There has been much written on the recently negotiated National Mortgage Settlement. Most of the reporting has revolved around the $25 billion that will be issued to consumers and states that have been impacted by the robo-signing scandal of 2010. We want to talk about a different issue addressed by the settlement.
Foreclosures have been slowed to a snail’s pace since the third quarter of 2010. Banks were concerned about the penalties that would be imposed by the settlement and decided to delay the actual seizure of foreclosed properties until the settlement was reached. This group of properties is known as the ‘shadow inventory’ which is currently hanging over the market.
The banks now have the roadmap they can follow which will allow them to repossess a home without penalty. The backlog of these distressed properties will now find their way through the process and be put on the market for sale.
Rick Sharga, executive vice president for Carrington Holding, explains:
"The bottom line is that 2012 will see a lot of foreclosures that should have taken place in 2011 and didn't."
How many foreclosures could we be talking about?
The Washington Post reported:
“Mark Vitner, a senior economist at Wells Fargo Securities, said the settlement helps the housing market in the long run because it allows banks to proceed with millions of foreclosures that have been stalled.”
This leaves three important questions:
- When will these properties hit the market?
- What impact will they have on housing values?
- Which areas will be affected the most?
Every buyer and seller should contact a local real estate professional for the answers to these questions in their region.