Foreclosure update:  Friday, October 15, 2010         RE/MAX  Regional Representative Joe Bush

The foreclosure market is stalling and confusion is rising in the wake of the recent suspensions of foreclosures by four major mortgage servicers. Last Friday, Bank of America announced it would suspend foreclose sales in all 50 states, which follows the bank’s earlier suspension of tens of thousands of foreclosures in the states that handle foreclosures through the court system, a move also taken by GMAC Home Mortgage, Inc., Ally Financial Inc., and J.P. Mortgage Chase & Co.’s home-loan unit. While it’s unclear how long the foreclosure market will be stalled, economists are warning that the delays are bad for housing. The uncertainties in the market will likely scare buyers away from foreclosed homes, which represent a big chunk of current sales.

So the mortgage market is in disarray, we all knew that. How long will the chaos last? How will this shake out in the housing market? Should we brace for an even-longer housing bust? ―At the end of the day, the U.S. can’t afford for this to go too far, says Gregory Watson of McKinley Partners, a development company that buys foreclosed homes. He goes on to give three potential outcomes for this ―Foreclosures gone wild. 1-In the best case scenario, the issues are simply technical, the situation is resolved and the foreclosure process continues. Many believe housing won’t recover until the glut of foreclosed homes clears the market. 2-In the medium-case scenario, litigation ensues and the matter takes years to sort out. That will inflict more pain onto the already troubled housing market. 3-In the worst case, the issues become a ―systemic problem that grinds the mortgage market to a halt and title insurers refuse to insure mortgages involving existing homes. In other words, housing Armageddon. ―It would be devastating for the resale market if this robo-signer issue spiraled out of control, Watson says.