Posted by: rgmorgan | October 6, 2010

Foreclosure Freeze ! Will it Help the Real Estate Market

As I’m sure you have read about or perhaps heard about on TV, many lenders have put a freeze on home foreclosures. There are various reasons for doing this including CYA for the lenders where hundreds of foreclosures were signed off on daily by individuals who didn’t or couldn’t take the time to read the documents associated with said foreclosures. Below is an article regarding what this could mean.

RISMEDIA, October 6, 2010—(CBS MoneyWatch)—On Friday, Bank of America announced that it would suspend foreclosures in 23 states while it amended filed paperwork. That makes B of A the third major bank in two weeks to put its foreclosure process in limbo. Two days earlier J.P. Morgan Chase announced it would freeze foreclosures on more than 50,000 homes currently in receipt of a foreclosure filing. Last week, Ally Financial Inc. (the former GMAC Mortgage) also froze foreclosures.

All three banks have admitted to problems in the processing of foreclosures, including the use of so-called “robo-signatures,” employees who job it is tp solely sign foreclosure docs without reviewing the paperwork.

Today, Ohio’s Secretary of State Jennifer Brunner asked federal prosecutors to investigate foreclosure irregularities in her state. Ohio has been pushing lenders to do better. On September 17, Ohio Attorney General Richard Cordray announced that the state court had affirmed its case and legal strategy of holding loan servicers accountable in the foreclosure crisis.

So will Chase’s and Ally’s foreclosure freeze ultimately fix the housing market? That’s one theory put forth in today’s New York Times. But, I’m not so sure. What will happen in the short run is that all of the banks will put a moratorium on the foreclosures. Law firms that have become foreclosures processing machines in places like Florida, will have a lot of extra time on their hands.

I suppose, in the best of all worlds, slowing down or freezing foreclosures might actually force lenders to take a harder look at ways they might keep folks in their homes, like doing more loan modifications. That would reduce the so-called “shadow inventory” and keep housing values from crashing again.

Again, that’s the best possible scenario. I think it’s too soon to tell. And, there’s a lot that’s going wrong with the economy right now (jobs, anyone?) which could complicate the view in any rose-colored glasses.

Right now, those who have Chase and GMAC on the top of their loans are getting a reprieve.

Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!

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