Thank you Bank of America. You have just set in motion the real estate recovery.
With was is being dubbed ForeclosureGate, our friends at B of A have suspended throwing people out of their homes for non-payment because of a slight issue with who signed what. Is this a good reason for stopping the foreclosures? I don’t know, it’s a legal thing.
Seems a little weird though. You are either paying or you are not. But that’s a different discussion. What we have here is that the legal action is stayed and what will happen is that the shadow inventory we have all been waiting for to hit the market is not going to appear anytime soon. So, there will actually be less homes on the market.
That means less choices for those that want to buy, speculators will be on the sideline because there is no cheap homes to buy and the slow moving economic rebound will cause a bit of demand to increase. These will not be reflective is all markets but it may be in some.
Sounds great, huh? Well, here are the detriments:
1. Mortgage rates will go up because of what looks like a recovery. (P.S.- Refi now!)
2. This is only temporary…..after the legal stuff is cleaned up, the homes will fly onto the market and guess what? Values will go back down to where they were unless the demand increases.Hopefully, that demand will go up and the balance will work out.
But, thanks again B of A. We appreciate the screw up!
Sheila Rasak
October 10, 2010 at 11:11 am
I couldn’t agree with you more – or- less. The short sale properties I represent are frozen in time to prolong the agony of the homeowner…you know, under water and unemployed. The million dollar question is will the lenders stop asking the property owner for payments during their review time? Will the daily phone calls stop?
Chuck Gillooley
October 10, 2010 at 11:11 am
Fred,
Good points, but I doubt rates are going up any time soon. Latest job reports showed we lost another ~ 100K jobs, and Wall Street is licking its chops that the fed will have to hold the basic rate at near zero to keep this “recovery” moving in the right direction.
Almost feels like driving a car with flat tires. Lots of energy expended, but nobody’s going anywhere very quickly.
white bear lake mn homes for sale
October 10, 2010 at 11:39 am
I agree with Chuck about the interest rates not going anywhere anytime soon, however, who really knows at this point with how confounded the market-driving variables are at this point?! Great post!
Eric Hempler
October 10, 2010 at 12:09 pm
Interesting View Point. Although, I’m not so sure interest rates are affected by the number of homes on the market. With as much inventory as there already is I’m also not so sure stopping more inventory will make prices come back, not right away at least. I would think more people working would cause prices to go up b…ecause there would be more people buying. Until the jobs come back I have a tough time seeing things improving in leaps and bounds.
I’ll have to give this some more thought and write something later this week.
Cheryl Johnson
October 10, 2010 at 1:56 pm
I am concerned about bank-owned properties that were sold and closed over the last year or so. If it is determined that a foreclosure was invalid and the foreclosing bank had no right to sell the property …. What is going to happen to the folks who purchased the property from the bank… Will they be evicted so the previous owners can return?
I sure wish I had gone on to law school. This is looking like a goldmine for real estate attorneys.
Melissa Zavala
October 10, 2010 at 8:35 pm
Fred: You do bring up a good point. I have a feeling that the general public will believe that this halt is more long term and will hold off on listing their properties, thinking that they can just hold up a little longer. Then, when B of A lifts the ban…. uh oh.
Bob Wilson
October 10, 2010 at 10:55 pm
The flip side of this is a potential good thing for short sales. With a back up of REO inventory, there is now an incentive for processing more short sales and a great opportunity for agents to get more short sale business done.
Fred, you cant have it both ways. These same banks have exploited every legal loophole on the planet. A little accountability isnt a bad thing. These same paperwork issues caused illegal foreclosures on properties where short sales have been in process. I know because one of my short sales was foreclosed on illegally in California, a non-judicial state, killing the sale. A week later the lender rescinded the sale,but failed to notify the homeowner for two months. We ended up getting the property sold via a short sale to the original buyer, but for $60k less than before.
That isnt my only example. I had a meeting with a Sr VP and our attorney and went over seven different files where the lender had committed fraud. The VP had no idea what was going on in her own department.
Its easy for pundits to say “Well, they arent paying so it doesnt matter”, but it does. It matters because the law has to be followed. The homeowner isnt breaking any law by not paying – they are breaking a contract where the other party has very specific recourse, but the recourse, or course of action is very carefully defined by law.
It is not too much to ask that they do it right so they get it right.
Paul Francis
October 11, 2010 at 12:24 am
Does this mean that everybody can just stop paying their mortgages?
Alex Cortez
October 11, 2010 at 12:43 am
It doesn’t seem likely that interest rates will increase because of this, but you do bring up good points.
I am not an attorney, I am merely a person with common sense. With that being said, I think it’s unlikely that those who already bought REO’s (that are eventually proved to be foreclosed incorrectly) would lose their homes to former owners, who weren’t making payments anyway. Punitive damages? Sure. Reversal of transactions? Nah.
johnplayers
October 11, 2010 at 12:47 am
thanx to bank of america for raising real estate prices,thanx a lot
jeffrey gordon
October 11, 2010 at 2:35 am
I would suggest that the current notarization and dummied up affadavits/Prom. Notes etc., is just the tip of the iceberg. Usually where there is lots of smoke there is a fire burning.
The lenders/Investors/Servicers/and law firms know they have a potentially huge problem on their hands on several fronts.
Old Republic is only the first title company which is going to put a moratorium on insuring title on REO/Foreclosure/Short sales. If you can not deliver clear title who is going finance/buy a house?
I predict within 3 weeks all the major banks/lenders will implement a nationwide moratorium on foreclosure auctions and REO sales.
The long term solution is going to have to come from the FEDS and will involve huge capital infusions along with likely nationalization of the biggest banks, title companies and eventual PMI companies.
Can you say RTC 2.0 is coming–get the failed banks out of the property management/disposal business and let the private side folks get to work stablizing our residential markets.
jg
Paula Henry
October 11, 2010 at 9:11 am
This is simply a nightmare however you look at it. If short sales are also halted, 20-30% of the current owners can’t sell, banks will have a floodgate of inventory soon at a time we have instability in the job and housing market.
With one bank owned and three short sales scheduled to close this month, it will interesting to see how the results of the moratorium affect the market both short term and long term. Will buyers buy or just sit on the sidelines waiting for the halt on foreclosures to be lifted. Could be a crazy ride!
Chris Sparks
October 11, 2010 at 11:59 am
Don’t hold your breath; there is more to this market than B of A. This weak economy is partially driven by the boomers lack of demand for housing. This will stick, we are down sizing every where to finalize our retirement plans. How many houses will be needed? One third of the population is boomers; this will continue the over supplied housing market well into the future.
In our 30’s and 40’s daycare boom, housing boom, auto boom, 40’s to 50’s the leisure market sky rocketed now we are in our 60’s save, save, save.
justin shire
October 12, 2010 at 11:21 am
not good for anyone who has been profiting unreasonably from the home real estate markets -this includes banks, inspectors, insurance companies, title companies,. etc… The home is the largest asset / form of securtiy 98% of people would agree, so business plans / models were developed (probably like those profiting from faster trading computers) that seems ok but is being distracted around a sensitive / highly emotional transaction and profiting from you / us when we are at our at the most vulnerable state of mind. no wonder it all came to a crash. i was bitching about this stuff 6 years ago.
justin shire
October 12, 2010 at 4:01 pm
not good for anyone who has been profiting unreasonably from the home real estate markets -this includes banks, inspectors, insurance companies, title companies,. etc… The home is the largest asset / form of securtiy 98% of people would agree, so business plans / models were developed (probably like those profiting from faster trading computers) that seems ok but is being distracted around a sensitive / highly emotional transaction and profiting from you / us when we are at our at the most vulnerable state of mind. no wonder it all came to a crash.