Some Wisconsin homebuilders and developers support the recent suspension of some foreclosures, but a board member of the American Bankruptcy Institute says the move will only delay the arrival of the foreclosed properties on the market.
Facing claims that lenders have used inaccurate documents to evict homeowners, a number of major lenders last week suspended foreclosures while the institutions review how their documents were handled.
Bank of America has halted foreclosures in all states. JPMorgan Chase & Co., Ally Financial’s GMAC Mortgage subsidiary and PNC Financial have stopped foreclosures in the 23 states where foreclosures must be approved by a judge, including Wisconsin.
The suspensions are a good move that should provide short-term relief to the struggling housing market while the financial institutions sort out their paperwork, said Jerry DeSchane, executive vice president of the Wisconsin Builders Association.
“It prevents additional foreclosed properties from going on the market that would drive home values down,” DeSchane said. “If these homes are sold for a fire sale price, that’s reflected in appraisals on the surrounding properties.”
But Claire Ann Resop, an attorney with Milwaukee-based Von Briesen and Roper S.C. and a board member of the American Bankruptcy Institute, said the foreclosures should be processed as planned.
“I understand the mortgage companies may be at fault for not keeping track of paperwork, and I can never condone people untruthfully signing affidavits, but that doesn’t change the fact mortgage payments are not being paid,” Resop said. “The only way to fix this situation is by reviving the economy so people can afford to make their mortgage payments.”
Richard Marcus, associate finance professor at the University of Wisconsin-Milwaukee, said time will determine the foreclosure suspensionís effect on the real estate market.
“There’s a chance the moratorium will increase the number of houses in this state of limbo,” Marcus said. “How it will eventually impact housing prices is yet to be seen, but I suppose it will not be positive.”
For the time being, Mike Ruzicka, president of the Greater Milwaukee Association of Realtors, said the moratorium is welcome news for agents struggling to sell existing homes, but the long-term effect will depend on the lenders.
“In this market, it’s probably a good thing they hold off on foreclosures just from a supply and demand standpoint,” Ruzicka said, “but that inventory is going to have to hit the market at some point. How much of an impact that will have all depends how gradually they’re released into the market.”
As of midyear, Bank of America had 420,000 U.S. properties in some stage of foreclosure, according to Realty Trac, an online marketplace for foreclosure properties. Chase announced last month its review involved 56,000 cases, and GMAC’s reviews are expected to reach into the tens of thousands.[polldaddy poll=”3906862″]