Clay Sparkman
Okay, I don’t know about you, but whenever I read news about some new development in the real estate market, my first instinct is to say, “What does this mean to me?” Hey I’m not proud of it, but that’s just how I’m wired.
This past two weeks we read that:
(1) GMAC and JPMorgan Chase are being challenged with regard to the legitimacy of their batch judicial foreclosures, and are in the process of reevaluating their foreclosures for possible irregularities.
(2) Old Republic National Title said this week that it would not issue policies on GMAC foreclosures until further notice.
(3) Bank of America, the country’s largest mortgage lender (by assets), went a step further, saying on Friday that they would freeze all their judicial foreclosure actions pending a review for irregularities.
(4) Richard Blumenthal, the Connecticut attorney general, asked judges in his state to put a halt to all foreclosures for 60 days so the “situation” can be further evaluated.
(5) California’s attorney general, Jerry Brown, said that Chase should stop any foreclosures in the state until it proved that it was following proper legal practice.
(6) Chase said that they have now frozen 56,000 foreclosure cases.
So as I scratch my head and try to make sense of all this, the question is floating in the ether: What does this mean to us? And by us, I mean those of us who are involved, directly or indirectly, in investing in private money loans.
Here is what I have come up with thus far.
(1) We are very happy that we are not title companies. They are in a tough spot. If they insure polices for these properties, they may end up paying enormous amounts in claims at some point, and if they don’t insure these properties, they will be turning away a great deal of business, and revenues will take a serious hit. (Fidelity National Financial shares fell more than 4% and FATCO shares fell on the order of 3%.)
(2) I think this is primarily impacting judicial foreclosures, so those of us who lend more on the west coast and generally in non-judicial foreclosure states, may not have too much to worry about, as far as any direct impact may go. (Though it is not clear to me what is up with Chase in California, California being a non-judicial foreclosure state.)
(3) If you are a private money lender, you probably aren’t doing large batch foreclosures and so again the problem may have very little direct impact on you. The issue with regard to the judicial foreclosures is primarily related to large batch foreclosure processes involving thousands of loans at a time. Apparently the issue involved inappropriately filing for summary judgments across the board and “robo-signers” in which mid-level executives would sign thousands of affidavits per month attesting that they had personal knowledge of the facts of the case.
(4) With regard to the economy, this may actually be a good thing. I was talking to my dear friend and wise attorney Jeff Hill on Friday and he said that he felt that this may be a sign that, though it is going to be messy, things are beginning to come to a head. I’ll take that idea one step further and suggest that this might actually serve as a sort of damper or shock absorber, slowing down the resolution process just enough to allow a more gentle transition to occur. (Of course, you could see this either way. Maybe it would be best to have it all come undone and be done with it—the sooner the better. The corrections must eventually take place.)
(5) I think this may open some real opportunities for those looking to buy short sale properties. Banks are going to be screaming to get these properties off their books. And of course that opens up opportunities for private money lenders looking for quality loans.
(6) Certainly this is good for home owners who are in foreclosure or on the brink of foreclosure. They may have gained 1-2 years in their homes.
(7) And of course, as always, this will be good for the lawyers. Any distressed homeowner who doesn’t go out and retain a defense lawyer immediately is probably missing the boat.
I guess I am being fairly optimistic here. It is certainly going to be a messy situation and it is difficult to know how it is going to all play out. It certainly won’t be good for the banks. And yet do we really care anymore what is good for the banks?
I’d love to hear from some readers out there. What unforeseen impacts do you anticipate or see coming about as a result of this fiasco?
— Clay (clay@privatemoneysource.com, 503-476-2909 or 800-971-1858)
Clay is Vice President of Fairfield Financial, a primary source for private money loans since 1964. Fairfield works with a broad range of private money investors, in a broker capacity, finding, underwriting, presenting, closing, servicing, and when necessary, assisting in the workout of difficult loans.
Tags: California, Connciticut, economy, foreclosures, hard money investing, hard money lending, hard money loans, investing, private money investing, private money lending, private money loans, real estate, real estate investing, short sales, title insurance, trust deed investing, trust deed lending, trust deed loans
