The foreclosure crisis is nowhere near resolution, but mortgage giants Fannie Mae and Freddie Mac have ordered resumption of foreclosures.
By end September, Fannie Mae and Freddie Mac, which have underwritten majority of the nation's mortgages, were set to conduct foreclosures on 240,000 properties. Around that time, Fannie and Freddie ordered a moratorium on foreclosures because of worries over propriety of court foreclosure proceedings.
By this is meant the impact of the robo-signing scandal in which employees of servicers' rubber stamped affidavits without checking facts or without the presence of notaries. Also under a cloud was whether cases were transferred from lenders to servicers in a proper fashion and this means that the right of servicers to pursue foreclosure action may be questioned.
Before people start blaming Freddie and Fannie for resuming foreclosures wrongly, it must be borne in mind that this does not mean foreclosures will be resumed overnight. Some banks are still probing their foreclosure procedures so that they do not violate the law and a national investigation of the foreclosure process is underway. Fifty state attorneys general, Federal Trade Commission and banking regulators consist of the team of Foreclosure Task Force Investigation. This task force will submit its report in January 2011.
Also the National Association of Realtors is an important player in this issue. It has blamed the moratorium on foreclosures for the slump in sale of homes and put pressure on the federal govt. to restart foreclosures. The NAR has also urged the lenders to loosen lending procedures to encourage people to buy homes.
This is a new line of thinking as Federal Housing Administration (FHA) and lenders had tightened lending requirements in response to sharp rise in foreclosures that started in 2007. The argument was that loosening of lending standards resulted in more defaults by home owners in making mortgage payments.
Fannie and Freddie backed the resumption of foreclosure sales by realtors. Sales had been suspended due to the robo-signing scandal where employees of lenders were accused of rubber stamping foreclosure documents without checking facts.
Major lenders revoked moratoriums on foreclosures they had announced in the wake of the scandal. But an investigation into the foreclosures mess by 50 state attorneys general is still underway. Investors and borrowers in mortgage backed securities are mounting law suits against major banks. This has resulted in the situation that on one hand foreclosures must be resumed for recovery of the housing market and on the other hand the process must be conducted strictly according to law.
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