The Lifting/Resolution of the Foreclosure Freeze

While dust from the robo signing – a shady practice where lenders allegedly processed foreclosure documents and affidavits sloppily, without a thorough review mechanism to verify the authenticity of documents – controversy is still up in the air, Bank of America and other giant lenders announced resumption of foreclosures which put almost 2 million homes at risk.

These institutions had temporarily suspended evictions and foreclosures in 23 states that require judicial approval for foreclosures. The attorneys general of all 50 states are currently investigating the mortgage servicing industry’s foreclosure practices. While robo-signing became an overnight Internet buzz word, it wasn’t the only ingredient of this deadly concoction.  Attorneys for home owners have found evidence of missing documents, some of which may have been thrown away. Federal and state investigators now believe that they may have to go back more than three years to unearth root causes that may have contributed to the current situation.

Despite skepticism expressed by various experts, Bank of America said it would resume foreclosures in the 23 judicial states, while the freeze would continue or lifted on a case-by-case basis in the 27 states that do not require judicial approval.

Lifting the foreclosure freeze is good news for real estate agents as many of them had seen their business come to a grinding halt after major banks had frozen foreclosures in October. Conversely, homeowners who are behind on their mortgage payments could soon feel the banks breathing down their necks.

Homebuyers and investors are in a dilemma about pulling the trigger now to purchase REOs or wait until the dust settles down. The hesitation to buy is partly emotional, but largely fueled by the uncertainty of the ongoing federal investigation and the recent announcement by the nation’s three largest insurers about not offering title insurance to buyers of bank-owned homes with flawed or nebulous foreclosure paperwork. This is a catch-22 for a lot of buyers that finance home purchases through a mortgage because lenders require a title insurance policy and insurance companies won’t issue one till they are convinced that the property in question was properly foreclosed by the bank.