Photo: Michael Snyder
The foreclosure-gate crisis isn’t just a legal/cost headache for the banks. It’s actually starting to impact the housing market, which means it’s about to be everyone’s nightmare.The New York Times has found specific anecdotal examples of people who thought they were about to move into a home that they had bought, only to find that they were unable to do so, because the previous owner had not moved out, because of the foreclosure situation, though there are no hard numbers yet to show how big this problem is.
But it could potentially be significant when you consider how big foreclosure/distressed activity is in the housing market these days.
Those reviews are throwing into limbo hundreds of thousands of foreclosures and pending home sales, analysts estimate, though the lenders and Fannie Mae have been mostly silent about precise numbers and other specifics.
More broadly, the revelations about the sloppy paperwork are emboldening homeowners and law enforcement officials in many states to question whether lenders rightfully hold the notes underlying foreclosed properties — further chilling the housing market.
Distressed properties, many of which are in foreclosure, make up about a third of all home sales. “Foreclosures are going to slow to a crawl,” said Guy D. Cecala, publisher of the trade magazine Inside Mortgage Finance.