Gilbert Denizard's Mortgage News

With Foreclosures Being Halted, Now What?

Thu, 07 Oct 2010 08:29:00 -0700

If you’ve been following the news, you are of course aware of the stories that GMAC/Ally Bank has suspended foreclosures in 23 states because of questions about the accuracy of the foreclosure documents. As news broke that the bank used a robosigner to process foreclosure documents, it sent shock waves through the industry because there was immediate concerns that some people may have lost their homes improperly.

This bad news comes in the wake of the realization that the foreclosure crisis has had a significant impact in both the “Great Recession” but has also slowed the recovery of our economy as well. Americans lost over a trillion dollars in equity in the past few years and that pain has been felt in all areas of the economy. In some cases the foreclosures happened because laid off homeowners no longer had the income necessary to make their mortgage payments. Others happened because homeowners who bought at the top of the market in 2005/2006 realized it was pointless to make payments on a mortgage whose balance was higher than their home’s current market value.

Whatever the reason for the foreclosures, they do provide the market with the opportunity to correct itself and give a new wave of homebuyers a chance to take advantage of these historically low interest rates and buy a much more realistically priced house. I think it’s absolutely vital to be sure that no one is losing their house under false or erroneous pretenses. That being said, the markets that see a blanket halt to all foreclosures and the sales of foreclosed homes will see a delay in the recovery of their markets. Real estate investors are often the most energetic buyers of foreclosed properties and putting them on the sidelines for any length of time will hurt.

As of this week, foreclosures are still occurring in Tarrant County. So any local impact will be limited to the banks like GMAC or Chase who have voluntarily stopped foreclosures while they do reviews of their processes.

Just remember that if you visit a forest that was ravaged by a forest fire, you will find new growth within months. As devastating as the fire was, it helped to weed out a lot of the dead underbrush and create new, less restricted areas for new trees to grow. The same will happen with our housing market. The major event has helped to eliminate a lot of incompetent lenders, loan officers and Realtors and the people who are left will help lead us forward out of the doldrums.

I’ll keep you posted on any changes to the situation but I’d love to know what you think by posting a comment below.

Gilbert Denizard's Mortgage News

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