Complicaciones creadas por un posible Foreclosure Freeze

Foreclosure freeze creates major headache for Collier, Lee real estate industry

10/18/2010 © Naples Daily News

Since Oct. 4, banks have withdrawn more than 270 foreclosure homes from the Fort Myers multiple listing service, or MLS. In the Naples market, there have been about 120 listings pulled from the MLS during the past week.

NAPLES —For years, Mike Donnelly has dreamed of owning his own home. His dream was about to come true, until his closing was abruptly halted last week by the seller, Fannie Mae.
“I was heartbroken,” said Donnelly, 52. “I thought, ‘You’re kidding me.’ It’s the perfect dream house.”
Fannie Mae, the seller, stopped the closing because of concerns over the title. The servicer on the defaulted loan was Countrywide, now part of Bank of America. Earlier this month, Bank of America announced it was putting a chill on foreclosure sales in 50 states because of concerns over faulty documents. Other major lenders, including Ally and JP Morgan Chase, also have suspended some foreclosure sales, as they review their procedures following criticisms that they improperly took homes away from struggling borrowers.

States are investigating the use of “robo signers,” who signed hundreds of affidavits a day, allegedly without a proper review of foreclosure documents.
Donnelly was given a two-week extension to close. He’s waiting it out, still hoping to buy the two-bedroom, two-bath home in Cape Coral.
“I definitely want the house,” he said. “I’m not going anywhere. Luckily, the landlord liked me and she let me keep renting her house.”
The freeze on foreclosures has caused headaches for buyers, sellers, real estate agents and other businesses, from title insurers to law offices.
Banks have pulled hundreds of foreclosure homes off the market in Southwest Florida.
More foreclosure sales are getting canceled at the courthouse.
The slowdown in foreclosure sales actually could benefit the market in the short term.
It could boost prices by limiting the inventory of homes available for sale, creating more of an urgency among buyers, said Kathy Zorn, broker and owner of Florida Home Realty of Collier County.
“We won’t feel the effects of this right this second,” she said. “I don’t think in this month. It will be interesting to see how it will affect our market.”
Some fear that slowing the foreclosure sales will hurt the market as it’s finally showing signs of recovery.
“It’s a lot like ripping a scab off a healing wound,” said Steve Koffman, a broker/Realtor with Century 21 Sunbelt Inc. in Cape Coral.
Koffman estimates that about 20 percent of the bank-owned homes that were on the market in Lee County are now in a holding pattern. On top of that, other homes that were getting ready to come on the market never made it there because of the freeze.
Since Oct. 4, Koffman said, banks have withdrawn more than 270 foreclosure homes from the Fort Myers multiple listing service, or MLS. In the Naples market, there have been about 120 listings pulled from the MLS during the past week: “At least 40 percent of those appear to be foreclosures,” Koffman said.
Brian Fulton, a mortgage broker with Tomasso Mortgage in Fort Myers, said closings were delayed for five of his customers during the past few weeks. One of them was Donnelly, who was a day or two away from closing when everything came to a standstill.
“The frustrating thing is he’s got money spent on an appraisal. He’s got money spent on a home inspection, a survey. He probably has close to $1,000 invested in this particular property,” Fulton said.
Now, Donnelly is living out of boxes.
“My house is all packed up,” he said. “Everything I own is packed up and I’m ready to go out the door. It’s killing me.”
Debra Monterosso, a Realtor with Amerivest Realty in Naples who specializes in bank-owned resales, said her business is hurting after many of its listings were put into limbo.
“It slowly hit,” she said. “We probably had about 50 listings, and I want to say it affects about two-thirds of them.”
That means there are two-thirds of her team’s listings she can no longer sell, until the reviews of those foreclosures are completed.
“It’s a nightmare for foreclosure agents,” Monterosso said.
On a positive note, she said one listing that was pulled for review last week has been cleared for sale again already. She’s seen a few sales fall through. One couple she was working with from Pennsylvania canceled a contract and walked away when their closing was postponed by Fannie Mae.
“They bought something else,” Monterosso said.
Affected buyers have the option of getting their deposits back without penalty, but if they walk away from a contract they’ll still lose the money they’ve invested in home inspections, appraisals and surveys.
Tony Price, an owner broker for Priceless Realty in Fort Myers, said his company had about 15 of its 75 bank listings pulled off the market in the past week. About half of the 15 had buyers, he said. “There are a lot of properties that are not frozen,” Price said. “I do have a lot for Fifth Third Bank. They haven’t pulled any of theirs.”
While there has been a higher rate of cancellations for scheduled foreclosure sales at courthouse auctions in Lee and Collier counties, banks involved in the freeze still are moving ahead with some public sales.
Meanwhile, even as Bank of America and the other lenders are undergoing an investigation of their foreclosure steps, they still are filing new actions against borrowers who have defaulted on their loans.
In September, Collier County had 400 foreclosure sales at the courthouse — the highest number it has ever seen in any month, said Robert St. Cyr, a director of community outreach at the Clerk’s Office. He’s not sure what to expect this month with more sales being canceled by banks.
“I think it’s too early to tell,” he said. “There is no trend line going here.”
Locally, home sales dipped in the third quarter, from July through September.
Going forward, Realtors are worried that buyers may be more reluctant to purchase foreclosures because of title concerns, causing a further slowdown.
As the busy season approaches, Realtors hope the freeze on foreclosures doesn’t linger through the winter, especially since bank resales make up so much of the market these days. In Lee, they are about 38 percent of all sales.
In August, short sales and bank-owned sales made up 50 percent of the residential market in the Naples area, Naples Area Board of Realtors statistics show. Short sales are those made for less than what’s owed on the mortgage.
At Florida Home Realty, Zorn has noticed more calls from sellers who are racing the clock to try to get a short sale done. The freeze may give them more time to do that, enabling them to avoid foreclosure, she said.
There also could be more mortgage adjustments worked out between banks and borrowers.
“It’s much better to get a short sale — or get a loan modification — than to deal with all the problems of a foreclosure,” said Steve Barker, a broker at Amerivest Realty in Naples.

There are still many unknowns.
Mike Hughes, a vice president for Downing-Frye Realty in Naples, wonders what might happen to people who already lost homes to foreclosure or those who bought houses from them. Will lives change? Will a sale be reversed? He said one of the million-dollar questions is how fast the banks will get their reviews done. It could be weeks, or months.
“One thing I’m sure of is that this does have the potential to put a wrinkle into the recovery process,” Hughes said.
Jeff Ahren, co-chairman of the Collier County Foreclosure Task Force, said lenders need to take a time out to make sure they are doing everything right when they foreclose so it doesn’t hurt homeowners, or tie up courts later.
Ahren is pro bono coordinator at the Legal Aid Service of Collier County, which is helping low-income borrowers fight foreclosures. He cautions that borrowers shouldn’t just assume their foreclosures will be put on hold as there are cases still moving ahead.
There are some foreclosure cases lingering without any action, while others are getting dismissed as lenders seem more eager to do mortgage work-outs, said Maria Barbosa, a housing attorney for Legal Aid Service.
She said if problems with accuracy and documentation aren’t fixed in the foreclosure process now, it could lead to many problems later. If the wrong bank forecloses on a mortgage and there’s a final judgment, the borrower may not be able to get that judgment wiped out, even in bankruptcy, Barbosa said.
She said if there isn’t a clear title when a bank sells a home, the buyer could face problems later when he tries to resell it. The buyer may be forced to get what’s know as a quiet title by filing a lawsuit and getting court approval.
“It’s foreseeable we could be creating more litigation in the future, rather than clearing out the case load,” Barbosa said.