The Foreclosure Story

There’s a new wrinkle in the foreclosure story (you know, that story about how it seems half the houses on the market are foreclosures, and how buyers are dragging their heels, waiting for more, and possibly better foreclosures, even while the 30-year mortgage rate hovers at 4% interest). Now a couple of the major banks have suspended foreclosure proceedings because it turns out some of the foreclosures may have been filed incorrectly, mostly due to the overwhelming volume of paperwork required to file the foreclosure. So if you have a stack of 100 papers and there’s a paragraph buried in there that technically shouldn’t be, the homeowner could go to court to contest the foreclosure. So, this will slow the tide of foreclosures. BUT, there is already what’s referred to as a “shadow inventory” of foreclosures, which are homes the banks have taken back but haven’t put on the market yet, so as not to flood the market with even more foreclosures and depress property values even further. Add the foreclosures that the banks are now suspending, to make certain the I’s are dotted and T’s are crossed, and who knows how many will eventually show up. On the other hand, maybe by the time they do hit the market, housing will be in a turnaround phase and those foreclosed homes hitting the market will be worth more. At this point, it’s anybody’s guess. For more background, see the three posts below.