Buying A House-Is The Freeze on Foreclosures Good News?

Buying A House-Is The Freeze on Foreclosures Good News?

Is the freeze on foreclosures good news? From and economic perspective, I'd say no, it is not good news. Based on reports from people involved in the paperwork handling, many servicing the back room operations for lenders did not execute the procedures with enough care and attention to detail. However, halting the process for 100% of cases going through foreclosure just creates a larger problem that will take longer to resolve.

I do not come to that conclusion lightly. It is unfortunate that many are in the process of loosing their home. And the lenders and the servicers should not escape without penalty either. I'd be for something like treble damages where homeowners can show lender errors lead to foreclosures or threats of foreclosure. Just my opinion.

Buying a house that is lender-owned involves a winner, a partial winner, and someone who losses a house.

Typically the person buying the house is the winner. They get a house by paying something less than market value. True they pay foreclosure value, but that is almost always less than what anyone else in the neighborhood would expect to pay for a non-lender owned property comparable to the foreclosure.

The partial winner is the lender. Some may think the lender is a partial looser since they did not get full value for the funds lent to do the deal. But they did get the property sold and if sold as a short sale rather than foreclosure, they probably made out even better in terms of earning more on the transaction. Lenders make more money helping people buying a house than they do recovering houses due to foreclosures.

The original property owner suffers the greatest loss. They loose their domicile or, in the case of investment property, a potential revenue generating asset.Nobody goes into buying a housewith the expectation that they will potentially loose the house. Obviously some are unprepared for the responsibilities of owning a house. But sometimes life events just disrupt ones ability to stay on track.

So what happens with the Foreclosure Freeze? On the surface, this maybe good for some homeowners on the brink of foreclosure. Maybe some time and resources can be put toward getting back on track with payments and perhaps a work out arrangement with the lender.

For those thinking of buying a house that is a foreclosure, the time needed to clear the paperwork has been increased significantly, in my opinion. I believe title insurance policies will be more expensive, if available at all. Based on the political climate, there are lots of people who need a villain, so the lenders are good targets for now. They make great campaign contributors, but they provide fewer potential voters than does the public at large.

This freeze will likely have the unintended consequence of increasing the shadow inventory of houses that are almost ready to hit the market. So that means a longer period of time to get houses on the market,  If too much supply is released, prices will crater. Too much supply chasing too little demand. Can you say real estate recovery in 2016 boys and girls? I hope this is wrong.

Looking for a great real estate agent in the San Antonio area? Let  me Google that for you.
       

©By Wayne Johnson-All Rights Reserved*Buying A House-Is The Freeze on Foreclosures Good News?* October 2010