Bring on the Pain!!
Steve Brown from the Dallas Morning News brings us an article that is on point. Politicians from seemingly every state have called for foreclosure moratoriums. While moratoriums stall foreclosures they don’t stop them. It’s kind of like applying a Spiderman Band Aid to a gaping chest wound. It might stop a drip or two, but the blood keeps on flowing!
It’s not just politicians but also lenders. Both sets have tried moratoriums, but they just delay the inevitable. Don’t get me wrong, moratoriums are great for short sales. If a bank can’t foreclose one of the only options they have is to process a short sale. So, in the future, if you hear of a bank/servicing company suspending foreclosures, I can almost guarantee you that their negotiators will suddenly turn cooperative.
Foreclosure moratorium would only put off pain, housing analysts say
By STEVE BROWN / The Dallas Morning News
If Texas Attorney General Greg Abbott is successful in obtaining a moratorium on home foreclosures in the state, don’t expect a lasting change in home defaults.
A moratorium would only delay the foreclosures, housing industry analysts say.
Eventually those homeowners who aren’t able to keep up with the payments on their properties will have to be dealt with.
“This could definitely create some havoc in the market even if it turns out not to have much substance,” said Dr. James Gaines, an economist with the Real Estate Center at Texas A&M University. “It will definitely delay the whole process of cleaning up the market and especially resales for investors.
“This could potentially set the market back a good six months – maybe more.”
This week, the Texas attorney general’s office sent letters to 30 lenders that offer mortgages in the state asking for “a halt on all foreclosures, all sales of properties previously foreclosed upon and all evictions of persons residing in previously foreclosed-upon properties.”
Abbott’s office wants home loan companies to review their foreclosure processes and disclose whether their agents or employees authorized the forced home sales without fully reading and reviewing the documentation.
The practice, called robosigning, is facing criticism from government leaders and consumer advocates in states across the country.
Abbott’s office said its action is “an effort to determine the full harm Texas homeowners may have suffered or could suffer as a result of these business practices.”
The attorney general’s office is asking lenders to respond to its request on or before Oct. 15.
Other states are taking similar actions.
And some big lenders, including Bank of America and JPMorgan Chase, have voluntarily declared stays in foreclosures of up to 90 days.
“We have been assessing our existing processes,” Bank of America said in a public statement. “To be certain affidavits have followed the correct procedures, Bank of America will delay the foreclosure process in order to amend all affidavits in cases that have not yet gone to judgment in the 23 states where courts have jurisdiction over foreclosures.”
Foreclosures are not a court process in Texas, so it’s not included in Bank of America’s process, Rick Simon, a media relations representative with Bank of America, said in an e-mail message.
Moratoriums enacted by lenders early this year to allow borrowers time to renegotiate loans eventually caused a flood of foreclosures when the stays were lifted.
Rick Sharga, senior vice president at RealtyTrac, a California foreclosure research and home marketing firm, said loan companies and mortgage servicers will use the time to double-check their paperwork and processes.
“This will result in some delays in new foreclosures, along with delays in processing foreclosures already in the system,” Sharga said. “But it shouldn’t have any significant effect on foreclosure proceedings in states that do nonjudicial foreclosures such as Texas.
“The most likely scenario is that we’ll see a marginal decrease in overall foreclosure activity during the fourth quarter, followed by accelerated levels of foreclosure filings in the first quarter of 2011,” he said. “From an overall housing market standpoint, there really shouldn’t be any major impact.”
But if the foreclosures freeze drags on, it “would stretch out the housing market problems even further,” Sharga said.
Gaines said the calls for moratoriums may be just state leaders “trying to make political points.”
Home foreclosures nationwide are at record high levels.
In the Dallas-Fort Worth area, lenders have posted more than 53,000 homes for foreclosure in 2010, an increase of 4 percent from a year ago.
Resales of these properties by lenders have not caused a dramatic decline in North Texas home values.
“While no one likes to see foreclosures, from an absorption standpoint it is better if there is an even flow of forced sales for the marketplace to digest,” said Ted Wilson of Dallas-based housing analyst Residential Strategies Inc. “The challenge for the market if foreclosures get lumped together in the future is that too much inventory hitting the market at one time could put abnormal downward pressure on prices.”
The head of a Texas lenders group took a conciliatory tone toward the attorney general’s actions. But Scott Norman, president of the Texas Mortgage Bankers Association, said the questions about foreclosure documentation practices are “individual company issues.”
“We will suspend the foreclosures as long as we can until steps are taken to make sure the foreclosures are accurate and proper,” Norman said. “I am confident that every mortgage lender in the state will continue to do anything they can to avoid foreclosures.
“It’s in the best interest of every mortgage lender to try and keep their [customers’] payments current and keep them in their homes.”
Longtime foreclosure analysts say the action is likely to be pointless.
“It does nothing but just slows the process down,” said George Roddy, president of Addison-based Foreclosure Listing Service. “It puts things off that are going to happen anyway.
“The only way to get over this is to foreclose the bad loans.”