The end of foreclosures?

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Several major banks halted the foreclosure process as paperwork and methods of their foreclosure procedures have been called into question. Does this mean the foreclosure crisis is coming to an end?

No, not really. The vast majority of states where the foreclosures are being halted are states that require judges to sign off on the foreclosure. For instance, Bank of America said they are stopping all foreclosure sales across the country, but not the foreclosure process in some states.

Why some states and not others? Some states (as mentioned a moment ago) require judges to sign off on the foreclosure. Other states (such as Georgia) are classified as a non-judicial foreclosure state. That is a big hyphenated word, and it essentially means banks can take the house from the homeowner if they stop making payments.

As a loan originator in Georgia that attends almost all of his closings, one of the documents attorneys have the home buyer sign specifically says banks in Georgia do not have to sue to take the house back if mortgage payments are not being made. In short – “no pay, no stay.”

Will the foreclosure freeze in the states that require judges to sign off on a foreclosure allow homeowners to keep their homes? No, probably not.  Since the homeowners involved in the foreclosure process stopped paying their mortgage, once the paperwork is straightened out, banks will start foreclosing on homes again.

Regardless of what you may read on the internet or hear on TV, as things stand at this moment, nothing has really changed. Sure foreclosures are being halted for a time, but not permanently stopped. In some cases, delinquent homeowners not making their payments are only getting a temporary reprieve – not an outright pardon.

UPDATE – several of those same banks have announced (after roughly two weeks of internal reviews on how they handle foreclosures) they are starting back up with the foreclosure process.

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2 Responses to “The end of foreclosures?”

  1. Van Purser Says:

    When you think about it, just the sheer volume of foreclosures and the nuisances associated with the various state laws would certainly contribute to some of the complications.

  2. types of home purchases « The Mortgage Blog Says:

    […] owns the foreclosure and there are no title issues (though there has been some debate lately. See this recent post for more info).  In most cases, buyers must work with a real estate agent to purchase a […]

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