Foreclosure Freeze Produces 9% Drop in Home Repossessions

Some predicted the number of homes foreclosed upon would be significantly reduced by a government-imposed foreclosure freeze meant to stop major mortgage processors from filing invalid documents–and they were right. According to a report released on Thursday by RealtyTrac, bank repossessions shrank 8.7 percent in October because foreclosure processes cannot be completed.

What Is the Foreclosure Freeze?

In October, a possible foreclosure freeze became a reality when the government decided that invalid foreclosures filed by large mortgage processors like GMAC, JPMorgan and Bank of America were likely occurring with other companies as well.

A new bill called the Interstate Recognition of Notarizations Act was about to be signed into law by President Barack Obama that would have required courts to recognize notarizations of documents filed by big, out-of-state companies without challenging the validity of the documents.

Unwilling to accept more fraud or the possibility of homeowners being put out of their homes illegally, lawmakers wanted to take a closer look at these companies and their actions, therefore requesting an unofficial freeze on foreclosures.

Foreclosure Filings of All Kinds Affected

Now that foreclosure processes have halted, the number of foreclosures of all kinds has decreased. In addition to the large drop in bank repossessions, notices of default, notices of auctions and notices of auction sales decreased 4.4 percent during the month of October.

Many banks have postponed their auctions of homes to ensure all documents have been properly signed (rather than robosigned). This makes the process take even longer. Experts say November foreclosure rates of all kinds will probably be low too, but once the controversy blows over, the backlog is likely to skyrocket rates.

The Good and the Bad News

As always with foreclosures, there is good news for some and bad news for others. The good news for homeowners facing foreclosure is that, for now, most will likely be able to remain in their homes for longer than they expected, even if they were legally due to leave. Of course, those were being unjustly booted now have a fair chance at justice.

On the other hand, those in the market for foreclosed homes who are racing against the clock to take advantage of low house mortgage rates may be biting their fingernails hoping that this whole controversy won’t have too big an effect on their goals.

No matter which boat you’re in, there’s no doubt that the freeze affects you. Unfortunately, it’s just another issue that contributes to a sluggish housing market still fighting to improve.