The media has been reporting on issues involving foreclosures…but what does it mean to you? “Houston, we [may] have a problem.”
Because of the flood of foreclosures that have needed to be processed, there were employees who were signing off on thousands of foreclosures attesting to the accuracy of the documents without having much personal knowledge of what they contained. These employees are known as “robo-signers.” It now appears that many homes may have been foreclosed on without proper procedures being followed. The result? Several major lenders have suspended foreclosure procedings across the country. Now tens of thousands of foreclosures – in all stages of the process – have come to a screeching halt.
1. For homeowners in the foreclosure process: It appears that some banks will be backing away from following through with normal foreclosure processes until they can be assured that their paperwork is in order. Estimates are calling for a 30-90 day delay….this does NOT mean that each particular situation will be delayed, it is unknown at this time how many properties are affected or delayed.
2. For buyers who are in the process of purchasing a foreclosure: A portion of the inventory has been frozen. Some stories report people who were set to close and now are in limbo. The issue is that the banks need to make sure they actually own the properties legally before they can complete the sale. There will likely not be a large number of cancellations, however delays are to be expected.
3. If you are selling a home: The removal of foreclosures from some markets may help bolster overall housing prices. However, the longer the delay to return these properties to the market, the harder it may hit the market once a flood of homes comes back on the market. While there could be short term gains for sellers in some markets, this is not an ideal time to throw a wrench in the recovery of the housing market with the economic challenges the country is facing today. The longer the delay, the longer the recovery – pushing it back months, if not years.
1. Whether politicians are going to push for a moratorium on ALL foreclosures. If so, for how long? Expect longer delays should this happen.
2. How many homes were mistakenly foreclosed on? Experts are saying that the odds are that it is NOT a large number of homes affected. However, if instances where errors or fraud are uncovered, this will likely cause mass delays. Same if some former homeowners start to file class action lawsuits.
The National Association of REALTORS has issued a statement urging the freeze to be lifted.