Luxury Real Estate

The only news from the foreclosure fiasco that doesn’t seem to change by the minute is the word “mess” everyone is using to describe it. Back when the news first captured the nation’s attention several days ago, it looked as if banks would back away from pursuing any new foreclosures for at least 30 to 90 days—perhaps longer—while they re-examined the efficacy of their paperwork and procedures. But suddenly that timeframe dwindled to less than two weeks with Bank of America, the nation’s largest mortgage lender, boldly declaring it has thus far found no significant problems to justify a lengthier moratorium. GMAC Mortgage and J.P. Morgan Chase immediately followed suit and other large lenders are expected to do the same in an aggressive response calculated to debunk the growing public perception that the mortgage market is fatally flawed.

So what initially looked like a two-to-three month window of opportunity for sellers of non-distressed properties to sell in an environment stripped of the most heavily-discounted properties—has turned into a surprising new opportunity for sellers of short-sale properties.

For the first time since the term “short sale” went from being an arcane transaction to a household word, banks finally have major incentives to streamline the process in order to move these properties quickly off their books and into the “sold” column. Obviously the threat of legal and financial liability can move mountains. What once took upwards of six months to complete—if you were incredibly patient and lucky—can now proceed from start to finish in as little as a two to three weeks. So for now, at least, short sales are the most user-friendly transactions in the marketplace for buyers determined to purchase distressed properties with the least potential for deal-breaking title defects. Sellers of non-distressed properties—provided they are aggressively priced—are also in a position to benefit, as are buyers with the ability to pay cash in this era of tightened credit.

Sloppy paperwork could very easily amount to just cause for legally re-opening some foreclosure cases and possibly lead to favorable reversals for some borrowers. But clamping down on most foreclosure resolutions would have the devastating effect of further stalling the housing recovery—and by extension our nation’s overall economic recovery. Moreover, with the average foreclosed-upon homeowner behind by a full 14 months in their mortgage payments, even a year-long moratorium wouldn’t be humanitarian enough to prevent them from losing their home.

According to late breaking news from Washington Post (just before this column’s Tuesday deadline), federal law enforcement officials are now investigating possible criminal wrongdoing in connection with the foreclosure crisis; examining whether financial firms broke federal laws when they filed fraudulent court documents to seize people’s homes. Claiming the whole problem of faulty paperwork is a minor glitch that can be resolved quickly; the banks were rudely rebuffed by attorneys for the financial institutions that purchased these mortgages of uncertain legitimacy after they were bundled into securities. “We’ll see you in court,” the lawyers said. So clearly, once the full extent of this “mess” is known, the process of recriminations and restitution will drag on in the courts for years.

At Michael Saunders & Company we pride ourselves on adapting quickly to changing market conditions in order to best serve the interests of our clients and customers. The unfolding mortgage mess is so fluid and fast changing that predicting the outcome at this early stage in the investigation is impossible. As one economic pundit put it, “solving this problem is like looking under a rock. Until you turn it over completely and shine the light in, you just don’t know whether you’re going to find a bucket of worms—or nothing at all.” In fact, we waited until the last possible second to pen this column in order to keep it as accurate and up-to-date as possible.

Needless-to-say, we think it is of vital importance to keep the public, our agents and their buyers and sellers updated as we continue to learn more through hourly reports in the media; along with industry updates received throughout the day at our in-house title and mortgage divisions MSC Title and MSC Mortgage. As these matters affect the plans and goals of our clients and customers, we will continue to look for new opportunities to help them make the most of a difficult situation. Please stay tuned.