Depending on where you live in Chicago, Foreclosures and Short Sale Properties could make up as many as four out of ten Real Estate Transactions today. Unemployment locally, and across the nation, remains high. Credit standards remain tight. And thousands of homeowners have long given up on attempting to keep their house payments current.
In IL, completing the process of a lender acquiring a residential property by means of foreclosure can often take nine months to a year, sometimes longer. But now, alleged shady processing practices among many of the largest banks in the U.S. have put thousands of forecloses on hold. Indeed, as reported by AP Writer Michelle Conlin, and seen in the Chicago Tribune, big names under question for possible sloppy work include JP Morgan Chase, GMAC, PNC Bank, and the Bank of America.
Indeed, B of A has suspended foreclosures in all 50 states over allegations of forged documents, slipshod title work, and vanishing trails of required paperwork.
During the moratorium, the lenders will have to review thousands of foreclosures to make sure proper legal procedures have been followed. In states across the country (not in IL yet, however), attorneys general and other lawyers have filed class action suits against mortgage lenders, alleging mass mortgage fraud.
On the surface, distressed homeowners could view the foreclosure suspension as a bit of a reprieve. They would have more time to live in their homes before having to move on. If they elect not to pay their home mortgages in the meanwhile, they could use their saved money to pay other debt they may have accrued.
For potential home sellers, fewer foreclosures on the market now translate to fewer fire-sale-priced competitors. This might actually, short term, stabilize home prices in some areas, struggling with multi-year price declines, on average.
Longer-term implications are a bit more concerning, however.
These processing errors will eventually be corrected. The result could be a flood of foreclosed properties, at reduced prices, flooding the market months from now. Some experts fear this can stymie an already-fragile economic recovery, and keep home prices low for an extended period of time.
Banks insist that initiated foreclosure proceedings were brought only against those homeowners legitimately behind in their house payments. Even if that is true, however, if the actual foreclosure procedures are eventually deemed fraudulent, these processed foreclosures would have to be restarted again, from scratch.
One possible victim here would be those now purchasing foreclosed, bank-owned properties at a deep discount. Some Title Insurance Companies, including Stewart Title and Old Republic National, have stopped writing title insurance for properties held by banks thought to have engaged in sloppy processing practices. Without clear title, properties cannot be sold to potential homebuyers or investors.
Indeed, on Orlando FL Real Estate Agent points out that 40 of her over 200 listed foreclosed properties - 20% - are impacted by the Foreclosure Freeze. Of those, 12 are under contract, but are unable to close until their foreclosure processes are re-investigated.
Please see our post today via BlogChicagoHomes.com.
DEAN & DEAN'S TEAM CHICAGO