Posted on Wednesday, December 8, 2010
Although Fannie Mae and Freddie Mac lifted a moratorium on the seizure and sale of tens of thousands of distressed homes, it doesn't mean that would-be buyers will be rushing to close their long-delayed contracts.
More than a week after the government-sponsored mortgage companies said they would move ahead with sales of foreclosed houses, brokers and title agents say closings will be slow to resume.
In early October, Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac halted sales of homes foreclosed by several big loan servicers — including Ally Financial, Bank of America, Chase and PNC Bank — amid allegations that they were using flawed documents to foreclose on borrowers.
Because many deals have been on hold since the mortgage siblings suspended closings, loan documents have to be reworked and title searches have to be redone to make sure no liens or new judgments have been filed against properties during the delay, said North Miami attorney Carol Keys, who performs title searches for buyers.
Buyers also need to update employment information and other data required by lenders. Loan documents are good only for 30 days.
"It doesn't mean we can close over night," said real estate broker Larry Salas, referring to a Nov. 24 Fannie Mae memo giving the go-ahead to close deals.
"It's going to take some weeks if not a month before closings start," said Salas, owner of All Star Realty Sales in Miami. His company markets Fannie Mae-owned properties in South Florida.
Because the Fannie Mae is his largest client, Salas' business plummeted nearly 70 percent during the REO sales and marketing moratorium, he said.
Marcus Edwards, a Fort Lauderdale broker who specializes in lender-owned properties, said the review was needed because some loan servicers were in disarray.
Right before the freeze, a loan servicer sent Edwards an order to change the lock on a recently foreclosed home. Soon after the new lock's installation, a man appeared in Edwards' office with proof that he had acquired the property through a short sale, in which the lender agrees to sell a distressed property for less than the amount of the delinquent mortgage.
"The moratorium was good," Edwards said. "It forced them to take a closer look at their files."
Yvette Betancourt, president of a Kendall title closing company, expects to close five out of seven Fannie Mae contracts that were put on hold in October within a week.
"I am sure the big companies are experiencing a log jam," said Betancourt, with The Closing Co.
Processing hundreds of thousands of foreclosures since the nation slid into its worst recession in decades has created mounting problems for lenders and loan servicers.
The Florida attorney general is investigating four Florida foreclosure firms that processed a large volume of cases for Fannie Mae, Freddie Mac and Bank of America, among others, over allegations they fabricated documents and forged signatures to foreclose on properties.
The Fannie and Freddie lifted the freeze after their loan services claimed that internal reviews of their procedures reveals no wrongdoing.
The moratorium hurt REO sales at a time when they are critical to the industry's effort to rid the market of troubled properties.
For example, 408 REO condos in Miami-Dade County sold in November, compared with 623 in September, a drop of about 35 percent, according to the Miami Association of Realtors.
The sale of single-family REO homes fell to 235 in November, down from 364 in September, a decrease of nearly 36 percent.
In Broward County, 316 REO condos sold in November, compared with 557 in September, a 43 percent decline. The sales of single-family lender-owned homes fell to 207 November, from 325 in September, down about 36 percent.
The Miami Association of Realtors did not have Palm Beach County statistics.
Edwards, with Keller and Williams Partners, said his company already closed five deals since the Fannie Mae and Freddie Mac's announcement.
"It's been crazy in the last few days," he said. "Fannie Mae is pushing closings as much as they can before the end of the year."
He said financial institutions want to close deals to start the year on a better footing.
Lifting the freeze on the government-sponsored mortgage companies' REO inventory is good news for the housing market, because those homes will most likely sell at close to market value, rather than at a deep discount, several brokers said.
Fannie Mae and Freddie Mac often pay for home repairs, replace appliances, install carpeting and paint properties to boost their value and to make them more marketable, said REO broker Rick Suarez, owner of Castle Realty in Miami.
By doing that, they help protect property values, compared to other financial institutions that sell REO properties in poor condition at discounted prices, he added.
"Their whole idea is to bring the property to the value of the neighborhood," he said. "They don't want home values in the neighborhood to depreciate."
For that reason, he said most people buying Fannie Mae and Freddie Mac's REOs are people who will live in the home, instead of attracting discount-hungry investors, he said.
"They really help preserve values," Edwards added.
More than a week after the mortgage giants Fannie Mae and Freddie Mac said they would move ahead with sales of foreclosed houses, brokers and title agents say closings will be slow to resume.
Because many deals have been on hold since the government-sponsored companies suspended closings, loan documents have to be reworked and title searches have to be redone to make sure no liens or new judgments have been filed against properties during the delay.
Buyers also have to update employment information and other data required by lenders sincelLoan documents are only good for 30 days.Paola Iuspa-Abbott Daily Business Review