Foreclosure Freeze Will Cause Surge in Short Sales

October 8, 2010: Now that there is a voluntary halting of foreclosures by some banks, short sales will suddenly become easier, but only for a while. A short sale is the closest substitute for a foreclosure. A foreclosure trustee sale, once scheduled however, is always hard to stop. Calling the bank and asking them to postpone the sale is usually the best method. Filing a lawsuit and requesting an injunction from the court, worked for a while last year, but made the judges mad. For now, in some circumstances, the bank will stop the trustee sale without you having do to anything. Bank of America is staying foreclosures.

“Bank of America has extended our review of foreclosure documents to all fifty states. We will stop foreclosure sales until our assessment has been satisfactorily completed. Our ongoing assessment shows the basis for our past foreclosure decisions is accurate. We continue to serve the interests of our customers, investors and communities. Providing solutions for distressed homeowners remains our primary focus,” said Bank of America spokesman Dan Frahm.

But not all banks are joining the stay.
“Wells Fargo is not planning to initiate a moratorium on foreclosures. Our affidavit procedures and daily auditing demonstrate that our foreclosure affidavits are accurate,” Wells Fargo said. “As a standard business practice, we continually review and reinforce our policies and procedures. If we find an error or if an improvement is needed, we take action.”

The moratorium will have unintended consequences.
If there’s this perceived, rather real or not, notion that all these REOs are going to dry up soon, that could push competition. The investors would then increase their bids. But if any more lenders or regulators announce a suspension, the already fragile housing market may begin to buckle. REO sales account for 30% of the market, and taking almost a third of all sales away could have “serious consequences” for an unstable market. It all depends on how many more banks suspend these sales.

An overall moratorium would also delay foreclosure processing on thousands of homes, delaying their entry onto the market beyond the critical spring selling season, adding to the glut of distressed inventory, probably causing further deterioration in home prices, and perhaps triggering yet more foreclosures.

Foreclosure lawsuits will spike, for a while.
In what will likely be the first of a wave of lawsuits, Ohio’s attorney general is suing GMAC for alleged foreclosure fraud. The defense to those suits is a simple demurer: a legal so what? Even if the bank messed up the affidavit supporting the foreclosure, it doesn’t change the fact that the homeowner didn’t pay the mortgage. Expect most of those lawsuits to settle for pennies on the dollar or get dismissed shortly after they are filed

Published by Stout Law Firm

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One thought on “Foreclosure Freeze Will Cause Surge in Short Sales

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