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The nation’s foreclosure crisis has resulted in loan closings being scuttled in some regions of the nation and fears are mounting that if the situation isn’t rectified soon it will damage the one area where lenders are posting stellar profits: new originations.
“The unintended consequence of this is that some people won’t get to buy houses,” he said. “This is not a good situation,” he told
He added that the moratorium will allow delinquent borrowers to “stay in their houses longer” but the TMS chief believes ultimately they will lose out once foreclosures and REO sales start up again.
If and when
Since the vast majority of sales in the current market are distressed, either short sale or REO, Sternberg said, “they will be clouded by the specter that has been created with potential title issues.
“The real fly in the ointment will not be the lenders, but rather the title insurance companies,” he told
“The lenders will not close without title insurance and the title insurance companies will be reluctant to cover a title issue created by a faulty foreclosure. And if they exempt such an occurrence from coverage, then the lender or buyer’s attorney will not let the borrower close.”
“Now the industry has another black eye because we have people who are foreclosing that should not be foreclosing.”
Dannen is vice president, residential lending sales manager of
The bank’s September pipeline is up 72% over
“Originations have been very strong. We’ve had some of the best months we’ve had in a long time…we’re still doing short sales.”
The bank had an REO closing canceled recently where a large, national bank had foreclosed on a property and was selling it to a borrower at
“Two days before, the seller canceled the sale because of all these issues around the improper foreclosing of properties. So, this large bank that owns it felt they couldn’t turn around and sell it because they felt something was not right. The poor purchaser ended up losing the house.”
Personally, Dannen said he doesn’t think foreclosures will affect the overall origination business any time soon.
“It will eventually affect inventory on the market. There will be more inventory and I guess you could say it will affect us if there’s more inventory and prices drop further. There will be a delay of inventory coming on to the market,” he said.
“If it went on for a long period of time, it will have a lot of consequences-most of which will be adverse on everybody,” the JPM chairman said.
His company is now reviewing 115,000 loans that are in foreclosure to ensure the notes were processed properly. The bank is halfway through its review.
“From what I have read and heard, a moratorium on foreclosures puts a moratorium on short sales and the whole market,” said
“Twenty-five percent of the sales now are foreclosed properties. If you put a moratorium on it, that can only slow the market down even more.”
For now, it’s “too early” to know “how deep of a shakeup” the document scandal actually was in reality, added
“How many documents were signed just to have them signed? Will this impact the people you already threw out of these homes? Are there huge class-action suits to come? It’s too early to know.”
Several others megabanks are reviewing their foreclosure practices, including
B of A has temporarily halted foreclosures in all 50 states.
Others have halted them in the 23 states where foreclosures must be approved by a judge.
The disruptions are apparently not affecting all areas of the country.
The “Foreclosure-gate” crisis started when
Attorney generals in all 50 states agreed to coordinate efforts to investigate the nation’s foreclosure mess by setting up a special task force.
The attorney generals have set a goal of determining whether servicers violated state laws by cutting corners when filing their paperwork.
But the group fell short of calling for a national foreclosure moratorium, something the Obama White House also opposes.
Meanwhile, the foreclosure crisis is also hurting the secondary market for nonperforming loans.
Investors and brokers who participate in that market say the asking price for certain NPLs has fallen since foreclosure-gate started, but view it as a temporary development.
“It has caused a pregnant pause,” said one investment banker who represents sellers, “and it likely will increase due diligence and seller reps and warranties.”
The advisor, who requested his name not be published because he is working on several deals, said the chief cause for concern centers around “the uncertainty of title.”