The Housing Market Is Unpredictable
Passing legislation at the federal level (it already exists in Florida) that lengthens the time it takes a bank to forclose will motivate more borrowers to strategically default; stop making their payments and either live in their houses for free or rent them out and pocket the proceeds.
But it will also artificially prop up sale prices and make us think we have hit bottom. The flood of foreclosure properties that would normally be coming onto the market will be delayed, but they will eventually appear. This will give a false sense that the housing market is improving and will be spun hard by the OBama team that things are getting better, not just being postponed.
Government action to assist those threatened with foreclosure will have a tremendous impact on the value of your home...one way or the other.
Here is the article explaining the pending legislation. I have put in bold the parts I think sum it up.
Article from DSNEWS.COM:
Bankers Advocate Opposition of Mortgage Servicing Amendment
06/17/2011 BY: CARRIE BAY
The American Bankers Association has sent a letter to key lawmakers in the Senate, urging them to reject foreclosure legislation proposed by Sens. Jeff Merkley (D-Oregon) and Olympia Snowe (R-Maine).
Their bill, tagged the Regulation of Mortgage Servicing Act, has been introduced as an amendment to the larger economic development legislation (S. 782) currently making its way through Congress.
It addresses several reforms already included in regulatory consent orders, such as a single point-of-contact for borrowers and ending dual-tracking. It also requires an independent, third-party case review prior to foreclosure. This last point is a major sticking point for the bankers group.
In offering up the amendment, Merkley said, “This economic development bill is designed to help get people back to work, but we won’t get the economy moving again until we deal with the foreclosure crisis.”
He added, “Since foreclosures bring down the prices of surrounding homes, everyone loses when a family is not given a fair chance to refinance. This mortgage servicing amendment will help to keep families in their homes, producing a win-win benefit for families and local economies.”
But the American Bankers Association (ABA) says, “The Merkley/Snowe provision would further destabilize the mortgage and housing markets by suspending legitimate foreclosures already in process imposing new requirements on existing loan terms, and increasing costs for all homeowners as lenders factor in costs imposed by the new requirements.”
In the ABA’s letter sent to Senate Majority Leader Harry Reid (D-Nevada) and Senate Minority Leader Mitch McConnell (R-Kentucky), the group went on to say, “The on-going price declines in the housing market, foreclosures relating to job losses, and other impacts of the recent recession are devastating to borrowers and lenders alike. This legislation, however, will only exacerbate an already difficult situation. Delaying legitimate foreclosures and increasing costs associated with them will only prolong the pain of the current situation.”
ABA also stated that the legislation is “ill-timed,” noting that both the state attorneys general and federal banking regulators are already engaged in discussions on how to impose both servicing and foreclosure standards on lenders.
“This legislation would presumably trump and potentially conflict with those efforts, adding further confusion, delay, and cost to an already troubled housing market,” ABA said.
While Snowe argues that the amendment would help to stave off “unnecessary foreclosures caused by confusing communications with loan servicers and misfiled or flawed paperwork,” ABA again stressed that it will only prolong the market correction by slowing down “legitimate foreclosures” and they urged Reid and McConnell to lead the Senate in rejecting the amendment.
Here is the link to the Florida State Law on the same thing:
http://bit.ly/jCoFqq
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