In the Charlottesville / Albemarle area and surrounding counties, bank-owned foreclosures typically sell quickly, within a few days of listing (especially single-family homes), because they are usually 10% - 50% less than privately-owned "comps." But:
- What if the house is foreclosed...and then the mortgage holder discovers the bank didn't have a clear right to evict?
- What if a new buyer purchases a foreclosure...and then discovers that the bank didn't have clear title to sell it?
JP Morgan Chase, Bank of America, and Ally Bank (formerly GMAC, General Motors Acceptance Co., primarily owned now by Uncle Sam, have all halted foreclosures in 23 states because the legal professionals signing off on the foreclosure packages were giving signatures to so many thousands that they didn't bother to read them, and are also unable to produce complete documentation to prove ownership.
Other major banks ordered by the Office of the Comptroller of the Currency to review procedure include Citibank, HSBC, PNC Bank, Wells Fargo, and US Bank. And as a consequence, some major title insurance companies will no longer offer their services to foreclosure purchases.
For the widespread impact, read this from Google news:
"There is a potential for class action liability in the United States for billions and billions of dollars on behalf of homeowners who lost their homes in proceedings where lenders used these kinds of phony documents."
Even without massive lawsuits, the suspension was bound to damage the already fragile financial market and housing industry, [mortgage broker] Moskowitz said.
"It is going to encourage people who are in default already to drag it out. In most of the cases it means they will have to start the process again, even though actually speaking, they defaulted," he said.
"This isn't healthy for the market. It is unhealthy for the real estate market because the values are artificially high because all the foreclosures are not on the market yet."
"It is bad for the finance market because the lenders can't get their money for years. The losses for the banks will be much bigger."
Mark your calendar, because the housing "recovery" has just been set back several years.
See current foreclosure offerings (caveat emptor, as is always the case) here and here and here.
Virginia has two kinds of foreclosure: Judicial, and Right to Sale. Read
"7 Major Banks Ordered to Review Foreclosures" - WaPo
"Flawed Paperwork Aggravates the Foreclosure Crisis" - NYT
'Foreclosure Errors Cloud Homeownership With Millions of "Blighted Titles"' - Bloomberg
Title Insurer Will No Longer Do Foreclosures - NYT