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The New Foreclosure Mess: An Update

Banks have lifted their freeze on foreclosures. It seems a doomsday scenario will be averted. There is no way to absolutely predict what the fallout will be from the banks’ negligence in  their foreclosure filings. There will be lawsuits and some will cry out for the banks to make forms of restitution to injured parties. However, it seems the problem will not be of the magnitude originally expected.

NPR interviewed Nick Sharga, chief executive officer of RealtyTrac, and explained that:

Sharga said the controversy over sloppy paperwork was not a factor during the third quarter. He added that preliminary data from this month show almost no change in foreclosure activity since September.”We’re not seeing what we might have anticipated in terms of a falloff,” Sharga said.

Housing Wire quoted Mark Zandi, chief economist at Moody’s Analytics as saying that the effect of the robo-signing debacle will be minimal.

“It’s not going to be a significant issue.”

The title companies who were threatening not to issue insurance to some foreclosed properties are softening their position as well. The Wall Street Journal reported:

Title insurers have decided not to require lenders to provide a blanket shield from claims caused by flawed foreclosures after discussions around crafting an industry-wide agreement fell apart.

… First American Financial Corp. said Thursday that the Santa Ana, Calif., company had concluded that requiring banks to indemnify the title insurer from foreclosure errors resulting in questions about who owns clear title to a property was unnecessary “given the actions taken by lenders to remediate deficiencies and to improve their processes going forward,” said Dennis Gilmore, First American’s chief executive.

… Stewart Title Guaranty Co. said in a statement Thursday that the unit of Stewart Information Services Corp., of Houston, “stands ready to issue its title insurance to purchasers of foreclosed properties from institutional lenders representing that they have followed all applicable legal processes.”

Bottom Line

It seems as though worst case scenarios will not occur. This is a rapidly evolving situation however. We will keep you updated.

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