Bill Morris: Foreclosure freeze discussion heats up

Foreclosure freeze discussion heats up

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.


Bill F. Morris, ABR, CRS, CDPE, e-PRO, MBA
RE/MAX Capital City
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Comment balloon 3 commentsBill Morris • October 26 2010 12:57PM


Hi Bill,  I basically agre with you about getting on with it but in this litigious society thereare too many lawsuits waiting to happen for the lenders to move too quickly !

Posted by Bill Gillhespy, Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos (16 Sunview Blvd) over 9 years ago

We need to rip off the band-aid!  Our economy can not recover until it hits bottom.

Posted by Allan Sanchez, Rocklin & Roseville, Short Sale Agent (Roseville CA & Rocklin CA Short Sale Agent) over 9 years ago

While assumed guilt is not a substitute for following correct legal protocol, I agree that there are not many foreclosures that should not have happened.  Much of the short sale - modification dance is keeping some homeowners in their temporary homes, while they are being voluntarily stripped of whatever economic resources that remain in their posession.  Most would be better off being foreclosed and evicted, sent on their way to decent rental property.

The rate of foreclosure, given a more than ample supply of forecloseable property, is limited by banks' balance sheets and the realization that too many homes on market will affect yield.  The press and the government may influence the number of foreclosures in a given month, but I doubt if anything other than banks themselves will affect the annual total.


Posted by Mike Carlier, More opinions than you want to hear about. over 9 years ago