We could be on the verge of seeing a whole new wave of foreclosures, dislocating hundreds of thousands of distressed homeowners across the country and further roiling the housing market.
Following the “robo-signing” fiasco late last year, the number of foreclosures has been lower than it might have been, but unfortunately, that reduction in numbers has been deceiving. It has only served to delay the inevitable. A recent ruling by a New Jersey judge could be one of the first breaks in the logjam.
The judge ruled that several major mortgage servicers in New Jersey have now shown that their processes are improved, so they are free to resume uncontested home foreclosures. The New Jersey Supreme Court had ordered a review of the servicers’ procedures last December, in the wake of the robo-signing controversy. These servicers previously accounted for half of the New Jersey foreclosure filings, so you can imagine how the number of foreclosures will skyrocket. With nine months of bottled-up foreclosure pressure on these companies, it won’t be pretty.
As far as Texas is concerned, we talked to a senior bank executive at the Dallas Housing Summit earlier this month, and he sounded a similar note. His bank, he said, has a big backlog of foreclosures that have been held back by the courts, and has been working to fix its processes and prove to the courts they’re valid again. He expects the go-ahead very soon, and then this major bank will ramp up its foreclosure efforts.
We anticipated this earlier this summer, writing here about some of the reasons behind a drop in North Texas foreclosures. But what does it mean to homeowners? Well, if you’re a distressed homeowner, behind in your payments, and you’re wondering why the bank hasn’t taken action against you, brace yourself. They’re getting ready to.
The best strategy is to be proactive and move to begin a short sale of your house now. Beat the bank to the punch, and when they see you’re serious about resolving the problem, you are likely to be spared from foreclosure. Once the wave of foreclosures hits, it may be too late, and the banks’ take-no-prisoners approach could hurt a lot of people.
By getting your house on the market now and working with your lender’s short sale department, you can be ahead of the curve. Get the place sold, and you can walk away without owing money and with a far less damaging credit history.
Sadly, a wave of foreclosures will have a damping effect on home prices and values across the board, so everyone will be affected. It may all be necessary to work out the housing market’s problems once and for all, but it won’t be pleasant.