Demonstrators show support for moratorium in downtown Detroit
In the beginning, Bank of America, JPMorgan Chase, and Ally Financial (GMAC) indicated that they were going to halt foreclosures in 23 states, then some of them expanded it to all 50 states and then back to 23 states. In the foreclosure world there are 23 judicial states, where the foreclosure has to go through the courts. The rest, including Michigan, are non-judicial states. The freeze or moratorium was initiated by legislators who indicated the paperwork was not properly completed. These documents have to be “physically” reviewed before signing and they may not have been, thus the term, “robo-signed docs”. (NO, it doesn’t mean they were being signed by robots) These “robo-signers” admitted they did not verify information in thousands of foreclosure documents they signed.
Unfortunately, out of the vast number of foreclosures being processed, all are being lumped together even though only a small portion of these foreclosures may be affected. So, if the moratorium takes place it will it will tie up the legitimate foreclosures as well.
On Oct 18, only two weeks after its initiation, Bank of America, has announced that they have completed their investigation and is calling off the freeze. That was fast! However, every Attorney General in all 50 states now has chimed in on this investigation so we’re certain it’s not going to be away that fast.
The other lenders have indicated that they are lifting the freeze only in the 23 judicial states since the court procedure adds a certain layer of protection and, therefore, most likely those sales were done correctly. There’s a bit of confusion on this issue as some say that the main issue centers on the preparation and filing of court documents leading on to believe it should be the 23 judicial states in jeopardy. We will continue to get to the bottom of that as this saga continues to change daily.
In either case, a foreclosure moratorium would be devastating for the real estate market as all it will be doing is prolonging our housing recovery. They would only be putting off the inevitable which is a foreclosure later rather than sooner. Vacant houses will be vacant longer. Those who are in the initial phase of foreclosure will continue to stay in their homes without making payments and create more losses for the banks and our economy. My opinion is that we need to get these homes foreclosed and out of the system as soon as possible so we can get on to a healthier market. Contrary to popular opinion, a moratorium would be just a stall, not a total halt of the foreclosure. These banks are just looking to review their paperwork and then proceed.
This is not the first time we be seeing a moratorium. It happened the last several years during the 4th quarter, but not to the extent that they are talking about this year. A moratorium decreases inventory, however, that is just a temporary situation. The problem is that after the moratorium that inventory spikes up again and, therefore, house prices decrease. Furthermore, for the last two years everyone has been talking about the ‘shadow inventory.’ These are the hundreds of thousands of foreclosed homes that banks have deliberately kept off the market. The reason is presumably that they were worried about glutting the market with foreclosed properties, depressing prices even more. If the moratorium is prolonged, it would be double trouble.
Many of our short sale sellers and buyers are calling to ask how they will be affected. If you are currently undergoing a Short Sale and your home has not gone to Sherrif Sale, it should not be affected.
P.S. This moratorium has nothing to do with anybody having been wrongfully foreclosed upon other than the robo-signing issue. It is totally erroneous to think that anyone was foreclosed upon if they were current on their payments. A foreclosure can only occur if someone was behind on their payments. In many of these cases, the borrower is behind for over 12 months before they are foreclosed upon.