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Banks halting foreclosures and possible full moratorium on foreclosures


jasonw1
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In the past several days BOA halted their foreclosures across 50 states, and there is increasing talk about full moratorium on foreclosures.

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/08/AR2010100806850.html

 

What's the impact to housing market & banks?

 

I think in the short term it may help stablize housing price a bit as all the foreclosures are taken from the market, reduce supply. So there will probably be less great house deals if you're a buyer. It does look like a bad thing for banks as they will have people living in the property without paying mortgage, and they can't foreclose. I think it's also bad for title insurance, foreclosure service companies etc.

 

Not sure about its impact to general stock market and economy, any idea?

 

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Guest broxburnboy

In the past several days BOA halted their foreclosures across 50 states, and there is increasing talk about full moratorium on foreclosures.

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/08/AR2010100806850.html

 

What's the impact to housing market & banks?

 

I think in the short term it may help stablize housing price a bit as all the foreclosures are taken from the market, reduce supply. So there will probably be less great house deals if you're a buyer. It does look like a bad thing for banks as they will have people living in the property without paying mortgage, and they can't foreclose. I think it's also bad for title insurance, foreclosure service companies etc.

 

Not sure about its impact to general stock market and economy, any idea?

 

 

From the lenders point of view a house which has been foreclosed still generates monthly expenses.. taxes, utilities, property mngmt etc. If there is no hope of selling the foreclosed property (because of already swollen inventories), then it makes sense to let the homeowner stay in the home as long as they are maintaining the monthly expenses. I think this is a trend that has been going for a while now, as lenders seem to be taken their own sweet time foreclosing.

There is also the MERS issue that brings into question the right of a nominee to foreclose on behalf of a mortgage pool (a pool of mortgage holders who collectively

own 100% of the mortgage, but individually only a fraction). See article:

 

http://www.moriarty.com/ML_News/The_Cake_is_a_Lie/

 

Neither of these issues bode well for the general state of prices in this market.

 

 

 

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Here's my take:

 

1) Agree with broxburn...people already aren't paying their mortgages...might as well leave them in there to maintain the properties.  Banks don't want to take possession.

 

2) Recall a few months ago this issue about Fannie / Freddie 'threatening' to do massive mortgage putbacks to the banks...that was laying the groundwork for the moratorium now being discusssed.  If there's no foreclosure, is there any reason to find the 'fraud'.  The banks are probably in favor of this...if they're not, there's still obvious political benefit for congress running for reelection.  Also, as noted by Bronco, why shouldn't any of us just do the same thing (assuming we don't have a lot of equity).  In order to prevent those of us who play by the rules from crying foul, there has to be a "reason" for banks to stop foreclosing.

 

3) This is yet another sign...do we need another one...that the goal is massive, massive inflation to eat away this debt...either for the borrowers or the lenders...doesn't matter...just inflate, inflate and inflate some more.

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The only solution I've heard that makes any sense is what Bill Gross proposed:

 

http://blogs.wsj.com/developments/2010/08/17/bill-gross-refinance-wave-could-lift-home-prices/

 

Let people who are current on payments and who can actually still afford their payments refi at lower rates even though they have negative equity.  I'm not sure why that proposal doesn't seem to be considered seriously.  The current mortgages are backed by houses, they'll still be backed by the same houses.  Those homeowners will still owe the same amount, just spread over a few more years and at a lower interest rate. It would pump huge amounts of cash into the economy because the responsible people would now have more cash on their hands.. 

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Hi Josh,

I just posted about DJSP in another thread where it was first mentioned. There are more bad news for DJSP:

http://www.bloomberg.com/news/2010-10-12/citigroup-stops-using-foreclosure-law-firm-under-investigation-in-florida.html

 

I sold out as a loss. I would consider ride it out if it's temporary halting foreclosure by banks, but DJSP is being picked out and dropped for their questionable practice, I expect all banks will follow so they can appear clean. Also the court hearding of one of their previous paralegal doesn't look good either.

 

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Guest broxburnboy

In the past several days BOA halted their foreclosures across 50 states, and there is increasing talk about full moratorium on foreclosures.

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/08/AR2010100806850.html

 

What's the impact to housing market & banks?

 

Not sure about its impact to general stock market and economy, any idea?

 

 

I think what we may be seeing is an attempt to find a bottom in the housing market. Short term these legal/fraud allegation problems are likely to paralyse the housing market. They seem to be getting more complex and widespread. I don't think anyone in their right mind would buy a home if the state of the title could possibly be in jeopardy.

In the last example where a foreclosed family has reoccupied their home.. what becomes of the new buyers security? In limbo at best, lost at worst.

Maybe this will play out as demand for government to step in and set house prices lower, apportioning the loss between lender and owner... the market seems to lack the liquidity to do that on its own. This market needs to find a bottom in order to stabilize the whole economy and the houses need to be occupied.

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