The government has stated that major lenders are using improper procedures to seize properties. The mortgage servicing arms of the country’s major banks are freezing millions of foreclosures.
The improper procedure they are talking about is “robo-signers.” These are people who sign documents stating they have personally reviewed the facts of the foreclosure case.
The problem is that some of these people have said they or their team had signed as many as 10,000 foreclosure affidavits in a month. They never looked at the documents they were signing and have no idea of their accuracy. The banks are saying that any problem affected by these signers is just technical.
Greg Abbott, Attorney general for Texas, asked for a halt to all foreclosure sales Monday October 4, 2010. Notices were sent to Bank of America, JPMorgan Chase, and twenty five other loan servicers. The state also asked that auctions be suspended.
Bank of America, Chase, and Wells Fargo account for more than 50% of the foreclosures. Mr. Abbott has asked the companies to evaluate their foreclosure process to be sure they are in compliance with all governmental regulations. Since Texas is a non-judicial foreclosure state, there are no documents signed in court by robo-signers.
The effect on the Texas housing industry could be huge. And if you consider properties already sold, then the number rises dramatically.
A couple of title companies have started to decline to offer a “clear title” guarantee for a foreclosed home. This will cause a two-fold problem for buyers. First, they will be buying a home without a guarantee that all debts have been paid and, second, their lender may not allow them to buy the home without a title policy.
The real question here is, since Texas is a non-judicial state, do we really have a problem? Lenders here are allowed to foreclose on a home without going to court. The issue in Texas in the past was whether a lien holder was notified of the foreclosure. They are required to be notified along with the home owner. If the lien holder was not legally notified that would form the basis of a lawsuit.
The Houston Association of Realtors says “in any given month, about an average of 20 % of all sales through the MLS may be foreclosure sales. Many economists have said that the time likely to take to review all of the foreclosures may result in worse sales statistics, since those sales will not go through – at least not go through as originally scheduled. Many buyers may be put in a bad situation where they are unable to purchase the property that they previously thought was theirs.”
“This will result in some delays in new foreclosures, along with delays in processing foreclosures already in the system,” Rick Sharga, VP Realty Trac said. “But it shouldn’t have any significant effect on foreclosure proceedings in states that do non-judicial 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. 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.
Source: Nancy Sarnoff & Purva Patel, Houston Chronicle