Foreclosure

Servicers have picked up the pace as they work through a backlog of loans that have languished in late-stage delinquency status for months, and in some cases well over a year. As a result, Lender Processing Services says lenders' foreclosure inventories have risen dramatically and are about 7.4 times above the historical average. Increases in delinquency numbers have remained subdued, however, as loans are pushed out the end of the pipeline faster than new delinquencies enter.

The Law Offices of Daniel C. Consuegra, P.L. issued a notice this week announcing the firm's addition as a member of the Fannie Mae Retained Attorney Network. The Tampa-based firm is now eligible to represent Fannie Mae in foreclosure and bankruptcy matters in the state of Florida. Fannie Mae de-listed the controversial foreclosure mill the Law Offices of David J. Stern, P.A. from its approved attorney network and instructed its servicers to begin transferring pending cases to other firms earlier this month.

A Citigroup official says the company's review of foreclosure cases has uncovered some 14,000 affidavits that will likely need to be re-filed with the courts. Since the paperwork controversy surfaced and triggered foreclosure suspensions by several major mortgage servicers, Citi has been unwavering in its claims that the foreclosure processes it has in place are ""sound."" The company says for the most part, it has been able to steer clear of the robo-signing mess because of a restructuring that began more than a year ago.

The ongoing controversy surrounding deficiencies in foreclosure documentation is taking its toll on the housing market as a significant share of home shoppers refused to even look at distressed properties in October, according to a study conducted by Campbell Surveys. Not only did reports of major servicers pulling REO properties off the market spook would-be homebuyers, but servicing problems resulted in 12 percent of scheduled closings being delayed or canceled due to REO title issues, the company found.

A new Federal Trade Commission (FTC) rule bans providers of foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable. The rule also requires mortgage relief companies to provide their clients with a document describing the key changes to the mortgage that would result if the consumer accepts the offer. They must also remind consumers of their right to reject the offer without any charge.

New data from TransUnion shows the national mortgage loan delinquency rate in Q3 2010 declined by the highest amount since the last quarter of 2006. Based on the credit reporting agency's analysis, the delinquency rate for Q3 was 6.44 percent, down from Q2's rate of 6.67 percent. A representative from TransUnion said the significant decline is an encouraging sign for a struggling industry and attributed the drop to increased stabilization in housing prices and record low interest rates.

The industry's ominous shadow inventory of REOs that have yet to hit the market and soon-to-be-REOs increased by more than 10 percent between August 2009 and August 2010, according to new figures released by CoreLogic Monday. The company's calculations show the shadow supply of residential properties reached 2.1 million units in August of this year, a volume that will take eight months to clear at today's sluggish sales pace. CoreLogic puts the industry's ""visible"" inventory of homes for sale at 4.2 million.

The headline foreclosure news for the past couple of months has been the suspension of foreclosures by a handful of lenders after robo-signers and procedural deficiencies were uncovered in their servicing shops. The foreclosure tracking firm ForeclosureRadar says while the announcements initially focused on 23 judicial foreclosure states outside of the company's coverage area, GMAC, PNC, and Bank of America all later expanded their suspensions, and the impact is now beginning to show up in non-judicial West Coast states.

In another attempt to save struggling homeowners from avoidable evictions, Washington, D.C. Mayor Adrian M. Fenty has signed an emergency act that amends several sections of the District of Columbia Official Code. Most prominent in the new piece of legislation is the addition of a ""foreclosure mediation"" section, which has specific requirements banks must meet before proceeding with a foreclosure. Foreclosure sales resulting from a process that skipped a step or proceeded incorrectly will be considered void.

Federal banking regulators are in the process of conducting an in-depth review of foreclosure practices at the nation's largest mortgage servicers, which includes on-site evaluations and examinations of loan files. Officials say in cases where problems are found, regulators will require lenders and servicers to correct not only the faulty documents but the faulty systems that allowed them to occur. One Federal Reserve governor says institutions with ""widespread problems"" could also be subject to fees and penalties.