In California, more foreclosures could end up being a good thing for the market. Although California foreclosures are up, the sluggish pace at which they reach the market and the rock-bottom deals available throughout much of the American west are creating a tentative buyers market in the area, say experts and analytics firms in the area[1]. Last month, foreclosures volumes rose 35 percent over the month prior in California, but even with relatively “streamlined” foreclosure process in the state, foreclosures can take up to a year to reach the actual market. “The California foreclosure process has really slowed down,” explained ForeclosureDeals.com chief business analysts James Foxx. “It’s created a lot of great buying opportunities for foreclosure investors.”
That is evident when you look at home sales in the state, which rose 33 percent in March. “[The slow foreclosure movement] is slowly creating a buyer’s market,” said Foxx. And if California lawmakers get their way, the foreclosure process will likely slow even further. In the coming week, the California legislature will vote on the California Homeowner Protection Act, a key component of which prevents lenders from using the notorious “two-track” process for homeowners trying to achieve loan modifications in which the bank simultaneously negotiates the loan mod and pursues foreclosure on the property[2]. Lenders are arguing that the legislation will inhibit housing recovery. “It’s just not good for the housing market…It’s a reaction, an overreaction, to procedural mistakes…and doesn’t really get at solving any of those problems,” said California Mortgage Bankers Association spokesman Dustin Hobbs. However, if Foxx is correct, then a slower process could actually be good for the housing market and the economy out west.
Do you think that slowing the foreclosure process down could be a good thing in California and elsewhere, or is this just more artificial stimulation of the market that will slow down a true recovery?
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[1] http://starglobaltribune.com/2011/california-foreclosure-rising-trend-in-california-foreclosures-revealed-8294
[2] http://www.latimes.com/business/realestate/la-fi-dual-tracking-20110427,0,6683611.story
May 1st, 2011 at 8:47 AM
The problem with the loan mod process is the banks Do Not give immediate response to homeowners who do not qualify. Instead they drag out the process-while simultaneously processing the FC-so long that by the time they inform the homeowner they don’t qualify they are left with no time for any recourse action.
Freezing the FC process at the time of loan mod application, then picking up where it left off at the time of denial would at least give the unsuspecting homeowner time to pursue alternative action to try and avoid the FC, rather than being denied and given an auction date for 21 days later.
Of course Hobbs is against this it would eliminate the banks method of stealing away property, and ruining peoples lives.
Either way it would have little impact on the slowing down or speeding up of recovery time-with speeding up having just a slight advantage-only because a few more people would find an alternative to FC and they could become productive consumers quicker without a FC on their credit.
It’s good for the people, bad for banks, and has no impact on recovery. It probably won’t pass as the banks seem to run the government these days.
May 2nd, 2011 at 2:52 AM
The borrower and the lender need to do the calculation to see how long it will take for the effect of the lower interest rate to make up for the cost of the refinance.