Last month distressed sales in Lee County accounted for 63.27% of all single family home sales. This trend has been fairly constant for the past few years as Lee County has been hit hard by a sagging economy and a fallout from the real estate industry.
We have reported in past articles how the government’s loan modification plan was ill conceived and would not help struggling homeowners and in fact would prolong the housing crisis, and this has born out. While there is plenty of blame to go around, there is a new threat on the horizon that may shake-up the SW Florida real estate market and change the landscape of transactions.
Because of the volume of foreclosures nationwide, banks have hired outside firms sometimes regarded as foreclosure factories to handle and process the foreclosure. The problem is that these firms must certify and investigate certain facts before presenting to the court a notarized package that the person investigating has read all the documents and certified the package is true and correct.
Through recent testimony, it has been revealed that a few of the large banks have one person signing thousands of documents, making it unlikely this person has personally reviewed each case. In another case the vice president of one bank is also the vice president of another large bank, and is the person notarizing the attorney-in-fact’s signature. This is suspect and unlikely true, which gives further credence that this person is rubber stamping notary signings for various banks, which could invalidate all those foreclosures.
Three major lenders (J.P. Morgan Chase, Allied Financial Inc. (GMAC,) and Bank of America have halted foreclosures in 23 states because of this. There is a potential to postpone many foreclosures both here and nationwide, which could stall a real estate recovery. The talk of the industry is, would this make banks more likely to consider short sales? The answer is that would make too much sense, but it would speed things up and limit bank’s liability in this foreclosure document crisis.
FNMA has not been affected, and this document crisis will not halt all foreclosures, but it will shake things up for awhile. What’s going to be interesting is how the failure of the banks to properly certify their properties for foreclosure will affect title. A few title companies have already suspended issuing title policies on foreclosures of certain banks until they can determine the foreclosure was in fact legal. The interesting question would be what happens to previously sold properties that could come into question?
This all sounds like a legal mess, and it probably is. It is uncertain what all this means, but we do know it could have a profound impact on available inventory, and possible further effects on past sold bank foreclosure properties. The implications are far reaching and beyond the scope of anyone’s expertise I know of to accurately predict how this will play out. Our guess is it will just delay foreclosures in our area, which will prolong the market recovery. Sales transaction could decline further unless banks step up and approve more short sales.
This is one of those wild card events that can affect the market. Past wild cards were terrorism, oil prices, and the previous financial liquidity crisis. Stay tuned.
It’s arduous to search out knowledgeable people on this matter, but you sound like you understand what you’re talking about! Thanks
I was trying to remember how I found your post – TopAgent Blog » Blog Archive » Big Shakeup in SW Florida Real Estate Market? – but I can’t recall. I think other people would be interested in reading it too, so I bookmarked this page – http://blog.topagent.com/2010/10/25/big-shakeup-in-sw-florida-real-estate-market/ – on my Facebook page. I hope this is ok.