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Foreclosure FraudHow the Foreclosure Scandal Affects Home Owners, Buyers and Sellers
(10/21/10)

While the news media have been bombarding us with stories of “robo-signing” and fraudulent documents, most have overlooked explaining how the foreclosure scandal affects home owners, buyers and sellers. Many of those in the market to purchase a home have had second thoughts, wondering if their purchase might somehow be affected, especially if they plan to purchase a foreclosure. They may also have concerns about the overall impact of the foreclosure scandal upon the economy.

Sellers fear that the foreclosure moratorium will somehow impact the sale of their home. And some are concerned that the news may slow down the economic recovery and affect consumer confidence.

Such concerns are legitimate. The potential effect of lawsuits and the time, money and effort spent in making corrections to foreclosure documents will probably be felt for some time. And even if a quick resolution is achieved, the backlog of foreclosures will have its own impact, creating more downward pressure on prices and adding to the weakness in the economy.

Those who have already purchased a foreclosed property could have an issue with the clear title to that property. It is possible that the foreclosure documents were improperly prepared, and though it’s unlikely; there may be cases where the previous owner will be allowed to take possession once more. In such a case, if you had owner’s title insurance—a product I recommend HERE — you would be protected against financial loss; but still might lose the home.

Homeowners who are behind on mortgage payments and who are trying to save their home should contact their lender about a modification, even if they have already been turned down. With all the uncertainty regarding how soon this problem will be resolved, banks may be more accommodating in dealing with those customers who are making an effort to keep their homes.

With about 5 million homes currently facing foreclosure, the potential for problems is huge. And now that homeowners are aware that the banks haven’t been “playing fair,” many are hiring attorneys to contest or delay their foreclosure. Additionally, some class-action lawsuits are already in the works and all 50 states’ attorneys general are investigating lenders’ actions in their states. It’s reasonable to expect an impact upon the housing market as banks and courts attempt to work through the foreclosure scandal.

 

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