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Foreclosures Halted in all 50 States – TriValley Impact?

Earlier in the week, attorneys general in all 50 states agreed to investigate whether banks and other lenders have used false signatures and documents to substantiate foreclosures. What does this mean for the housing market across the country and in particular right here in our own backyard – the Tri-Valley area?  I believe that this is only delaying the inevitable both locally and nationally.  These homes, at some point, must come on the market.  Are we to believe that during this moratorium of foreclosures that no other homes will fall into a delinquent status and also eventually succumb to foreclosure?  This has been the situation for a few years now and will continue to be the case into the near future.

The answer is analogous to blowing up a balloon to its extreme.  More and more air fills the balloon until eventually the balloon pops letting out an explosion of air.  The only other option for the balloon is for someone to slowly let the air out.  The key is going to be in the management of how the banks distribute the foreclosure inventory to the marketplace once the moratorium is lifted.  If the banks disperse the foreclosures all at once or in heavy loads we can be in for a major impact to the housing market.  If the banks slowly roll out the foreclosures the immediate impact to the market might not be as great.  However, I believe this will only prolong the real estate market’s troubles for years to come.

On CNBC recently, former Fannie chairman and CEO Franklin Raines commented that loans that remain out there should be restructured “so that we can get out of this mess of people who are having a drag on the economy, a drag on confidence by consumers.”

“We need to have a major restructuring of the outstanding mortgages so that we can move forward with confidence and vigor,” Raines said.

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