Foreclosure nation BUSINESS


26 | USA VIEWPOINT WORDS | Brian Summerfi eld of NAR


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n October 2010, some major fi nancial institutions, including Bank of America and GMAC, declared they would be halting their foreclosures to ensure their processes were accurate and appropriate. The banks’ decision was perhaps not that surprising in retrospect, given that attorney generals from all 50 U.S. states were pushing for a nationwide moratorium on foreclosures. The reason? In a word, paperwork:


Many of these fi nancial institutions do not have the necessary documentation to incontrovertibly prove that they own the loans on the properties on which they are foreclosing. One particularly glaring issue is the practice of “robo- signing,” which involves hastily processed documents that are often unread by bank representatives, not notarized, and signed by individuals who have no connection to the process. Not surprisingly, this produces a substantial amount of errors in the documentation.


Although most of the fi nancial institutions that halted foreclosures have resumed processing them, the problem hasn’t gone away. Since October, the Massachusetts Supreme Court rejected — in a unanimous decision — Wells Fargo and US Bancorp’s attempted seizure of two homes due to a lack of proper documentation. The future status of these and other fi nancial institutions’ foreclosures is not entirely clear at this point, and it may not be for some time. So, putting aside the legal issues, the fact is that even when the documentation is not being called into question, the process still takes a remarkably long time. Data from LPS Applied Analytics shows that in New York, mortgage loans in the foreclosure process have been delinquent for a whopping 600 days on average! Additionally, in Florida and


Hawaii, loans in foreclosure have an average delinquency of more than 500 days. And despite efforts by banks and policymakers to shorten that process, it appears to be lengthening in many cases, LPS reports. There are states that do not require a judicial foreclosure, which tend to not take as long. A trip to the courts will almost always lengthen the foreclosure process.


Foreclosure rates in former hotspots such as Miami, Las Vegas and Phoenix are still high. And Nevada, Arizona and California still report the highest percentages of foreclosed property sales in 2010; for instance, foreclosures account for more than half of all home sales in Nevada, according to RealtyTrac Inc., which publishes databases of distressed properties that


“The crisis is spreading to what used to be safer real estate markets like Houston”


span the United States. However, foreclosure rates in these


locales appear to be tapering off, with Nevada, Arizona and California seeing three-year lows in January 2010. The crisis is spreading beyond these areas, which were “ground zero” for the housing collapse, and are proliferating most quickly in what were perceived to be safer real estate markets. For example, a recent report from CNNMoney pointed to unexpected cities such as Tulsa, Oklahoma, and Charlotte, North Carolina, which saw foreclosures jump more than a third in 2010. Additionally, major U.S. cities that had been relatively sound are seeing considerable increases: RealtyTrac reported that the Houston metro area saw a 26 percent jump in foreclosures from 2009 to 2010. Over that same


span, Seattle’s foreclosure rate shot up 23 percent. Chicago went up by 16 percent, and home repossessions in that area climbed nearly one-fi fth, giving it the second-largest number of bank repos among U.S. metros. (Phoenix was fi rst.)


A Realistic View


So what does all of this mean for the foreign property purchaser or investor? To be sure, they can still fi nd bargains, and the fact that many of them are cash buyers works in their favour. But the foreclosure process is frequently drawn-out and complicated, and many of the hottest areas for these kinds of properties are decidedly less glitzy. Moreover, according to an annual


survey conducted by the Association of Foreign Investors in Real Estate (AFIRE), the top three U.S. cities foreign commercial investors are most interested in are New York, Washington, D.C., and Boston. And, coincidentally, these


www.opp.org.uk | APRIL 2011


With all the stories about foreclosures fl ooding the U.S. residential housing market, you might think you’d be able to easily fi nd deep discounts on premier properties in any major American city. While it’s true that there are distressed property deals to be had in the United States, they may not be as plentiful or effortless as one might expect. OPP’s regular NAR column takes a look at what’s really going on in “foreclosure nation USA”.


Brian Summerfi eld is the Online Editor of REALTOR® Magazine, the offi cial monthly magazine of the National Association of Realtors.


three places do not have relatively high foreclosure rates. They remain — for the most part — expensive, particularly in the higher-end neighborhoods and surrounding communities, making them attractive destinations for commercial investors but perhaps not the right choice for bargain-hunting residential buyers. None of this is meant to discourage overseas buyers from looking for deals in the U.S. Property values, even in the most premier locations, have fallen considerably over the past few years and now seem to be stabilizing throughout much of the United States. Pricing is very good, both in distressed and conventional properties. But if you opt for the former, realize you may be travelling a rougher road.


The signs aren’t good | Cities like Oklahoma and Charlotte are now in loan crisis


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