Foreclosure chaos - who benefits?

Bankrate.com’s Marcie Geffner writes about the pros and cons of the recently announced pause in mortgage foreclosures in many states.

“Recently, several major lenders suspended foreclosures as they review irregularities in legal paperwork. These suspensions could have a significant impact on today's homebuyers and sellers.

“The extent of disruption will depend largely on how long banks hold up foreclosures in the 23 states that require a judicial foreclosure process. During these suspensions, banks will review affidavits that have been challenged.

“If the problems are resolved quickly, the impact may be minor, according to Rick Sharga, senior vice president at RealtyTrac, a national foreclosure-tracking service in Irvine, Calif.”

The slowdown will, in our opinion, be temporary. The result of the banks’ review of foreclosure files will find them to be in order. We’ll then see a surge in foreclosures going to auction in the beginning of 2011.

How does it affect sellers?

“Homeowners in foreclosure who hope to sell may get a "temporary break" before the process moves forward, according to Nick Libert, broker/owner of Exit Strategy Realty in Chicago. That would allow them to live in their home a while longer and potentially close a short sale. Or, they could negotiate a loan modification to avoid foreclosure.”

“Homesellers who aren't in foreclosure also may benefit since banks have taken foreclosed homes off the market and the diminished supply could put upward pressure on prices.”

For buyers,

“Potential homebuyers who previously considered shopping for foreclosures may be scared off by the recent negative news reports. But Libert says there's no reason for buyers to delay their plans as long as they can get clear title to the property and title insurance.”

For everyone, “The bottom line is that affected housing markets are now in a state of heightened uncertainty that presents both risks and opportunities.”

Read the full report.

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