Owned) departments until they can sort through the paperwork, and make any needed corrections. They realized that folks are not going to be so eager to buy a foreclosed property until the potential title issues get resolved. And Title Companies are not going to touch a sale of a foreclosed property without intensive scrutiny. Better to solve the problems if any, first.
The first freezes on these REO's were in the states where there are judicial foreclosures. That means the foreclosure petitions have to go through the court system before there is an auction. Now some of the banks are just freezing any resales of REO's until they do their due diligence and correct any potential title problems.
So what does this all mean?
One question folks have asked me, What properties are affected by the freeze?
The properties affected are the existing already foreclosed homes sitting in the REO departments. There is NO change to pursuing foreclosures and notices of default to homeowners who are behind. Foreclosures will proceed.
What will not proceed is the banks reselling the foreclosures they buy at the auctions.
And, the biggie, How will this impact the real estate market?
Now we leave facts and get into opinion...my opinion is
1- Demand for homes that are not REO's will increase.
2- Short sales will become even more attractive, both to the buyers and to the banks.
3- People will be reluctant to buy any house at a foreclosure auction or any REO until this mess is cleared up.
4- Title companies will scrutinize sales and resales of REO's more than ever.
5- This could take weeks or years...if the past experience we have had with banks and their inefficiencies predicts the future, it could be a loooooonnnnng time!
6- The market will at some point begin to have the REO's listed for sale, and values will be impacted.
7- There will be even more areas with vacant and boarded up houses.
8- Some people will make a killing cleaning up the mess.
9- REO agents will be hurting for a time.
In the end, the freeze itself is not the culprit, although many will be impacted by it. The culprit is still the housing buying frenzy and the careless mortgage process of the early 2000's.
Long range, it is vital to correct the mistakes that have been made and create clear title to get this housing debacle cleaned up. Some folks will get their homes back because there was fraud perpetrated on them. Some will still lose their homes, because they cannot afford them. The process needs to be fair.
I have one more prediction:
Congress will get involved in legislating some sort of amnesty for past foreclosures if this thing drags on and on...
What are your opinions and predictions?
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