Economy Watch: State Leaders Call for End to Foreclosures
- Oct 05, 2010
October 5, 2010
By Dees Stribling, Contributing Editor
The attorney general of Texas, Greg Abbott, has called for foreclosure activity in that state to come to a halt. Texas is a not a judicial foreclosure state, meaning that the courts don’t oversee foreclosures, as is the case in 23 states. Borrowers who believe that their foreclosure documentation isn’t in order, however, are free to take their lender to court, and with the wave of national publicity regarding bum foreclosures, it’s likely that an assortment of lawyers will emerge from the woodwork to pursue cases of this kind in non-judicial states.
In Maryland, also not a judicial foreclosure state, a joint letter was sent to by Gov. O’Malley, Attorney General Doug Gansler and Rep. Elijah Cummings to Ally Financial Inc., Bank of America, CitiMortgage Inc., JP Morgan Chase, One West Bank, PNC Financial Services Group Inc., and Wells Fargo, asking these lenders in polite terms to knock off residential foreclosures in the state.
So far lenders have murmured about a “few bad apples” putting together mortgage affidavits and the like, but that characterization might not stick as an assortment of attorneys general and possibly the U.S. Department of Justice, or the federal Financial Fraud Enforcement Task Force, start looking into the matter for patterns of misconduct among lenders. Civil action, including a RICO suit, might be in the offing as well. It could be that the lid is about to blow off of an really big can of worms.
On the other hand, in Florida, Judge Jack S. Cox of the Fifteenth Judicial Circuit in Palm Beach County ordered state Attorney General Bill McCollum to stop his investigation of Shapiro & Fishman L.L.P., a firm that initiates foreclosure proceedings on behalf of lenders. The judge said the AG lacked jurisdiction and that an investigative subpoena was overbroad and vague (legal terminology for a fishing expedition).
Foreclosures Still Going Strong For Now, However
The latest word from RealtyTrac is that foreclosed homes accounted for nearly a quarter, some 24 percent, of all U.S. residential sales in the second quarter of 2010. Moreover, the average price of these properties was 26 percent lower than for homes not in foreclosure, a fact that is acting an enormous drag on prices.
All together during 2Q10, 248,534 U.S. residential properties were sold at some point in the foreclosure process, including default, already slated for auction and REO, according to the company. That represents a 5 percent upward bump compared with the first quarter of 2010, but a 20 percent drop compared with 2Q09.
More than half of all home sales in the poster-child state for foreclosure, Nevada, were foreclosed homes during 2Q10, the highest percentage in the nation. Arizona was a close second at 47 percent of all sales, and California saw foreclosure sales for 43 percent of all sales.
Pending Home Sales Index Edges Up
The National Association of Realtors said on Monday that its pending home sales index rose to 82.3 in August from 78.9 in July–bad to less bad. During August 2009, the index stood at 103, but those were the early days of the federal home sale tax credit. The data reflects contracts and not closings, which normally occur with a lag time of one or two months, and an index of 100 represents contract activity during 2001, the first year of the index.
The Northeast and the Midwest are close to the national average, but pending sales are considerably stronger in the West, were it stood at 101.1 in August 2010. The volume of short sales in such places as Las Vegas and Phoenix seems to be pumping up the regional average.
Wall Street started the week on a down note on Monday, with the Dow Jones Industrial Average losing 78.41 points, or 0.72 percent. The S&P 500 declined 0.8 percent and the Nasdaq was down 1.11 percent.