Redondo Beach Real Estate: BofA Foreclosure Moratorium Update

We have received numerous inquiries regarding Bank of America's announcement on October 8, 2010 regarding their foreclosure moratorium. No matter what their motivation, we applaud them for doing the right thing (at least in the short term). But, while this is certainly good news for anyone facing imminent foreclosure, in our opinion it does not bode well for the housing market and the real estate recovery in the long term. 

Until the paperwork fiasco is cleaned up there is now a potential question of whether many of the foreclosures (whether done through the judicial process or a trustee sale) by any of the banks, were done with the proper supporting documentation. Apparently, some of the title insurance companies agree as well and as of this blog post at least one has backed off from writing policies on certain REO foreclosures. We assume the banks are lawyering up in response to what will certainly be an onslaught of individual and potential class action lawsuits. Make no mistake about this, if buyers can not secure title insurance on REO foreclosure purchases, there will be no sales. Additionally, if the banks take further hits (as is highly likely) it will also be more difficult for any borrower to secure a mortgage. And, we have seen no one (at least not yet) raise the question of whether the short sales that were approved were done with any greater validity either. In other words, if the banks did not have the proper paperwork to foreclose, did they have the right documentation to approve short sales?

While these questions linger, a cloud of uncertainty hangs over everyone. Many homeowners in some stage of (BofA) foreclosure are clinging to this straw in the hope that they will ultimately get some form of relief either in terms of a loan modification, principle reduction or some other miracle. We hope for their sake that is what happens. Remember, however, that ultimately the investor of the note has to decide to provide any relief and they may be reluctant to do so as long as they feel they have recourse not only to the homeowner but the servicers (BofA, Wells Fargo, Chase, etc.) as well. Technically, this is what is considered a "mess".

We'd like to point you to a few posts on this topic we like. Robert Kuttner has authored an excellent article on this and how it relates to how the sub prime crisis was handled initially. Click here to read it. We also like this blog post from MND Newswire. You can also read this article for further background on this fiasco. You will also see a number of rapidly breaking posts on all the blog sites regarding this topic. The Wall Street Journal just published this piece, and this post appeared on ABC News.

Lastly, if you haven't heard yet, Wells Fargo has announced that they will NOT, we repeat not, be implementing any foreclosure moratorium.

In our opinion, BofA, while doing the "right thing" they may be a little too far ahead of the curve relative to their competitors and investors to sustain their position for very long barring any government intervention which the Obama administration seems unlikely to support. (The Repuclican position as expressed on the Sunday talk shows is "let them foreclosure - personal responsibility"). This story is rapidly evolving and we will attempt to keep you updated as material changes unfold.

Our advice to anyone selling a home and facing foreclosure is to keep your options open but be realistic. If, at the end of the day you can not afford the home even at reduced payments, it is time to move on. If you are holding out for a loan modification or principle reduction, this may be the break in the dam but we just don't know yet.

For home foreclosure buyers, proceed with caution. It is unclear as to the status of Title Insurance until this is sorted out. This advisory is for both REO and short sale buyers at this point.

If anyone is still interested, there are currently 11 REO homes for sale in Redondo Beach. Two of these are single family residences, the balance are condos or townhomes. Click here to view all REO homes for sale listed in the MLS. There are also 49 short sales listing in Redondo Beach in the MLS. Follow this link to view single family residences, condos, and townhouse listings.