Foreclosure Moratorium Will Destroy The Real Estate Market

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  • October 12, 2010

Foreclosure Moratorium Will Destroy The Real Estate Market

The Obama Administration on Tuesday rejected calls for a nationwide moratorium on foreclosures because of concerns it could cause broader harm to the housing recovery.

But a freeze on foreclosures is still widening. It’s like watching dominoes fall. One mortgage lender after another is putting the brakes on foreclosures and the foreclosure mills that they have been using to fast track the repossession of homes.





 

Maybe Obama should have thought about this earlier. Anyone who had half a brain or any experience in real estate should have understood the possible repercussions. Hello..McFly!!!

While a forced moratorium may help some consumers in the short term, the impact it will have long term could be disastrous. In some markets we may see a false rise in prices. Why? Well what happens when 30-40% or more of the inventory is taken off of the market?

Then what do you think will happen when all of the “shadow inventory” comes back online? I’ll tell you what happens. We will probably see a significant price correction downward hurting everyone at once. Well..maybe not everyone. Those of us who make our money on opportunities like this are licking our chops.

Can you imagine the deals that you’ll be able to make once all of this junk comes back onto the market? It’ll be like a real estate Christmas. Banks and defaulted homeowners will be begging us to take this inventory off of their hands. And if you’re a buy and hold landlord type…can you imagine the cash flow? Salivating yet?

Just hold on…it’s coming. Just don’t look to anxious. Am I being facetious? Not at all! Who do you think is going to be needed to clean up this mess? Realtors..puhleeze…first time home buyers? Yeah right. The cash having Investor is going to be the White knight…so saddle up!

Nevermind that these delays in foreclosures will be costly to banks; Freddie Mac could charge servicers for costs and fees, such as maintenance upkeep, for each additional day a home foreclosure is delayed, says Freddie spokesman Brad German. Those servicers could also lose Freddie’s business if it turns out they were fraudulently carrying out foreclosures.

White House Press Secretary Robert Gibbs did say the White House supports a multi-state investigation into foreclosures and the mortgage industry, however.

“We’re supportive of getting to the bottom of the process and ensuring that these banks are following the legal process for making these decisions,” Gibbs said.

Attorneys general from dozens of states, led by Iowa Attorney General Tom Miller, are expected this week to announce a joint investigation into banks and flawed documents used in the foreclosure process. Ohio Attorney General Richard Cordray has filed a lawsuit against GMAC, claiming it used fraudulent affidavits and documents to foreclose on homeowners who were in default.

Banks say the problems with foreclosure documents are technical and that homeowners are still in default and should be foreclosed upon. Lawyers representing homeowners say filing flawed foreclosure documents with the court is fraud, and homeowners who’ve been foreclosed upon could assert they still have a property claim on the home.

“The industry is minimizing this, and even the Obama Administration is,” says Tom Cox, a lawyer in Maine. “I’m just outraged by there overlooking a fraud upon the court. It really is serious.”

Some housing advocates say it’s not clear how much federal regulators knew about the paperwork problems.

“These practices were widespread in the industry,” says Diane Thompson, with the National Consumer Law Center. “So anybody who was paying attention knew what was going on.”

JP Morgan Chase said Tuesday that it’s expanding a review of foreclosure paperwork to include some states that don’t require a court approval to foreclose, the latest sign that delays are growing.

Chase will examine foreclosure documents in more than a handful of states besides the 23 that require judicial approval for a foreclosure — expanding on its earlier review of 56,000 foreclosures.

GMAC Mortgage is expanding its review of foreclosures to all 50 states and for the first time looking at all U.S. foreclosure-sale files nationwide to ensure there are no errors.

A unit of Ally Financial Inc., GMAC Mortgage was among the first companies to review affidavits used to foreclose in 23 states where court approval is required. Several other banks have initiated similar examinations in light of allegations that certain documents could be incorrect.

The new step announced by GMAC Mortgage Tuesday involves “several legal and accounting firms” that will conduct “independent reviews” in all 50 states. A “specialized team” will look at the foreclosure-sale files nationwide, the company said.

Separately, Wells Fargo & Co. revealed that it has started a review of all pending home foreclosures where affidavits are required, a spokeswoman said.

She wasn’t aware whether that review covers all 23 states. It was the first admission from the San Francisco bank that it has taken additional steps in the wake of revelations that banks use so-called “robo signers” to approve hundreds of foreclosure documents a day.

Bank of America Corp. last Friday agreed to halt all foreclosures and foreclosure sales, the first bank to do so.

A Wells Fargo spokeswoman said the additional review began “around the first of October or the beginning of last week.”

“Given the public debate, we felt like it was important to begin looking at this.” The bank, she added, wants to assure ‘customers” and “elected officials’ that “we are doing all we can to ensure their affidavits are accurate.”

What the rest of the Country is saying about this..

Obama Administration Opposes Foreclosure Moratorium By Claude R. Marx There should be a thorough investigation of problems with the foreclosure process but no moratorium, White House spokesman Robert Gibbs  

Ally Expands Foreclosure Review Process to All Fifty States The remarks reinforce comments by White House senior adviser David Axelrod, who said on CBS’s “Face the Nation” program Oct. 10 that a moratorium may damage  

GMAC will review foreclosures in all 50 states The moved stopped short of a nationwide moratorium on foreclosure sales like Bank of America announced last week. GMAC previously announced it was halting  

NAR Says Families Will Suffer If Foreclosure Freeze Continues  that the moratorium is already creating some anxiety among purchasers as transactions are being delayed and that some foreclosure listings are being  

Attorneys general expected to check foreclosures Rick Sharga, a senior vice president at foreclosurelisting service RealtyTrac Inc., said a blanket moratorium could hinder a housing market trying to

Ally Expands Foreclosure Review Process to All Fifty States The remarks reinforce comments by White House senior adviser David Axelrod, who said on CBS’s “Face the Nation” program Oct. 10 that a moratorium may damage  

NC atttorney general is talking with lenders, as Ally increases scrutiny The San Francisco-based bank, which acquired Charlotte’s Wachovia Corp. in 2008, doesn’t plan to implement a foreclosure moratorium, Adams said.  

NAR Says Families Will Suffer If Foreclosure Freeze Continues  that the moratorium is already creating some anxiety among purchasers as transactions are being delayed and that some foreclosure listings are being

About Barry Cunningham

Remember us? was one of the co-hosts of the long-running, truly goundbreaking, and arguably the #1 online radio show about real estate investing. Real Estate Radio USA was on the air 5 times per week before podcasting became cool. But now, we're back as a full multi-media operation and we're aggressively buying houses again! We're back baby!

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