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Foreclosure Moratorium: Latest in the Debate

By Robert Freedman, Senior Editor, REALTOR® Magazine

About half a dozen articles and editorials have come out in the last two days cautioning against the federal government imposing a national moratorium on foreclosures while banks review their processes. They’re summarized here for  informational purposes only.

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The Politics of Foreclosure, Wall Street Journal, Oct. 10, 2010. The foreclosure problem isn’t about  whether some home owners had their homes wrongly foreclosed upon (there’s been no evidence of that to date) but to what extent banks were taking short cuts on foreclosure procedures in states requiring judicial foreclosures. Banks need to conduct their reviews and correct their processing mistakes, but talk in Congress about imposing a national foreclosure moratorium would unnecessarily disrupt the housing market at a time when it needs to find its bottom and move on.

SIFMA: U.S.-Wide Foreclosure Moratorium Would Be a ‘Catastrophe’, Dow Jones Newswires, Oct. 10, 2010. The Securities Industry and Financial Markets Association (SIFMA) says cases of incorrect foreclosure processing must be identified and addressed on a case-by-case basis but imposing a national moratorium while banks sort things out could be “catastrophic” for the housing market and the economy.

Senior White House Official: Not Sure About a National Foreclosure Moratorium, Washington Post, Oct. 10, 2010. White House Senior Advisor David Axelrod says there are valid foreclosures that would get caught up in a national moratorium, throwing the housing market into turmoil. Meanwhile, congressional leaders are ramping up talk about imposing a national moratorium.

Obama Administration Does Not Support U.S. Moratorium on Foreclosures, Washington Post, Oct. 11, 2010. FHA Commissioner David Steven says it’s crucial to protect households from being foreclosed upon in error but the government must be careful not to overreach and apply a remedy that will make the problem of foreclosures worse, which is what a national moratorium could do.

Foreclosure Freeze Could Undermine Housing Market, Associated Press, Oct. 11, 2010. Widely watched housing economists Karl Case of Wellesey and Mark Zandi of Moody’s Analytics were starting to become relatively upbeat about the housing market before the foreclosure processing problems came to light. Now both of them are concerned that the problem, and the effort to fix it, could set back the recovery.  “Anything that slows the foreclosure process is a bad thing,” says Case.  Banks say the issue isn’t whether the mortgages should have been foreclosed upon but about the procedures they used, because most people who were foreclosed upon were behind on their payments.

More on the foreclosure processing problem.

NAR’s talking points.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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Comments
  1. There is always two sides to a story the first part of the story is for whatever reasons homeowner stopped making mortgage payments and paying their association dues and allowed the property to become total neighborhood eyesores plus some have stolen appliances and attached fixture when they moved out of the home.The only best way to move out of our depressed housing maket is to re-sell these homes in orderd for the housing market to ever return to normal and I hope politics doesn’t get involved.. .

  2. NOAH

    Regarding Banks and their “Robo-signing” of false documents:

    I am sick and tired of reading “the Banks took shortcuts” and ” a moratorium on foreclosures will devastate the housing market recovery”!

    The Banks committed fraud! Period…end of story! Attempts by sources to portray this latest predatory failing by Banker/Lenders is intentionally overlooking and underplaying the depth of this scandal!

    First, I doubt seriously that a moratorium on foreclosures would hurt the market when ShortSale alternatives can pick up the pace while at the same time offering underwater Homeowners a more humane homeownership exit! Please recognize, that if you or I did what the Banks have done, we would be under the proverbial jail!

    No more Banking bailouts or get-out-of-jail-Free passes for Banks! How soon we forget how the Banks played a major role in the real estate meltdown as well as our Government, many Realtors, Appraisers and even local governments and their Property Appraisers. The same players that patterned the market downfall are now going to revive the market?? I think not! There is a pervasive and gross lack of responsibility and accountability for these offenders and people are fed up and not going to take it anymore. Wearing “white hats” now does not excuse them from the black-hearted roles they played during the real estate bubble…and continuance of same today!

    Amazingly, underwater Homeowners are expected to continue the Banking Bailout by continuing to make their house payments. Attempts of Homeowner brainwashing continue daily with banking supporters trying to make them think that because they (the underwater Homeowner) signed a note and mortgage they are obligated to make these payments…even though their Lender’s lack of responsibility may have caused them and millions like them to loose their jobs, savings and home equity! The same Government lackies that bailed out the Banks are now trying to demonize and shame homeowners into continuing to make payments on underwater real estate assets that they, the Government and Bankers, fouled up with their thoughtless greedy actions!

    Here is the news-flash, The People are not stupid! The People will not be brainwashed into paying too much for undervalued assets….more and more People realize that this undervalueing was not a result of investment mistakes they personally made, but rather, they have suffered at the hands of Government help and greedy market players who continue to defend their innocence while pretending to have a solution. Government and Banking attempts to help homeowners have been a joke and the People are growing more and more aware of this daily!

    For those self-serving, nervous-Nellys that claim, “Foreclosure moratoriums will ruin our real estate recovery”, I suggest they should be more concerned that the People are steadily waking up to the reality that will commit them to no longer accept Bank and Government intimidation-intervention and brainwashing. They will no longer feel responsible to make a house payment to a government supported lender that devalued their property and likely cost them their job, their home and their future hopes for their children and grandchildren! When enough of the People figure this out and wake up to the fact that they are being asked to continue the Banking Bailout….then the market will start its true recovery because we all will need new homes and they will be affordable once again!

  3. KATHY SLAYTER

    I broker for Fannie Mae in South Carolina, a judical foreclosure state. The halt to sales caused 3 transactions I had in escrow to be tabled, and 4 other listings terminated. realtor professionals, mortgage and title professionals, and prospective sincere qualified home buyers were all affected. Wells Farog, not a part of the foreclosure “stay” yet, had Fannie Mae assign me two new BPO’s to complete.- one property had the foreclosed mortgagor still in the property. She had stopped her payments over a year ago! She was not unemployed,continued to work, and judging from the interior of her home which I have to view as part of my duties in this situation for fannie Mae, had skipped on nothing including a well stocked high end liquor bar and a dining room table dressed with the seasonal fall decorations including matching autumn place mats and ceramic harvest decorations. It actually made my blood boil last night as I thought about how many are taking advantage of this situation. I understand, they never should of had the chance to buy as it was “banking deregulation” which allowed the era of easy credit and no docs loan to be ushered in to fuel a fire we all fanned. But just to stop making your payments so you could spend that money on other things, including a lovely flat screen TV, tells me something is wrong here, seriously wrong. Stopping foreclosures is not the way to go – we need to clear out the folks who never should of owned that piece of the pie to begin with, let the markets correct back down to where it needs to realistically be, and we need to look at housing as what it is – a place to call home, not a get rich scheme. When you hear the statistic that one in four homeowners are at risk facing foreclosure, you have to agree, we have a serious problem on our hands and we need true leadership, not politics to see our way clear of this. I believe NAR needs to step up on all levels, local most importantly, to let the public know that REALTORS can help to lead them out of this mess. We need to revamp our advertising campaign to target this most important issue and tell the public that we are educated, know the ways to help them, and how to move them forward. Our voice needs to be heard, our experience needs to be valued. You have to make our message meaningful so that people listen not flip the channel.j We sould have our national state, regional and local leaders mounting a PR campaign – TV, Radio, Internet, Print, the likes we have never seen before. We are the voice of Real Estate, not Harry Reid.

  4. I think many are missing the point. Banks did not sneak up and take houses by foreclosure for no reason other than non-payment of mortgage by owners who promised to repay the loans. In many instances, the length of time from the first missed payment until actual foreclosure exceeded 6 months. Then, in Michigan, where homeowners have a 6 month redemption period, the banks were again very generous in holding to the 6 month period. Ultimately, many homeowners, for whatever reason were not able to make their payments had Over 12 months living in the home without making house payments, without paying property taxes or paying for homeowners insurance. Simply keeping the utilities paid. Yes, the process Does need to be legal, however, the news is giving the impression that homeowners had their homes unfairly foreclosed, which is not the case.

  5. Plainy Jainy

    Well, we saw the effects of government trying to “fix” the foreclosure mess with tax payers money in the form of $8,000 buyer credits – it tanked the current market.
    Strange this came to light the month before the elections – I suppose the politicians want to buy votes any way they can, and if they put a moratorium on foreclosures, most likely they will buy the votes of the people and their families that are squating in the houses now for free, and all the others that were foreclosed on that expect to settle with the banks in the future…and their lawyers. These people did not make their payments, did not live up to their contracts – it is time people learned to take some responsibility for their own actions.
    Please….just get on with the foreclosures, make sure the paper work is current and right, and lets clear out all this unwanted inventory ASAP, so we can get back to a more normal market sooner – AND THE PEOPLE THAT ARE MAKING THEIR PAYMENTS WON’T HAVE TO INCURE ANY MORE LOSS OF THEIR VALUES.
    I think we have all had it with the Banksters and Washington right now – lets just let the market correct itself on its own….no matter how painful.

  6. realtor

    I have a buyer in a fully executed contract on a house that has been vacant for a year. They are suppose to close in 2 days but can not. They have no place to live and the banks are not giving a time frame. THIS IS OUTRAGEOUS. I understand wanting to save the improper foreclosures, but what about the buyers of these homes? Why isn’t anyone talking about them and the “unknown” they are suppose to live in until who knows when.

  7. Tee-EX

    oh the banks did nothing wrong!!!!!!!!!

  8. The Housing Market will not improve until the foreclosures are out of the way. As an REO listing agent it make no sense to delay the marketing and closings of vacant bank owned properties.
    We must address the housing market challenges with a logical and sensible approach.
    There are three steps that will improve the housing market.
    1. Any property that is abandoned (vacant) should take priority in foreclosure proceedings. The housing market price will not stabilize or improve until these properties are sold.
    2. Any seller cooperating in the short sale of their property should be allowed quick due process. The best sale is between a cooperating Seller and Buyer.
    3. Any owner that wishes to remain in the property should be granted a permanent modification including principle reduction or should be allowed to pursue a transfer of deed in lieu of foreclosure and rent back at an affordable monthly payment.
    If these three steps are implemented and calculating the current value of homes versus loan amounts owed, we should be out of this housing crisis within an average of 28-34 months, otherwise it may take almost double that time. Different parts of the country may recover fast than others, I live in Florida.
    .

  9. J M

    I applaud Noah for his well said words. many agree with you.
    Kathy Slayter, as a broker in WA., I work for several banks and do local BPO’s as well. Because a homeowner is working, has a “nice” home , well decorated, and shows no sign of distressed to you or her neighbors is wrongful on your assessment of profiling.
    I have many high end homes that are in short sale situations and since they may have had “nice” things prior to their recent situation, this does not reflect their current private or personal financial situation to Brokers.
    JM

  10. Thanks for this useful compilation of articles as I think one of the biggest issues that still continues to plague us is simply the lack of information and sources to get it from!

  11. If the Banks would pull their heads out of the sand and start actually fast tracking short sales like they keep saying they are going to do, we’d all be better off. The lawsuits over illegal process would go away, the buyers would hang in there and close escrow and the need to foreclose could be greatly reduced. How many years did it take for B of A to start using the same system for handling short sales as they use for foreclosures? Too many. Yet even now that they are doing that, it really hasn’t speeded up the process, so a short sale turns into a foreclosure. Maybe with foreclosures being frozen for now it will put enough pressure on getting short sales closed in 60 days instead of 60+ days just to get a ridiculous counter back from the Banks.

  12. SaRita Gjersdal

    I have been a listing agent for REO’s for the last 7 years and prior to that time, I was an Asset Manager for a major loan servicing company. I have seen homes that were foreclosed and stripped of all appliances, fixtures, lights/ceiling fans, furnace, AC, water heater, etc, etc, etc. I have seen borrowers stall the foreclosure by filing bankruptcy hours before the F/C sale which causes the sale to become invalid and then the bank has to start over and the mortgagor gets to live in the house numerous more months For Free while the bank attys get relief through the court system. There are many many people who are living in homes For Free because they know how to play the game. I have been watching the news with great interest over the last weeks as many commentators are referring to the banks commiting mortgage fraud. I think this is a total mischaracterization of what is going on. Homeowner’s attorneys are looking for anything they can find….an undotted “i”, an uncrossed “t’….anything to get their clients off….and of course, they must earn their fee. The bottom line remains….the homeowner borrowed money to buy a home and they are not paying it back as agreed. If the homeowner had not paid their car payment in months, or years, and one morning they went outside and their car was gone….they would know that the car was finally repossessed…..and they would move on. I think people have turned to a belief that living in a house….whether you can pay for it or not….is a right. News commentators are inflaming the situation when they state “on air” that these poor people are being thown out of their homes….as if for no reason…..If they were paying their mortgage, this would not be an issue. I have to pay my mortgage every month. I know of one home in my neighborhood where the owner braggs that she has not made a single payment of PITI in over 3 years….and she still lives there. She has new clothes, all the latest in technology, a brand new car, and a job……and continues to live there For Free. Now, another hurdle for the lenders as the government once again steps in to save the poor homeowner…..How nice. This government involvement has cut my business in half over the last two years and I struggle to pay two mortgages, because one of my own personal residences has been on the market for 650 days without selling….due to these woes…..I no longer buy new clothes, shoes, TV’s, latest cell phone toys, cars, etc…..my personal discretionery income has dwindled as I struggle to pay my commitments…..yet my neighbors live For Free and are being rescued over and over…..as they continue to go shopping and out to restaurants in their new cars every night. Something is really wrong with this! This is not fair! Government forced loan modifications did not work. Many of those that were approved for loan modifications are now in default again…..because they know they can live For Fee and Uncle Sam will rescue them….and the media will be on their side….because they are so unfortunate, etc. If you can’t pay for your house….go back to living in an apartment, or with friends or relatives if you are indigent. Give the house back to the bank and let the bank recoup their losses so they can re-lend that money to a new buyer who will pay the money back to the bank. This mess is so out of hand it amazes me to hear the ridiculous comments on the news…..I borrowed money to buy a house (actually 2 houses-one of which I cannot sell due to this mess), I pay both my mortgages every month….one way or another….both of the houses are now on the market For Sale….and now, government is stopping all foreclosures…..this will put ME out of business and next thing you know, my TWO HOMES will be in line for foreclosure….this is a domino theory….government interference and continuing to hinder and/or stop foreclosures will put real estate agents, title insurance companies, homeowners insurance companies, loan officers, loan processors, appraisers, home inspectors, pest control companies, remodelers…..on and on and on….out of business….then all their homes will be in line for foreclosure….We need government to get out of this and let the lenders work it out and move forward~~!!!

  13. john (OHIO)

    AFTER OVER 90 DAYS OF SUPPLYING A BANK WITH ALL NECESSARY DOCUMENTS TO CLOSE ON A FANNIE MAE 203K LOAN WE WERE 1 WEEK AWAY FROM CLOSING AND THEN WE RECEIVE A NOTICE THAT THERE ARE TITLE ISSUES AND THE CLOSING WAS PUT ON HOLD WE HAVE CONTRACTORS LINED UP TO REPAIR A HOME THAT IS VACANT FOR MORE THAN A YEAR IT IS A DITRESSED HOME AND WE WANT TO REVAMP IT TO LIVEABLE CONDITIONS NOW NO ONE CAN GIVE US A TIME FRAME OF WHEN THIS WILL BE SETTLED SURELY SOMEONE NEEDS TO STEP UP AND KEEP US BUYERS INFORMED WE HAVE PAID FOR APPRAISAL AND OTHER ITEMS TO READY THE HOME FOR CLOSING AND WE CAN’T GET AN ANSWER WE WERE ASK TO EXTEND OUR CONTRACT TO 3-31-2011 WHICH WE DID WE DON’T WANT TO LOSE OUR INVESTMENT SOMEBODY HELP US

  14. Bill Blaylock

    The old saying ” if you need a heart transplant hold out for a lenders heart because it’s never been used” rings so true. As a real estate broker I have seen them operate for 30+ years now and if I ran my business the way banks and other lenders have run theirs I would have been broke a lot sooner than I am now. Especially credit card companies that defaulted everyone’s rates after being 1 day late. I sincerely hope that they all eat their contracts , notes, and trust deeds. Yes, we all may be in the streets one day but the realtors, and agents will survive because we are a lot smarter and a whole lot tougher than our lender friends.

    Keep the faith.

  15. SaRita

    to Bill Blaylock – While I appreciate your comments regarding credit card companies….and lenders in general….I suggest we are forgetting one thing…..these are loans….we are borrowing money…via credit card or mortgage loan. Every purchase you make on a credit card is a loan by the card issuer.

    If you don’t like the heartless lenders – don’t borrow money. Pay cash for everything!

    I don’t know how many Cash home buyers you have in your market place….but the average American in my market place does not have All Cash to purchase a home.

    We must have lenders to loan money to buy homes. And, those lenders, who you refer to as “heartless” have guidelines and requirements set out by other agencies…and these must be met in order to approve and fund the loan and sell the paper to the secondary market.

    Our government passed laws over the years that made our banks make questionable loans…..and now we are all bashing the banks and accusing them of fraud and predatory practices. I recommend reading “Architects of Ruin” – sorry, I don’t recall the author’s name.

    And, Wall Street greed led to all the sub-prime ridiculous loans that have defaulted or will default. See “House of Cards” on CNBC.

    But, either way, this began with government interference and continues to be a mess with government interference.

  16. I am a Realtor in Dallas, Texas and I have been trying to get an offer worked on a foreclosure for 3 weeks now. My investor came in $4,000.00 less than list price with $50,000 down and great credit with a lender prequalification letter. The bank responded that they would not accept the offer because his loan may require some rehab. He was buying it “as is” in the contract. How are we suppose to ever clear the market of these foreclosures if the banks behave like this?

    Frustrated,

    Kay

  17. Joan Quinland

    Hello over there!!! you greedy Realtors and you greedy Brokers….oh and not to mention the appraisers who were getting paid under the table to say a house was worth more than what it was actully valued. Oh, not to mention you greedy builders who cut corners by using carcinogenic cheap materials to build cheap homes and sold them for hundreds of thousands of dollars. Whom do you think was going to continue to pay for these overpriced homes while the builders and bankers filled their pockets with citizens hard earned money and sold inflated assets. On top of it, gets bailed out with our tax paying dollars and fill us with false promises of modification. Citizens.. wake up and smell the coffee..DECEPTION. I agree with the moratorioum. All foreclosures should stop until correction is made. All thieves should bring back the money they stole so that the economy can be restored and the innocent people can live again. Those brokers and realtors who exhausted all their powers into buying homes they did not need to the point in using up every name in their immediate family and extended family friends and thier sphere of influence to satisfy their greed. I have never seen anything like this in all my life. No measure in place that could stop this action except for the exit strategy which are: BAILOUT FOR THE BANKS…broke for the investors …SHORTSALE FOR REAL ESTATE …PROFESSIONALS …FORECLOSURE/HOMELESSNESS FOR THE HOME
    OWNERS. Now- Please tell me why moratorium is not necessary?

  18. twinkle

    STOP the banks!!! As a realtor and homeowner I can tell you the banks are AGAIN taking advantage of people! Trust me they are making a profit in more ways than you know. I have made every payment on my property as agreed, then the bank raised my payment $800 a month for escrow fees??? When questioned they could not tell me why…I paid insurance, property values were down, so no it was not taxes as they finally said.Low and behold they “force placed” insurance on my home through their own company-(more money in their pocket) even though I had insurance of my own. I have an overage now of almost $30,000 in my account-they called and told me to STOP making payments. Now they have served me with foreclosure papers.They have not applied the overage to my account nor my last several payments-the money just disappered ! This is on a Fannie Mae loan the servicer states the attorney (foreclosure mill) hasn’t received the proper docs from them yet-this attorney is also being ivestigated by the attorney general for fraud!, Meanwhile I have had to hire an attorney to fight this….why is it the homeowners problem that the banks different depts can not communicate with each other, you can not speak to a loss mitagator..I have found forged documents, RESPA violations etc….it is crazy…..so YES, let’s please fix this system and make it legal, ethical for all involved! So in the futire we can sell, buy and conduct business without the fear of a clouded title coming back or future lawsuits!

  19. Realtor for Homeowners

    I am a Realtor that works with both Buyers and Homeowner Sellers. I never found that banks gave such great deals on foreclose sale anyway. And, doesn’t it seem like the “freeze” on foreclosure sales will help the current homeowner trying to sell their home without it going into foreclosure, have an opportunity to have potential buyers consider theirs? I am not sure where the mentality came from that buyers got “deals” by purchasing foreclosures! I am hoping this freeze will help my homeowner listings to sell, so that we can prevent homes continuing to be foreclosed on. I don’t claim to be a rocket scientists, but I think there maybe a window of opportunity here that we can make the most of. Just a thought.

  20. It’s a big distress, really, not only for the loaner but also for his family members. It has to stop. The government must do something about this matter.

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