A senior adviser to the president has questioned the need for a blanket halt on foreclosures, as the crisis grows as a major political, economic and social issue.
David Axelrod, a political strategist for President Barack Obama, said there are valid foreclosures that should go forward. Congressional leaders are divided, with those in states hardest hit by foreclosures seeking a halt to the process, while others saying that would shut down the housing industry.
Of the more than 1,500 homes on the active sale list in Frederick County as of Thursday, 26 percent are distressed homes — 133 foreclosures, 254 short sales, according to Bob Sawchuck, an agent with Mackintosh Inc. Realtors. A short sale is when the lender will accept less money for a sale than is owed on the mortgage.
One of the myriad of issues tangled up in the foreclosure crisis is ensuring a clear title for sale.
"I think the largest concern is going to be getting future title insurance on some of the properties that are already in foreclosure, which will allow fewer buyers to purchase," said Sandy Fouche, president-elect of the Frederick County Association of Realtors.
"We always recommend title insurance on a foreclosed property precisely for this reason," Fouche said. "I know that I would not buy a foreclosed property without title insurance, nor would I recommend it for any client. If a title insurance company feels that the paperwork has not been completed properly they are less likely to provide insurance and I would not blame them. This is going to slow down the process quite a bit for buyers looking to buy a foreclosure."
A major problem has been banks revealing that some of their loan officers simply signed off on the overwhelming number of foreclosures without reviewing the documents.
Marty Lapera, CEO of Frederick County Bank, said the foreclosure issue "has the makings of a significant event, especially since a third or more of the home sales (nationally) involve foreclosures or short sales."
Lapera agreed with Fouche that it could involve title insurance companies, investigations or actions by states, and a significant ripple effect.
"I think it is difficult to fully understand the magnitude of this, particularly if it takes a long period to resolve the problems," Lapera said.
Fortunately, Lapera said his bank originates first and second mortgages for its own portfolio and is closely involved in the entire process from loan application to settlement, after which the documentation is audited, he said.
"There are no third parties involved in our loan origination or servicing," Lapera said. "We do not have a sizable residential mortgage portfolio and very few delinquencies and no owner occupied residential mortgages in foreclosure at present."
Frederick County Bank is more concerned with the impact of further real estate sales, a slow down on the financial health of real estate brokerage firms and Realtors, Lapera said.
"Any recovery to the residential industry will be further hampered by a prolonged moratorium," he said.
As happens with any crisis, there are those who take advantage of the situation. The Maryland Attorney General's Office is warning about potential foreclosure scams on those fearing loss of their home. The Maryland Consumer Protection Division, 1-888-743-0023, can offer information on any company saying it can help with the problem.
The Frederick Community Action Agency, 301-600-1506, and the Consumer Credit Counseling Services, 301-695-0369, can offer advice on the issue.
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