Some sources say that the recent foreclosure fiasco threatens to postpone the recovery of the housing market for another year or more. Other sources say, the banks might have mis-handled the paperwork, but the foreclosures were legitimate and “fall out” from this mess won’t be that bad. Only time will tell…
Summary of Foreclosure Fiasco:
Seven of the U.S.’s largest financial institutions are now postponing foreclosures: Bank of America, Ally Financial (formerly, GMAC), JP Morgan Chase, PNC Financial, Goldman Sacs, Litton Loan Servicing and One West Bank.
These institutions are accused with forging/missing/shredding foreclosure documents, faking social security numbers, and using “robo signers” (bank employees who rubberstamped foreclosure documents without a notary and reviewing them) to process foreclosures. This accusation has lead to federal investigations, class action lawsuits and talk of a possible national foreclosure moratorium. With all of the document fraud, forelcosures could be held up in the legal system while they are reviewed. Some foreclosures could be overturned or deemed outright fraudulent. An added worry is the possiblity of difficulty of getting title insurance for a buyer of one of these banks foreclosure properties. Old Republic National, a large title insurer, has told their their insurance agents to stop issuing title insurance policies on any foreclosed homes by GMAC or JP Morgan Chase.
Bottom line is this: A recovery in our housing market can only happen once the foreclosure properties are sold and out of our inventory. With all of the investigations and review that will need to happen on all of these foreclosures, this fiasco may only prolong their eventual return to the market and sale.
At this point, everyone, including myself, is just trying to get a handle on this entire situation and how it will play out. I hope to report more next month…
