Maui Real Estate Blog
Faulty Foreclosure Documentation Issue Spreads
A couple of weeks back, we posted that Hawaii is one of 23 States where Allied Financial (GMAC) was halting foreclosure proceedings due to faulty documentation. In the last couple of weeks, the issue has snow balled to include other financial institutions such as JP Morgan Chase and Bank of America. Earlier this week, Old Republic Title Company announced that they would no longer issue title insurance on Allied Financial Foreclosures. Wednesday of this week, the State of Ohio announced they would be filing a suit against Allied Financial for fraudulent practices. I am sure there are other state and potentially federal suits that will be forthcoming. Under mounting political pressure, Bank of America announced today that they would be putting a hold on all of their foreclosures throughout the country. It will be interesting to see how this continues to evolve and if and when other lenders will put national holds on foreclosures.
While the big picture is still evolving, it will be interesting to see how this will ultimately impact the Maui Real Estate market. I did touch base with one of our title and escrow companies this week to see what impact if any impact it was having currently. They indicated that four REO purchases that they were handling have been put on hold. Not only are the banks having to review properties that are currently in the foreclosure process, they are also reviewing properties that have been through the process and reverted to bank ownership. This is clearly going to slow down the volume of REO and bank owned transactions in the near future. Some have speculated that the foreclosure fall out could lead to a bump in prices during the fourth quarter in many real estate markets. The price increase would stem from a combination of a shrinking inventory and fewer REO closes which are traditionally at a discount from conventional transactions. The big thing to bear in mind is that the foreclosure documentation issue is unlikely to ease the total number of pending foreclosures. Instead, it will likely mean that that the foreclosure inventory will be slower to hit the market and the buyer absorption of the foreclosure inventory will be a more prolonged process. We will continue to follow the foreclosure issue on The Maui Real Estate Blog.