By now you may have heard that Bank of America has suspended foreclosure sales in all 50 states. The start date is October 9th, so more facts may be forthcoming, but so far this is all we know:
“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.”
Nobody is exactly clear yet on whether they are including trustee sales, REO sales, or both.
The local BofA reps haven’t heard anything definitive, and we probably won’t know anything else until we get there. But so far the REO sales are still happening (I closed one today, the house in Escondido after nearly a year). The Equator website that BofA uses to process REO sales has not had any memos, updates or suspended any action.
What will it mean for the market?
Other lenders will feel pressure to join in, and over the next few weeks there will be more uncertainty about when the “foreclosure crisis” will commence, let alone end.
BofA hasn’t been lighting up the scoreboard around here lately – they only foreclosed on 6 houses and 4 condos this week, out of the 301 on their NOT/auction list for NSD County Coastal (3%).
Could a big game-changer come out of this? Maybe, Congress conducts hearings and they start into the MERS debacle. Our resident real estate attorney, Kingside, mentioned that in California the laws and trustee-sale process make it tougher to fight a foreclosure in court – but about MERS he said:
The foreclosure trustee lobby is pretty powerful in California, and there is a lot of law in California that is very favorable for foreclosure trustees. That being said, this thing (MERS) may start getting legs in California, especially with the lender/servicer foreclosure trustee affiliates, and the nervousness of the title companies.
What is the MERS? From their website:
MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.
(bold added)
Attorneys have filed a class action lawsuit against MERS (see more here) and if they can get the attention of Congress and the mainstream media, we could have a real mess on our hands.
Is it possible that some borrowers could get a free house because of the way bankers handled the loans and paperwork? It seems far-fetched, but lawsuits will be pushing for that – and if a judge were to let it happen, the revolution won’t be far behind. But lenders/servicers will be fighting it with everything they have, so the appeals would go on for years.
So does this mean more free rent for the freeloaders?
Maybe.
If they are just providing window dressing and good PR, BofA could have their whole crew in this weekend working their foreclosure list for next week.
The properties that have a clean file would get the green light to go ahead with their foreclosure, and those with question marks go into the ‘start-over’ bin.
We’ll know more by this time next week.
I have said it before, this is just like Japan and it will take 10 years or more until real estate prices adjust.
Great piece from Paul Jackson from Housing Wire that I think helps put this whole thing into perspective.
http://www.housingwire.com/2010/10/05/the-greatest-heist-in-our-countrys-history
Well, more waiting . Prices will drop like a rock once this is clear uo.
More windbags quoted by David Streitfeld in tonight’s N.Y. Times:
http://www.nytimes.com/2010/10/09/business/09mortgage.html?_r=1&src=mv
“If it’s still January, February, March, and they’re not foreclosing, you’ll see a big effect,” said Jim Klinge, an agent in San Diego. “It’ll be a banker’s holiday, free rent for everybody and a lawyers’ gold mine.”
aljanet and RC,
Can you go back and review the last four videos on local pendings please?
The demand is strong now in the fourth quarter, and if there were more foreclosures, we’d see more sales – at healthy prices.
from David’s article above
At that time, Citi stepped up its employee training and tightened its documentation processes, giving officials there confidence that they have sidestepped the document issue. But given the huge number of mortgages it processed and its sprawling operations, Citi — which has faced one embarrassment after another — is not publicly declaring victory.
On Friday, Wells Fargo, another big lender that has not halted foreclosures, continued to maintain that its foreclosure processes were accurate and said it was not planning to initiate a nationwide moratorium.
jack wrote:
> So does this mean more free rent for the freeloaders?
If you are behind on your mortgage you just not got an incentive to stop. Looks like the rest of us will be paying for the freeloaders.
Jim,
If they let the “FREE” market work and if government minds it’s own “blank” business, I promise you there will not be enough buyers out there to keep prices up. I am renting in Solana Beach and I understand what you are saying but I also have seen many properties in SB sell when the seller took a 500K+ loss on the sale, I can give you specific addresses. Lot of these buyers right now are the future knife catchers and time WILL tell.
aljanet, the buyers that bought a house before the bubble actually got a big bonus out of this downturn which is a remarkable adjustment down in their interest rate and hence monthly payment. In other words the strong hands have actually gotten stronger in this downturn. Once the weak hands are flushed out who are you going to buy from?
I know several people who are in a better situation now than they were 3 years ago and rates are still moving downward. My neighbor is talking about getting a 15 year fixed at 3.5%. When they bought their house rates were 8%. These people now have a payment substantially below rent. Not much reason to sell especially since they love their house.
Jim,
how do you see this affecting short sales? Esp. ones in progress now? Will people hold off thinking they have longer to an actual foreclosure? Or just get it over with.
@aljanet,
How does a 500K loss on a sale correlate to knife catchers? IMO being a knife catcher is ONLY dependent on current sales price compared to what you perceive the future expected value to home to be – regardless of current loss or gain on sale. In in normal times that goes back to fundamentals such as price to rent, price to income, replacement costs, etc.
Then what about QE2 and the devaluation of the dollar and effect that could have on hard assets like RE? That gets more into the inflation/deflation debate . . . and if you have the answer and know what’s gonna happen there I am all ears.
Full disclosure – I am looking due interest rates, family situation, finding a place close current rental costs(within couple hundred $) and what I expect to happen to the dollar.
More evidence that the bankers who got us into this mess cannot be trusted to get us out!
My armchair analysis is that we may be seeing the bowshock of the seizing up and/or disintegration of the entire United States real estate market.
Halting all foreclosures means the banks’ final remedy against the so-called “dead beats” is gone. Suddenly, as the lending bank, your actuarial risk has gone way up. You will either raise interest rates through the roof, or you will stop writing mortgages entirely until your existing pile is completely cleaned out and marked to market. Banks will be sued by investors who bought toxic waste (nee mortgage-backed securities), and the banks will sue the servicers and law firms who shirked their duties and engaged in fraud to cover it up.
What this means for the home viewer (so to speak) is that, unless you can pay 100% cash, you will not be able to buy anything, because no bank will be lending.
This is admittedly an extremely pessimal (as opposed to optimal) reading of the situation. It probably won’t get that bad. Probably…
pemeliza, I agree with you that it will help lots of people but my point is there are “TOO” many weak hands out there who NEED to sell. I know people right now that have been living rent free for a LONG time and not received NOD yet and it was not their intention to be in this situation. They have tied up very big chunk of their cash and still can’t get out of their mess and they will lose everything they have. As you said, there are past buyers who are getting stronger but there are so many strong buyers who have become very weak. If interest rates were the only factor than you would see application for mortgages JUMP but we have not seen that. IMO, it is the price that will fix everything and we are not there yet.
oh boy…
At the Law Offices of David J. Stern in Broward County, where Kapusta worked, long “signing tables” were set up across eight floors and employees would process 250 documents per floor each day, she said during the interview.
Two or three employees sat around practicing the signature of Chief Financial Officer Cheryl Samons, at Samons’ direction, Kapusta said.
Company lawyers were overheard saying they worried about breaking the law or getting disbarred, but Kapusta said they worried more about losing their jobs.
Toward the end of the interview, which was conducted under oath with Kapusta’s attorney present, she also describes romantic relations among people who worked in the office, including Stern.
Stern’s office learned about Kapusta’s statement Thursday, when it was posted on the Internet and picked up on attorneys’ blogs, said Jeffrey Tew, a lawyer representing Stern.
The statement isn’t true, Tew said.
“It’s terribly unfair to circulate these allegations on the Internet,” he said.
http://www2.tbo.com/content/2010/oct/07/fired-worker-says-home-foreclosure-firm-forged-doc/news-metro/
aljanet,
How many people do you know in that situation, where they haven’t made their mortgage payment for a LONG time?
It’s not right for you to come in here and make vague statements as scare tactics. Furnish more specifics – if you know a handful of different people in that predicament I’d be surprised.
I have dozens of qualified buyers who are ready, willing and able to buy today. But because they can’t find any decent inventory at an attractive price, they are still waiting – some for years.
For every non-payer you know, I have 2-3 buyers.
How I wish I would have bought a house at the top so I could freeload for a few years.
If I had a mortgage right now there wouldn’t be a chance in hell that I would pay one more nickel.
maynard,
IMO, The Fed will keep rates very low for a very long time to try to create some inflation, just like Japan. I think they are worried about deflation right now. Japan’s real estate prices went down for at least 10 years, YOY, while interest rates have been almost 0% all that time and I see the same thing for us here. I think the Fed is intentionally creating another bubble in commodities and that will increase prices for some things but not real estate. With so many people out of work I just don’t see real estate going up. My biggest fear is if investors dump the treasuries, I guess that is why people are driving up gold price.
Jim, I know three and one of them is a family member. He bought his house for under 300k and now owes about 1million on it and the house is maybe worth 600-700k right now. He used the money for his business but business took a bad hit. Rent free for over a year now.
Banks have no one to blame but themselves. With every revelation like this, it’s less and less palatable that the govt stepped in to save these guys from themselves and essentially no one has been called on the carpet. They blew up almost all the significant financial institutions in the US and it turns out they screwed the pooch on the documentation as well.
Bank equity investors should have lost everything and, say, the top 10 (or 20) executives (and all members of the board of directors) of these banks should have been barred from the industry for, oh, 20 years — and let go without severance. And those let go should be relieved if that’s all that happens.
And yes, there’s plenty of talent that could replace them. I worked on Wall St for 10 years, there’s no shortage of smart guys who know finance.
Nothing personal — in the US Navy, if the captain of a ship allows his ship to go aground, the captain is relieved of duty. Doesn’t matter what the circumstances are, (s)he’s in charge, (s)he carries the can.
Same should be true of the clowns that got us into this.
ewhac,
Banks aren’t making mortgage loans anyway. The vast majority of the mortgage market has been nationalized (Fannie/Freddie/FHA).
The bigger question is how much this will cost the taxpayer through Fannie/Freddie/FHA.
ewhac wrote:
> The bigger question is how much
> this will cost the taxpayer through
> Fannie/Freddie/FHA.
Eventually the treasury will have to raise interest rates because they can’t sell treasuries. This will happen as other countries start raising their interest rates as they `decouple` from the United States’ economy.
Would you buy Bonds here or in another country where the yields are better?
Also the bank borrowing money @ 0.25% interest rate and buying stocks is going to be another bubble when the Stock Market corrects and they can’t pay back Uncle Sam because they leverages 30:1.
Interesting times we live in.
I found this interesting from the above link:
California, at least, seems to have had its priorities straight. Under California law, borrowers looking to challenge a foreclosure sale on grounds of any irregular procedure (like affidavit signing, notarization, and the like) must first make a “valid and viable” tender offer to the lender for the amount due on the loan. In other words: a procedural error doesn’t matter, if the borrower still can’t pay the debt.
Learned something new today.
By freeloaders, do you mean the banks, or, the house flippers, the criminal minded home buying fraudsters and regular folks who were duped into “bound to fail” mortgages?
From the article in 16.:
“I’m a little astounded that the attorney general would proceed this way,” he added. “It’s not fair that we were not aware of this statement and not given the right to question this statement.”
He noted that the version circulating on the Internet, which is on attorney general’s letterhead, is not signed by anyone or notarized.
The Attorney General’s Office confirmed Thursday that the statement is authentic. The office released it in response to a Florida public records request.”
Hmmm… unnotarized statements from the Attorney General… Next up, Robo-AG-enforcement?
This delay is all politics and will not end until after the elections. No matter who is in office, are they going to allow the gov/taxpayers and China to eat the loans? No. This legal move will be stamped out in the next 6 months.
http://www.thedailyshow.com/watch/thu-october-7-2010/foreclosure-crisis
I just bought a house for one of my kids in the Sacto area. Nice nieghborhood, 6 yr old place. Spent 15k replacing carpet with hardwood, custom paint scheme, new stainless appliances, and r&r bathroom tile. Total all-in for $72 per sf. Put her into a 15yr frm at 3.625% and her PITI is less than 1,200/mo. Comp rents are 1,600 plus. How much lower can it go?
MERS 101
http://stopforeclosurefraud.com/mers-101/
.
LPS 101
http://stopforeclosurefraud.com/lps-101/
.
NO. THERE’S NO LIFE AT MERS
http://stopforeclosurefraud.com/2010/09/22/no-theres-no-life-at-mers/
Seems to me it is in the banks’ best interest to delay. Prices are going up. Why should banks want to dump inventory now so it can step-change the prices up for the rest of the sellers? I think BoA is thinking very logically. Buy low, sell high. With Bernanke declaring inflation would be beneficial for the US, how can prices not go up? How can debt not decrease in nominal terms?
I’m so glad I didn’t sell my property for a huge loss when I moved. (And yes, myself and other home owners have the choice of selling without a short sale or foreclosure because we were responsible, contrary to what some buyers think!) I think it will go up in the long term. If not, it is still a good rental investment. Win-win for me! 🙂
Bank equity investors should have lost everything and, say, the top 10 (or 20) executives (and all members of the board of directors) of these banks should have been barred from the industry for, oh, 20 years — and let go without severance. And those let go should be relieved if that’s all that happens.
And yes, there’s plenty of talent that could replace them. I worked on Wall St for 10 years, there’s no shortage of smart guys who know finance.
enplaned | October 8th, 2010 at 10:32 pm
——————–
Could not agree more with this post.
Didn’t Hank Paulson tell us that they would go after the “bad guys” just as soon as the “crisis” was averted? Well? How long do we have to wait?
(Yeah, I know the answer to that question.)
I still wake up in cold sweats thinking what would have happened had I not sold my rental properties in Phoenix, the vacation home in Flagstaff and the condo in Vail in May of 2005.
Today, even though my employer went belly up in 2009 and every employee was without a job, I live in my paid off house, drive my paid for vehicles, eat organic food I grow in the backyard and am thinking about when to sell gold and if I want to go back to work when my 99 weeks of unemployment runs out.
The current mortgage crisis was as predictable as Obama pissing off the electorate because he is a whack job radical Progressive nitwit that can read a teleprompter.
If you bought a house after September of 2005, you deserve to be underwater.
If you think this administration is going to make it any better you are as blind as you are dumb.
We are 14 trillion dollars in debt and 10% unemployed mainly caused by this housing crisis and runaway spending that was precipitated and perpetuated by Frank, Schumer, Dodd and Obama’s band of flying monkeys who took over Big Spending Bush’s debacle.
The only way this is ever over is to let the market find the bottom. Let the prices fall, let the borrowers lose their property and let the banks fail.
Propping up real estate by halting foreclosures and keeping prices artificially high through incentive idiocy are a couple of reasons we are in so deep.
Only when we allow the cold gut wrenching pain of market forces to send its chills into the hearts of lenders and borrowers who made bad decisions and let the market mark itself to real values, can we heal.
This stupidity of letting those who should never have seen a mortgage document, keep those properties or lower their principals or interest rates, is as dumb as it gets.