The Foreclosure Freeze has Little Impact on San Diego

This week, Bank of America and GMAC Mortgage partially lifted their nationwide freeze on foreclosures suggesting that the mortgage issues may be letting-up. Bank of America said it would resume foreclosures in 23 states on October 25th, while GMAC said it would resume foreclosure action on an unspecified number of cases.

There is no immediate word whether other lenders including, Goldman Sachs, PNC Financial, and JP Morgan Chase will follow the others’ lead. These institutions are still addressing the allegations of forged documents, faked Social Security numbers, incomplete paper trails and other accusations, all of which led to the freeze.

While California does have a large concentration of foreclosures, the good news locally is that foreclosures are a smaller part of the San Diego real estate market than in other cities, so the impact is likely to be felt less here than elsewhere in the state and country. It’s hard to determine exactly how many foreclosures there are in San Diego, but based on MLS listings in early October, they made up about 8 percent of the market.

Some sellers may actually benefit from the moratorium in the short-term. With a substantial number of foreclosed houses off the market, housing prices could rise. However, Paul Bishop, NAR’s vice president of research, points out that it’s likely that eventually these homes will return to the market so this scenario won’t have a long-term impact. In the long run, however, this situation should lead to a reevaluation of lending and foreclosure practices that ultimately will improve the process—and protect consumers.

Those immediately looking to purchase a foreclosed property in San Diego should be aware that because of the freeze, you can make an offer, but it probably won’t be considered in the near future. You likely will be the first in line once the freeze is lifted or when that home is officially cleared to sell. Keep in mind, however, that if more foreclosures enter the market, upon the release of the freeze, your initial offer may turn out to be higher than the value of the home.

If you have already made an offer on a foreclosed home and it was accepted, you’ll have to endure a longer wait while the lender determines if the previous owner has officially foreclosed. Consult your REALTOR® to learn the best way to proceed in any of these scenarios and get the advice of a real estate attorney, particularly if you’ve already made an offer on a foreclosed home.

- Mark Marquez, San Diego Association of REALTORS® President - sdar.com

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