Many large banks have announced they will be halting foreclosures due to allegations that the foreclosure process had not been followed correctly by several of the “Big Banks”. JP Morgan, Chase, Bank of America and Ally (formally GMAC) are the usual suspects and are now under FBI investigations in regard to fraudulent documents pertaining to foreclosures, also known as robo-signers. Robo-signing is when lender employees are electronically signing foreclosure documents without even looking at them to ensure accuracy. The employees are saying they were overwhelmed with paper loads and were instructed to continue on.
Many top officials are outraged that the lenders would take such bold steps forcing people out of their homes without even verifying all of the documentation was even accurate. The hold in foreclosures will likely not last very long and already has been rescinded in several of the initial states. The underlying issue with a foreclosure freeze is the build up of lender owned inventory that can potentially flood the market when all of the lenders need to unload the properties all at once. This in turn can create a race to the bottom, where lenders are fighting each other to see who can dump properties the fastest. The only way to do that is price reductions. You have to remember banks are not in the real estate business and need to liquidate their “assets” to get their money out. They have already taken billions in tax payer dollars, so dumping your neighbors home for 50 cents on the dollar makes no difference to them. For more information on this please feel free to call or email me.
