A quick ‘n dirty high-level overview of what’s happening:
What’s the Problem: Some of the major banks admit to “robo-signing” on foreclosures, meaning employees weren’t actually reviewing files to check for accuracy in foreclosure proceedings. Not having the right paperwork in order means they don’t actually have the right to foreclose. As a result, states are now launching investigations into proceedings using their Attorney Generals.
Who Caused the Problem: As of this writing on 10/14 – Bank of America (all 50 states), JPMorgan Chase, Ally Financial (formerly GMAC), PNC (who acquired National City Corp.), Litton Loan Servicing (an arm of Goldman Sachs)
Who May Join the Fire? The New York Times has a chart of the Biggest Mortgage Servicers as of June 30th (as seen below). Other big banks probably soon to join: Wells Fargo, CitiGroup, Suntrust (this is MY pure speculation).
What This Means for Prices: In short – it’ll be a good thing, if it has any affect at all. Year to Date in 2010, 2,045 homes have sold in Arlington and of those only 103 were bank-owned; that’s only 5%. We don’t really know WHO the particular bank was on those properties unless you call the agents who represented each sale. By taking the bank-owned inventory off the market, you’re left with regular sales (and/or short sales) and this can help push up prices. It’s hard to say if it’ll have a huge impact since the market share is so small in our area, but in other parts of the country where they may account for 40%, it’ll probably increase their prices.
What About Short Sales? I have no idea. Everything I have read only talks about a freeze on foreclosures proceedings, people who are already in default. Banks normally won’t even consider a short sale until the homeowner has missed a payment or two, so it may mean you get to live there longer rent-free, or it may just take longer to get your short sale approved since they’re now going over paperwork more thoroughly. It’s hard to really say what it’ll do to the process. Derek Massey, an Attorney and President of MidAtlantic Settlement Services, says he expects Short Sales to increase, via Twitter Massey said “if i’m a…negotiator, I either take the deal or send it to…limbo.”
What Should You Do If You are the BUYER on a Bank-Owned Transaction: The freezes have extended closings dates by 30 days so they can get paperwork in order. Many of the banks are reaching out to buyers to give them out and refund their deposits. It’s up to you if you want to/can afford to wait to see if the house you are buying can actually be sold. Talk to your agent about your options if you’re a part to a contract with one of these banks.
What Should You Do If You are THINKING of BUYING a Bank-Owned Property: #1 Find out who the bank is. Many of the Arlington bank-owned properties are owned by Fannie Mae and Freddie Mac, so you may be fine to proceed with a contract. There are currently 16 active foreclosures for sale and 13 pending. Don’t underestimate the deal you can get on a regular sale these days, many of them are priced to sell (which is why nearly 50% sell in the first 30 days). It does NOT have to be a foreclosure or short sale to get a good deal these days.
Another Key to the Foreclosure Freeze Puzzle: Title Insurance. While the Owners Coverage of title insurance is optional, it is STRONGLY encouraged for this exact reason. It protects YOUR interest in the property you’ere buying, if the title (chain of ownership and right to sell) the property ever comes into question. Many people are now turning to title insurance companies to see what they’ll do for buyers in a transaction with a bank. Don’t be surprised if you can’t get title insurance on properties being sold by certain banks. Buyer Be-Very-Aware.