Understanding the Foreclosure Freeze

In September and early October 2010, several lenders suspended foreclosures due to questions about whether the transactions were being processed consistent with applicable state law requirements.

Although nearly all of the foreclosures in question are expected to be fixed eventually, the current situation is creating difficulties and a new hurdle to the recovery of the housing and mortgage markets. Additionally, homes on the market without clear title will make sales much more difficult. It is expected that foreclosures in question are likely to be withdrawn from the market.

The foreclosure problem isn't about whether some home owners had their homes wrongly foreclosed upon (there's been no evidence of that to date) but to what extent banks were taking short cuts on foreclosure procedures in states requiring judicial foreclosures.

It is difficult to say what percentage of foreclosures that were improperly processed were. The assumption is that, for most of them, this may be only a technicality and the property ultimately would have been repossessed. Owners who believe their home was wrongly foreclosed may wish to contact an attorney to investigate the possibility of a property claim. However, that could prove costly and time consuming-regulations vary by state.

Any family who loses a home to foreclosure is one family too many. Anyone facing foreclosure should be sure to consider all the options available. In many cases, it may make more sense for a bank to modify a loan or agree to short sale to expedite disposal of inventory.

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