REO sales in the areas hardest hit by the foreclosure crisis dropped dramatically in October as major lenders halted the process to check faulty affidavits, according real estate data provider ForeclosureRadar
Bank of America (BAC)
, JPMorgan Chase (JPM)
, and Ally Financial (GJM)
announced moratoria in 23 judicial foreclosure states when employees signed affidavits without reviewing documentation or having a notary present. BofA suspended foreclosures across the country.
While 50 state attorneys general offices and 11 regulators are investigating the matter, Sean O'Toole, CEO of ForeclosureRadar, said the issue will only have a brief effect, and that the real problem will be new scammers cropping up.
"Despite a short-term impact to foreclosure sales, the latest foreclosure scandal will likely lead to little more than a new scam perpetrated on those who have already lost their home," O'Toole said. "Much like the cottage industry of loan modification consultants that took up-front fees and provided little in return, we are now seeing consultants promising to overturn foreclosure sales, despite any experience in actually doing so."
Earlier Tuesday, Moody's Investors Service
said the risks posed to residential mortgage-backed securities by the robo-signing debacle are extremely low to moderate and should have a limited impact
Nevada REO sales to third parties dropped 41.5% in October from the previous month, followed by a 36.5% drop in Oregon and 26% declines in Arizona and California.
The amount of properties take back by the banks dropped significantly as well. Oregon had the biggest drop at 38.2%, followed by Nevada at 35.6% and California at 30%.
Write to Jon Prior