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More thoughts on the foreclosure freeze …

Over the past several weeks there has been a lot of news about major banks freezing hundreds of thousands of foreclosures due to possible paperwork deficiencies.  In a sure sign that we’re in a political season, there have been proposals for a government-imposed moratorium, and now the Federal Reserve wants to get involved.

Even with this slow-down, there will be something more than 1,000,000 foreclosures completed in 2010.  That’s down from the 1,200,000 we were headed for previously, but it’s still a big number.  They are heavily concentrated in the five states where the worst of this recession has played out, but the effects are being felt nationwide.

In considering the faulty foreclosure paperwork, the next owner deserves the process to be squeaky clean — possibly more important than the current property owner’s position.  If a property is foreclosed, the defaulting borrower is evicted, then the property will eventually be sold “in good faith” to a new owner who in most states, including Texas, will have a title insurance policy to protect his or her rights in ownership.  If the original eviction wasn’t handled correctly, then this can obviously get complicated — and expensive, mostly for the lender and the title company, but with the current owner caught in the middle.

What is largely missing from the discussion is that the properties and property owners involved are on lenders’ foreclosure lists for a reason — mortgage default.  Every real estate closing that involves mortgage financing includes paperwork that basically says “no pay, no stay.”  Should the lenders be required to make sure they have their i’s dotted and t’s crossed?  Sure.  But there is no doubt that these foreclosures will happen, as they should under the terms of the mortgage contracts.  Empathize with the circumstances that led the borrowers into their difficult situations?  Absolutely!  Is empathy a good enough reason for them to keep possession indefinitely without paying?  Absolutely not.

My point is, “Let’s get on wiith this.”  Wringing our hands for months over foreclosures that ARE going to happen, will only result in more market confusion and disruption, and a longer, deeper, housing crisis than we already have.

About Bill Morris, Realtor

Many years of business experience (high tech, client service, business organization and start-up, including almost 20 years in real estate) tell me that service is the key to success and I look forward to serving you. I represent both buyers and sellers throughout the Austin metropolitan area, which means first-hand market knowledge is brought to bear on serving your needs. Learn more about my background and experience, my commitment to my clients, my profession, and to the real estate industry at


3 thoughts on “More thoughts on the foreclosure freeze …

  1. the only way real esate and the economy is ever going to recover is to get through the forelcosures that need to be processed the only thing is as long as they are done right not just done to be done. But sad truth is there are tons left to be foreclosed on and need to be. Santa Maria Homes For Sale

    Posted by Gene Perez | October 27, 2010, 10:28 AM
  2. I don’t get your reasoning. If the bank is foreclosing based on a robo signed affidavit or has paperwork with holes in it, the requirement that they own the property they are foreclosing on is not being met.
    That’s a matter of law. It doesn’t matter if at some later date these people will still lose their houses. It doesn’t matter if you think they should have been smarter when they got their mortgages.
    It’s a matter of law. I promise you if adherence to the law is the primary factor here, a lot of mortgage foreclosures are going to come to a screeching halt.
    There is building evidence that there may be no paperwork. Many, many foreclosures may have been done without any prove of ownership. This is a crime.

    Posted by southwerk | October 28, 2010, 8:59 AM
    • I agree. My original post said that the banks’ paperwork needs to be squeaky clean. I just don’t want the federal government imposing a nationwide ban on foreclosures. That would extend and expand the problem. Legitimate foreclosures need to be processed as quickly as the market can absorb them rather than creating a situation in which hundreds of thousands of REOs hit the market on the same day six months in the future. There is no doubt that lenders have folded, been acquired, merged, etc. and mortgage loan portfolios, securitized and otherwise, have changed hands quickly and in large volumes. Documents need to be prepared and recorded properly and responsibly. The lenders, with appropriate oversight by state regulators and courts where the process is judicial, can handle this. I attended a presentation yesterday by an economist who specializes in analysis of the real estate market, and he said that 55% of all the foreclosures in the United States are in just 37 counties nationwide. We do NOT need the federal government creating any more confusion and uncertainty in all 50 states than they already have.

      Posted by billmorrisrealtor | October 28, 2010, 9:24 PM

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