Despite the recent news that Bank of America has decided to halt foreclosures in 23 states across the country due to a faulty "robo-signer" program, speculation continues to spin that the worst of the housing market is behind us. These problems of robo-signers and the repackaging of loans sold to investors does not sound like the road to recovery, but rather another setback that has created a ripple effect throughout the real estate industry.
According to Beacon Economics founding Principal Christopher Thornberg, the high level of affordability is likely to drive demand and reduce the stock of excess inventory, ultimately resulting in the need for new housing, a rise in prices, and a pickup in new construction. Advisor from the firm state, "While prices may fluctuate modestly over the next several months, we believe the worst of the housing crisis is behind us," says Beacon Economics Research Manager Jordan G. Levine. "We expect prices to stabilize around current levels and likely be higher in the next 12 months." Source: Beacon Economics (10/11/2010). This statement was released nearly a week after the announcement from Bank of America. Needless to say, it could take years for the market to rebound and for new construction to significantly increase.
Another article from the Washington Post states, "Fannie Mae and Freddie Mae will force lenders to pay for any losses that the GSEs incur due to a breakdown in the foreclosure process. According to Anthony Sanders, a George Mason University real estate professor, "The mortgage giants could lose billions of dollars in a prolonged delay because they would be unable to sell properties that have slipped into foreclosure." Source: Washington Post, Zachary Goldfarb, Dina ElBoghdady, and Ariana Cha (10/12/2010).
It appears there is no lack of speculation about the direction of the housing market, but where does this leave us and who are we to believe? Long story short, nobody really knows. The best advice we can offer friends and clients is to read everything, but don't believe everything you read. Keep your eyes and ears open. Most importantly, consult a realtor you can trust before making any real estate decisions. We are here to assist you in these turbulent economic times and help you make the best decision for you and your family. Recovery is a challenging and slow process, so stay informed and surround yourself with advisors you can trust. As your neighborhood realtor of 25 years, it would be our pleasure to work with you.
See the latest article below from the Union Tribune for the full story.
Bank of America halts foreclosures across country
Senate leader calls on other major lenders to follow its example
By Dean Calbreath
Originally published October 8, 2010 at 11:55 a.m., updated October 8, 2010 at 7:27 p.m.
Bank of America, the largest bank in the country, halted foreclosures in all 50 states today, prompting the leader of the Senate to call on all other major lenders to follow its example.
Over the past week, BofA and four other leading lenders - Litton Loan Servicing, PNC Financial Services, Ally Financial's GMAC Mortgage and JP Morgan Chase - suspended most or all of their foreclosures in 23 states, because of fears that the processing of the foreclosures may have been flawed. Unlike California, those states require court approval before a house can be foreclosed upon.
But today BofA became the first lender to extend its foreclosures nationwide, saying that it would not start seizing homes again until it completed a thorough internal review of its foreclosure procedures.
Senate Majority Leader Harry Reid, D.-Nev., praised the bank "for doing the right thing" and urged all other major lenders to suspend foreclosure procedures nationwide.
Earlier this week, Reid had called on the lenders to suspend foreclosures in his native Nevada, which has been one of the states hardest hit by the mortgage crisis.
In the meantime, title insurers - who provide protection to homeowners and lenders during property transfers - have begun clamping down. Stewart Title Guaranty Co. said today it would impose tougher standards on issuing policies on properties that have been foreclosed upon. Old Republic National last week told its agents not to insure properties foreclosed upon by JP Morgan and GMAC, after they became the first two lenders to announce suspend foreclosures.
During the first half of this year, there were 5,458 notices of default in San Diego County and 3,315 foreclosures, according to MDA DataQuick, a real estate analysis firm based in La Jolla. Although the default rate has dropped nearly 45 percent from last year - partly because a number of borrowers are selling their homes at a loss through short sales - the foreclosure rate has slid less than 6 percent.
The root of the problem is that a number of banks used so-called "robo-signers" to sign and approve the foreclosure documents without reading them. A document obtained last week by The Associated Press showed a BofA official acknowledging in a legal proceeding that she signed up to 8,000 foreclosure documents a month and typically did not read them. Court documents in another case showed an Ally official making a similar admission.
The banks say that is a technical glitch and that most of the homes will eventually be foreclosed upon. But a number of borrowers complain that they were foreclosed upon even when they were still making payments on their loans. For instance, Feliciano Mendez of Vista said he was making payments for nine months on a loan modification when he called BofA on a procedural issue - only to find out that the bank had launched foreclosure procedures against him and expected to seize the house in less than a month.
In some cases, foreclosure-processing firms hired by the lenders have been accused of altering documents or forging the signatures of borrowers and notary witnesses in order to speed the process.
In addition, because the loans were repackaged and sold to investors throughout the world, it is sometimes unclear who holds the legal right to pursue a foreclosure. In some cases across the country, two or more lenders have tried to foreclose on the same property at the same time.
San Diego real estate agent Jerry Adams Jr. said the problem could make it harder to sell property that has been foreclosed upon. "It's going to make people even more cautious: 'Gosh, do I go in on a foreclosure?'" he told the Associate Press. Adams said he has seen one sale get put on hold.
Gary London, who heads San Diego's London Realty Group, said does not think the halt in foreclosures will make any major change to the dynamics of the real estate market.
"Most of these properties are still going to be foreclosed upon," he said. "The preponderance have seen the writing on the wall for a long time. The main thing this will do is make the process longer."
On the other hand, making the process longer might be enough to help a small number of the homeowners avoid foreclosure, by giving them some breathing space to get their finances together.
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