“Right now everyone in the industry is trying to understand the scope and breadth of the problem, and is looking to lenders to get their paperwork in order so that sales can resume,” –Kurt Pfotenhauer, chief executive of the trade group American Land Title Association.
A couple of days ago, I received an email stating that title insurer Old Republic Nation had ceased offering policies on foreclosed properties owned by GMAC or JPMorgan Chase. Another title insurer, Stewart Title, was also said to have “ issued an internal memo making it incredibly difficult –if not impossible —for an agent to write a policy for any foreclosure property connected to any of the now-tainted banks.”
The same afternoon, Old Republic issued a memo stating:
“Contrary to some reports, the Old Republic Title Insurance Group continues to insure foreclosed properties which lenders, investors and servicers choose to close…according to its customary underwriting guidelines and will continue to evaluate those risks based on all relevant facts.” I heard word that Stewart, too, characterized the statement as untrue.
Info-bits and opinions are swirling like snowflakes making it hard to see the structures of truth, both near and far. This latest development in real estate news is a complex of possibility and problems. On October 11th, the Huffington Post, in its piece, Foreclosures Could Prolong the Housing Crisis for Years commented:
“In the near term, [mortgage] freezes could actually benefit both homeowners and the housing market. Homeowners would have time to live rent-free and chip away at their debt. Prices might stabilize because so many homes are penned up.”
Then added, “But the long-term implications are grave. Only a month ago, housing watcher Mark Zandi, chief economist at Moody’s Analytics, predicted that a housing recovery would be under way by the third quarter of next year. Now he believes the foreclosure scandal could prolong the housing depression for at least another few years.”
Whether the above statements are accurate descriptions of the landscape before us, the truth is most likely complex. Some positives: for over a year, we’ve been haunted by the spectre of shadow inventory: a potential tsunami of foreclosures that would reach into the normally-insulated Santa Fe market. But, we’ve yet to see the predicted numbers. In the short term, he need to sort out the foreclosure situation is might keep foreclosures in abeyance, perhaps even giving underwater homeowners a chance to pay down principle while the status of their home is being investigated.
Moreover, to the extent that title companies become more cautious about insuring foreclosures from certain key banks, foreclosures may lose a measure of investment appeal. This shift could benefit owners of realistically-priced, non-foreclosure homes. Bottom-feeding buyers previously focused strictly on foreclosures now may be willing to buy a short-sale or non-distressed home, if its price and condition merit their interest.
For a clear and basic overview of the foreclosure situation, read CNBC’s A Primer on the Foreclosure Crisis ; to delve more deeply into the structure of the issue, read Foreclosure Fraud for Dummies: a five part article beginning with The Chains and the Stakes. Know of another resource? Please pass it along.