BofA halts foreclosure sales in all 50 states

Yup, all 50 states.  What is going on?

Ok, so we’ve read about the recently termed “robo signing” where foreclosure documents were apparently signed rapid fire without checking the facts.  Imagine that.  So, to avoid litigation, lending institutions are halting foreclosures until they can take the time to make sure the procedures are being handled correctly.

Interesting to me is Bank of America’s most recent quarterly report to investors where they state that Bank of America sold $453 million worth of foreclosed properties during the second quarter of 2010.  But wait, it gets more interesting!  They still have an inventory of properties valued at $1.74 billion.  Billion – with a “b”.  When I was growing up, billion was rarely heard or used.  Now it’s too common to get attention.

That’s a lot of remaining inventory.  In fact, nationwide estimates are that there is still $460 billion worth of shadow inventory. 

This freeze by so many of the large banks (BofA is, I’m sure, leading the way of more to come) will help that $460 billion number shoot even higher.

State attorneys general, federal regulators and lawmakers are putting lenders on notice that they should discontinue foreclosures unless they are sure their procedures are in full compliance with the law.

I’ve been trying to think this thing through.  Banks are afraid now to foreclose for fear that a homeowner will find they have not followed legal procedures.  So, what if a property has already been foreclosed and a new owner is in it?  What rights does the new owner have?

Have you purchased any properties out of foreclosure?  Have you had a property go into foreclosure?

I’ve also read that it will be harder and harder to get title insurance for foreclosed properties.  That will ultimately make these properties less appealing to buyers which will keep these vacant properties on the market even longer once the banks do release them.

And what about all of the properties currently in the process of being purchased and sold?  There will be a lot of people caught in this transformation.  Are you one of them?