Earlier this month, the Texas Attorney General issued a letter to 30 mortgage loan servicers doing business in Texas to stop foreclosures and sales of foreclosed properties. The letter demands a halt to all foreclosures, all sales of properties previously foreclosed upon, and all evictions of persons residing in previously foreclosed upon properties, until mortgage companies have completed a review of their processes, including whether employees or agents “robosigned” affidavits and other documents recorded in Texas.
Demand letters were sent to:
- American Home Mortgage Servicing, Inc.
- American General Finance, Inc.
- AmTrust Mortgage Corporation
- Aurora Loan Servicec, Inc.
- Bank of America
- Carrington Mortgage Services, LLC
- Cenlar, FSB
- JP Morgan Chase & Co.
- CitiMortgage, Inc.
- EMC Mortgage Corporation
- First Horizon National Corp.
- Ally Financial, Inc./GMAC
- Home Loan Services
- HomEq Servicing, Inc.
- HSBC North America Holdings, Inc.
- Litton Loan Servicing, Inc.
- MGC Mortgage, Inc.
- Midland Mortgage Company
- MorEquity, Inc.
- National City Mortgage c/o PNC Financial Services Group, Inc.
- Nationstar Mortgage Company
- Ocwen Loan Servicing, LLC
- OneWest Bank Group LLC
- PHH Mortgage Services Corporation
- Saxon Mortgage Services, Inc.
- Select Portfolio Servicing, Inc.
- Vanderbilt Mortgage and Finance, Inc.
- Washington Mutual
- Wells Fargo & Company
- Wilshire Credit Corporation
How will this demand letter affect transactions?
If any of these institutions choose not to respond to the demand letter, the transactions in which that institution is a steward of should continue as if no letter had been sent. If an institution does choose to respond to the demand letter, the transaction could be affected in one of the following ways:
- They (the institution) could recall posted foreclosures and halt any additional foreclosure postings until the problem has been resolved.
- They could halt entering into sales agreements for properties that are foreclosed and listed for sale.
- They could delay closing on foreclosed properties that are currently under contract of sale.
- The closing dates for short sales could be delayed until a resolution has been determined.
- Evictions for tenants at sufferance on foreclosed homes may be delayed until a resolution has been found.
In my opinion, this turn of events will serve to only delay foreclosures, causing a looming backlog which will likely surge onto the market at some time in the future. As everyone knows, a surge of extra supply with limited demand, particularly with distressed sales, will only help drive market prices down as individual sellers are forced to compete with lenders who need to get REO property off their books in a hurry.
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