Impact from Foreclosure Freeze

Impact from foreclosure freeze

The recent freeze on home foreclosures by major banks and mortgage firms nationwide is having a mixed impact on home sales generally. It's deterring some prospective home buyers of foreclosed properties who are worried about legal problems related to the freeze, but will boost sales of low- and medium-priced homes, analysts say.

In the wake of the freeze, some buyers are indeed switching their focus from distressed properties to conventional higher priced homes. The overall result of the freeze remains to be seen. Congressional hearings on the subject are scheduled this month (November).

Background: Many mistakes in foreclosure proceedings are causing buyers to have misgivings about property titles and the right of home possession, said Richard DeKaser, chief economist at Woodley Park Research in Washington, as reported by the Bloomberg Professional. Confidence in the legality of repossessions will cut foreclosure sales more than a reduction of available properties because the market already is flooded with repossessed homes, he said.

Bank of America Corp., the largest U.S. lender, extended its freeze on foreclosures to all 50 states as concern spread among federal and state officials that homes are being seized based on faulty data. JPMorgan Chase & Co. and Ally Financial Inc.'s GMAC Mortgage unit stopped repossession cases in 23 states where courts supervise home seizures, amid allegations that employees submitted documents with unverified or false information to speed the process.

On October 18, Bank of America announced plans to resume seizing more than 100,000 homes in those 23 states. It said it has a legal right to foreclose despite accusations that documents used in the process were flawed. At this writing, other major banks also announced plans to resume their foreclosure processing, possibly at their peril.

On October 27, Wells Fargo admitted mistakes were made in paperwork for thousands of their mortgages slated for foreclosure. Those mistakes will be corrected by mid-November, a spokesman said. In the meantime, the bank is continuing to process foreclosures.

 Thank you to Ryan Nelson from Academy Mortgage for the Great Article