Earlier this week, we reported on the GMAC/Ally “Robo-signer” who allegedly signed off on tens of thousands of inappropriate and even illegal foreclosures. In Connecticut, the state attorney general has already demanded that the lender freeze all foreclosures in the state pending his investigation, and similar moves in other states have sent rumors spiraling across the real estate investing market and the housing industry that the mortgage giant will actually be freezing foreclosures, pre-foreclosures and bank-owned properties already on the market for an undetermined amount of time.
It is certainly possible, although at the time of publication we could only find state-specific instances of GMAC freezes and a lot of speculation about the nationwide, comprehensive freeze. In Florida, real estate attorneys are reporting that insurance companies are refusing to provide title insurance on GMAC foreclosures: “I think that the underwriting community – all of the title companies – are going to be looking at sales after foreclosure very carefully in light of the GMAC freeze,” said Marlyn Wiener earlier in the week, pointing out that if underlying affidavits of foreclosure are false, “then the whole foreclosure is suspect”.
This could present serious problems for already-struggling communities dealing with massive foreclosure volumes since the freeze will likely leave even more homes abandoned and derelict, creating blight on neighborhoods. In fact, the threat is so serious that one Florida defense attorney, Matt Weidner, called it a “nuclear bomb” to the affected areas. “Effectively, [this] means that all these foreclosures were a waste of time,” said Weidner.
As of press time, the GMAC had halted evictions, homeowner lockouts and resales of bank-owned homes in 23 states. However, it is continuing with new foreclosures.