Print
E-MailThis post comes to us from Chudozie Okongwu and Timothy McKenna, respectively, Senior Vice President and Senior Consultant at National Economic Research Associates.
In late 2010, a number of banks with mortgage servicing operations declared moratoriums or suspensions on some aspects of foreclosure proceedings, a move that appears to have been prompted by revelations about the banks’ alleged substandard foreclosure practices. By mid-October 2010, it was reported that the Office of the Comptroller of the Currency and the attorneys general of all 50 states were launching investigations into issues surrounding the mortgage foreclosures.
Meanwhile, the foreclosure suspensions were announced at approximately the same time that mortgage servicing was coming under increasing scrutiny by investors in mortgage-backed securities (MBS). These investors have seen a substantial decrease in the value of their MBS holdings over the last few years, which has led some to pressure the banks that sold the mortgage loans securitized in the MBS into repurchasing some of the loans.
In this paper, Foreclosure Suspensions and Other Mortgage Disputes, we address the history of this episode of foreclosure suspensions; discuss economic implications of the suspensions; look at other areas where the banks are facing allegations of mortgage documentation issues; examine where put-backs may occur; and consider some potential litigation related to these issues.
The full paper is available for download here.
5 Comments
The banks, for the most part, have now a 2+ year backlog of pre-foreclosure properties, that will depress the housing market even further. We are in for another 10-25% price drop in house values, as a result.
The main reason for the foreclosure moratoriums and other efforts by banks to stop home foreclosure is because the banks want to show that they are complying with the new laws regulating foreclosures and because many of the new laws provide certain exceptions and benefits to banks if the banks show that they have a comprehensive loan modification program in place.
In the end, the banks have the 2nd largest lobby in Congress. They will do what they please and get away with it.
Nationwide, foreclosures in the first quarter took an average 400 days from default notice to the day the bank reclaimed the property, market researcher RealtyTrac reports today.
That’s up from 340 days a year ago and more than double the average 151 days it took to foreclose in the first quarter of 2007, at the start of the nation’s foreclosure crisis.
Foreclosure times are stretching out partly as a result of last fall’s revelations that many foreclosure documents were improperly prepared.
The US public has been pushed around by the banks during this financial crisis. The banks are not handling the foreclosures in a timely manner therefore keeping supply up as demand is restored slowly.
The banks did not have a proper plan to try and sell the foreclosed homes and in some cases are keeping them around too long. Banks are getting offers and have no idea how to handle the offers they get through real estate agents. Someday the Government will step in and place a law on how the banks handle foreclosures.
In California, the foreclosures continue despite the stop in foreclosure 2010. While the number of foreclosures have decreased since the initial financial crisis, the number of foreclosure are still high in especially lower income communities such as Riverside, California. It seems the settlements with some of the larger banks including Bank of America have done little as the number of bankruptcies are still in record high numbers. If the lenders would only help more home owners, there would be less riverside bankruptcy filings and less foreclosures in general.