Full-Blown Foreclosure Moratorium Unlikely

Real Estate Broker/Owner with ERA Atlantic Realty

Bank Repo Open House SignThe chances of a full-blown Foreclosure Moratorium are slim and none despite all the retoric and hopes from many politicians desperate for re-election.  According to an internal communication sent to Bank of America's REO Vendor Partners, BOA's delay in foreclosure action is likely to be brief...less than a month and only to confirm the process is sound.

Because there is much confusion about what the latest issues are and most people don't read beyond the headlines, this most recent cry for taking the foot off the accelerator of foreclosure auctions is likely to fall on deaf ears.

First, since when has the government ever been able to force lenders to incur additional financial losses without compensation?  It would certainly extend the red ink if lenders were prohibited from foreclosing, taking possession and turning those non-performing loans into real estate and that real estate into recovered proceeds upon re-sale.

I take it that the government is done with hand outs so it would likely have little jurisdiction or ability to force an across the board moritorium even if it could. 

Also weighing on the minds of all would be the effect of delaying more inventory from clearing out of the system.  Right now estimates are that we have 3 years of REO inventory.  Tack on delays from a moratorium and the economic effect would be likely worse.

The internal memo from Bank of America in essence assured its vendor partners that the delay was temporary and then further explained the real issues.  While I can't re-post that without permission, the highlights touch on a few key points...

First, Bank of America will review foreclosure documents in all states, and as of Oct. 9, they stopped all foreclosure sales until assessments are done.

They reiterate that there is no moratorium...simply they intend during review to continue the foreclosure process on delinquent borrowers, but not proceed to judgment or with a foreclosure sale at this time.  The expectation of timeframe for this assessment to be complete is likely short...probably no longer than November 1, 2010.

For those homeowners who aren't candidates for modifications or short sale, this will likely only give another 30 - 90 days of delay to the inevitable.  And so it appears to be much ado about nothing.  For more information about Metro Atlanta Foreclosures or questions about this post, contact me at info@atlanticrealty.net or visit our website at www.atlanticrealty.com

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Comments (3)

Leslie Ebersole
Swanepoel T3 Group - Saint Charles, IL
I help brokers build businesses they love.

In many states, all sales of foreclosures have been halted, voluntarily or otherwise.In the 23 Judaical foreclosure states, my state of Illinois being one of them, the AG owns the foreclosure process and compliance with the laws.  The Illinois AG has "asked" the major lenders to hold off on closing REO sales. Since the AG controls the foreclosure process, she could take action to delay sales if she suggests that a crime would take place if the property was knowingly and illegally transferred to a purchaser.

There are many BofA memos. (1) The "talking points", which are meant to pour oil on troubled waters. is probably what you are referring to. A BoA LO posted parts of 2 memos in comments on my post two days ago.  But  then there are other memos going to area people and reo agents. Another memo said that they are halting 2,000 closings this week.

Touche to the pr person who wrote there is no moratorium, just don't proceed with "completing" foreclosures. Very smooth, don't you think?

This news has already changed the landscape for months or years to come.

Oct 12, 2010 11:41 AM
Kent Dills
Broker, Dills Real Estate - Bellingham, WA
Real Estate 817-495-8028, Bellingham, Washington

Our thoughts are much the same on this issue Greg.  I was just telling my wife and partner last night that "I bet this delay is for about 2 or 3 weeks and then B of A will be right back on track"! 

Might be a tad longer than 2 or 3 weeks but not much.  I'm willing to bet on it!  ;-)

Insightful and timely post!  Good job!

Oct 12, 2010 12:06 PM
Greg Kurzner
ERA Atlantic Realty - Atlanta, GA

Hi Leslie:

My post intended to comment on whether this latest stumble by lenders will likely spawn a moratorium of future auction transfers similar to those from 2008 and 9.  You are right that forcing lenders to go back and document a proper foreclosure action by halting the eventual 3rd party sales of already-foreclosed homes until it is substantiated is far-reaching in implication.  Your comments on potential delay and even setting aside of sales of REO assets currently in pending sale status to 3rd party buyers are very insightful in light of the judicial procedure in Illinois.  We here in Georgia haven't heard anything from any of our clients that would signal potential sale postponements of our REO properties currently under contract and I am certainly hoping we won't. 

It seems as you've said that Attorneys General where they can, have or might intervene based on the affidavit issue to slow the process down so they can evaluate what happened.  Yikes.  It would be something akin to waiting on short sale approval.  We all know how long that can take.  If REO's in pending sale to 3rd parties status are held in limbo, it is going to ruin our day for sure.  It could likely take a while to evaluate each case and likely many of the contracts could evaporate along the way. 

Thanks for your comment!


Oct 12, 2010 02:10 PM