Foreclosure Halt

The banks are at it yet again! Anyone who keeps up with the real estate market or even watches the news I’m sure as heard about the halt on foreclosures. News has surfaced over the last 2-3 weeks that GMAC Mortgage and GP Morgan Chase are suspending foreclosures in 23 states (Virginia is NOT included!). Bank of America announced they were halting foreclosures in all 50 states in order to investigate their foreclosure process. It has been said that Bank of America employees signed documents without verifying the information in them. This raises an important question: Have banks been foreclosing on borrowers who are not delinquent? And will this latest action save a borrower’s home?

It’s not my place to say rather foreclosing on a home is right or not but if you have defaulted on your mortgage, the only choice the lender has is to foreclose. Last time I checked, we weren’t giving houses away for free. I don’t think many people signed their mortgage paperwork while intoxicated, drugged, under undue duress, or without being told some disclaimer about the terms and conditions of the mortgage. One thing I can say is that I do think that many consumers took out very risky loans because they were caught up in the mentality that real estate was a guaranteed quick money maker. Why so many people though this is beyond me.
So, will consumers who are in default be saved from foreclosure by these latest moratoriums? The answer is a NO! Defaulting borrowers will still lose their homes. Banks will continue to foreclose on homes when the borrower proves they can’t pay the mortgage. These investigations will assure the banks that their paperwork is in order.


In states, like Virginia, that adhere to nonjudicial foreclosure, this moratorium has little bearing on the market. Virginia borrowers sign their rights away when they sign their mortgage instrument at the settlement table. There is a clause in the deed of trust that states that the borrower gives the lender the right to repossess the property if the borrower fails to make their mortgage payments when the mortgage payments are due. There is no court action that needs to be taken for the lender to pursue a foreclosure. Simply, it is very easy for a lender to foreclose on a property in a nonjudicial foreclosure state. Foreclosure has a very quick timeline in Virginia, as well. Some foreclosures here in Virginia may have to start over, but the house will still be foreclosed on.


Defaulting borrowers should not look at this latest news as the answer to all of their prayers. This is more of a postponement of the inevitable. They should still make plans to bring the mortgage current, pursue a short sale, or find a rental.


As for buyers who bought a foreclosure and is ready to close this could hurt the sale of the home. Buyers who buy foreclosures should buy title insurance. In my humble opinion anyone who buys a piece of real estate should buy title insurance. It is a onetime cost and it protects the buyer against title defects. A basic owner’s policy protects buyers against things like forgery, fraud and improperly signed or recorded documents. It will be interesting to see as this unfolds how it will affect the title insurance companies and title insurance.


Now I know that’s a lot of news but I would love to hear what you think of all of this. Please leave your comments below; I would love to hear from you.

Go to www.ShanellRobinson.LNF.com to view my office listings, search for homes and MUCH more!


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