4 Things Buyers Should Know About The Foreclosure Freeze

Foreclosure Sign

Foreclosure Sign

1. What is robo-signing is, and what all the fuss is about? The phrase robo-signing refers to what we’re now realizing has been a very common practice in the banks’ foreclosure document processing divisions, where one person was essentially given the job of signing as many 10,000 foreclosure documents per month, by hand. These individuals were supposed to be reviewing the files, making sure grounds for foreclosure actually existed, signing the docs in front of notaries. But because of the volume of documents, what they actually did was just sign thousands of documents at a time, without even reading them, and ship them off somewhere else to be notarized.

If you do the math on an 8 hour workday, you’ll see that that only gives the staffer 1.5 minute to review each file and documents to make sure the foreclosure is warranted. That’s not humanly possible, which is how these staffers got the nickname “robo-signers”

Government regulators are very concerned that the banks may have been taking people’s homes without following the proper legal procedures. As a result, 40 states’ attorneys general are teaming up to launch a multi-state investigation, and the federal Comptroller of the Currency and federal attorney general may also get involved in investigating this issue.

2. Will the freeze will make the banks cancel buyer contracts on REO properties? Currently, the freeze impacts bank-owned properties that are owned and/or serviced by Ally Financial/GMAC Mortgage, JP Morgan Chase, and some properties that were owned by Bank of America. Generally, contracts to buy these homes are being put on hold and extended for 30 days. As well, the banks are often reaching out directly to buyers and offering them the option to cancel their contracts and recoup their deposit money.

3. Is it safe to buy a foreclosed home? There’s lots of talk right now about the “clouds” that this scandal will create on the titles to homes that were foreclosed by the banks’ foreclosure mills. And that makes sense: if the home wasn’t properly foreclosed on in the first place, then the legitimacy of the bank’s resale can be called into question. Normally, I’d say: Don’t worry about it, buyer – that’s why you’ll get title insurance! But last week, 3 of America’s largest title company insurers declared that they will not offer title insurance on a number of the homes that may have been involved in this scandal.

In the vast majority of cases – when the foreclosure was justified and a bona fide purchaser, someone who was not involved in the bank’s wrongdoing, has purchased the home, courts will not reverse these foreclosures or their sale to buyers. But if you’re in the market for a foreclosure, get clear on which bank owns the place as soon as you can, and run the property past your title insurer before you get too far into the transaction to make sure they can write a policy of title insurance on the property before you spend too much money on inspections and appraisals.

4. How the foreclosure freeze will impact American home values, say after you buy. In the short term, these freezes might cause prices to stabilize, as we expect to see the supply of foreclosures for sale start to shrink. However, if these freezes stretch out for a long period of time, they could simply be delaying many inevitable foreclosures, which could delay the recovery of the housing market and home prices, over time. I wouldn’t expect to see the freezes cause prices to drop much beyond where they are now, but if they stretch out, they could keep appreciation flat for a longer period of time.

P.S: Don’t underestimate the deals you can get on non-foreclosed properties. You can often get just as good of a price on a better property with more flexibility on the seller’s part in terms of repairs and other negotiation points if you buy a home from an individual seller, as opposed to a bank-owned property.

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About LA Real Estate Info

As a native to Los Angeles, Aaron has been buying and selling homes in the Los Angeles area since 1992. With extensive real estate experience, representing first time home buyers to high profile clientele in entertainment and related businesses he is a third generation resident, his knowledge includes a vast history of sales throughout the Los Angeles area. Some of his real estate areas of expertise are the Sunset Strip, Beverly Hills, Hollywood Hills, Bel Air, Brentwood, West Hollywood, Encino, Sherman Oaks and Studio City. He believes in representing all clients with utmost care, respect and attention to detail is a priority. I have the knowledge and experience to get my clients the most amount of money for their homes in any type of market. I came to Rodeo Realty after having become a Top Producer for Coldwell Banker and one of the top 50 agents in the entire Northwest Region. Prior to real estate, I had been a successful entertainment executive. I oversaw the development of programming, implementation of technologies and negotiation of strategic partnerships for eHobbies.com. I also served as producer of the independent feature film “Love, From Ground Zero”, and was a development and production executive for feature film companies based at Paramount, Disney and 20thCentury Fox. This gives me aunique background for employing a variety of creative marketing strategies to insure a timely and successful close to eachtransaction. I believe the trust that is passed on to me by my clients must be continually earned. It is this commitment to my clients and their needs, which is the cornerstone of my business and philosophy. Together with exceptional communication skills and comprehensive knowledge of the business, I am able to successfully navigate all aspects of the real estate business for my clients in any market condition. So when you decide that you'd like to buy or sell a home in the Beverly Hills, Bel Air, Brentwood, West Hollywood, Encino, Sherman Oaks, Studio City, Hollywood Hills areas, please contact me.
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