As this blog noted the other day, three major banks halted foreclosures due to fraudulent procedures, and others were ordered to examine procedures.
Now the nation's largest bank has put the kibosh on foreclosures. BofA services 14 million mortgages, and 14% or nearly 2 million of these are in default / foreclosure. Hundreds of thousands of families are impacted.
Last year, 1 million homes were taken back in foreclosure. This year, the number is on track to reach 1.2 million. It's difficult to know how many homes in the Charlottesville / Albemarle and surrounding Counties are impacted by this moratorium, but suffice it to say there are many mortgageholders breathing sighs of relief tonight in this area.
But what's this going to do to the national economy?
Mortgage Consultant Mark Hanson says,
The domino effect cannot be underestimated.
"It will have an immediate negative impact on house sales volume, house prices, private label MBS investors, bank earnings, mortgage servicing values, and much more. It opens up all the servicers to a rush of litigation at an extent never experienced before from homeowners and investors alike. This scandal has the potential to make the Subprime crisis look like a minor market correction and at the end of the day, the nation's largest banks will feel the most pain...."
The estimate of "distressed" sales in this area varies wildly, and monthly, in the range of 40-60% with short sales and foreclosures combined.
Fannie Mae Homepath properties sell quickly in this area, and BofA serviced the mortgages. This is what they're telling prospective buyers:
Fannie Mae, which owns a huge number of the loans Bank of America services, is obviously faced with a new conundrum now that the freeze has gone national. They have been giving REO (bank owned) property buyers the option to get out of deals where the foreclosure might be in question or to stay in while the servicer guaranteed all was fine. "All transactions on potentially affected properties are currently on hold until the servicer can verify the issue has been rectified," spokesperson Amy Bonitatibus tells me. Fannie Mae has a special program called Home Path which offers REO buyers incentives, as the mortgage giant tries to unload its vast supply of foreclosed properties.
BofA Press Release
CNBC has numbers and Mark Hanson commentary
BofA Halts Foreclosures in All States - NYT
Flawed Documents Thwart Home Sales - NYT
Black swan copyright Baltimore Sun.