Almost hourly the nightmare facing the housing industry worsens as the ramifications of what is being called ForeclosureGate become clearer.
Though opposition from the White House and the industry has halted calls for a national moratorium, all 50 states now are proceeding with investigations that will take weeks at least. One major lender, Bank of America, has halted foreclosures in all states and several others, including GMAC and JP Morgan Chase, have stopped them in 23 judicial states.
Trade associations are demanding that lenders keep their foreclosure engines running for the sake of the housing markets and Senate and House candidates across the country are demanding that they stop.
Families in the process of foreclosure are breathing easier, and for good reason. A conference call with executives of JP Morgan Chase this morning made it clear that at this point it may not be until next year until their foreclosures can resume.
“We really believe the proper approach and response here is to go loan by loan, file by file, customer by customer, and if mistakes have been made then we need to address them individually which we absolutely will do,” said the executive, discussing the 115,000 loans that his firm will review.
Although individual states had foreclosure moratoria in place much longer than that in 2007 and 2008, the current crisis has spurned concern that homeowners will stop making monthly payments or investor will stop buying foreclosed properties for fear they would not the able to get clear title until lenders review the paperwork trails on hundreds of thousands of properties.
In fact, the foreclosure market was cooling off long before this crisis erupted. Yesterday ForeclosureRadar reported that in September REO inventories increased in the five Western states it covers as properties went back to banks in state after state as investors failed to step up to the plate. Even though sales were up in states like Arizona, where REOs were up 61.2 percent from the prior year and California, where sales to third parties declined 15.6 percent from August.
Count on ForeclosureGate being around for awhile.