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Tuesday, October 05, 2010

Foreclosure Mess: Little impact on California

by Calculated Risk on 10/05/2010 03:21:00 PM

From Eric Wolff at the North County Times: Lender woes unlikely to halt California foreclosures

The pace of foreclosures in California will continue unabated, despite paperwork improprieties that drove three of the nation's biggest mortgage lenders to suspend foreclosures in 23 states last week, real estate attorneys said Monday.
Last week, GMAC Mortgage LLC, JPMorgan Chase & Co. and Bank of America said they needed to review thousands of crucial legal documents that they may have signed without reading. But the documents only matter in states that require a judge's order for a foreclosure. The three lenders suspended foreclosures in these states, but announced no changes to their activities in California.
Most foreclosures in California are non-judicial, so there will probably be little impact on the pace of foreclosures.

And - all else being equal - the housing market in states that require judicial foreclosures will probably be under pressure for a longer period than states with non-judicial foreclosures. Just more bad news for Florida and other judicial states.

And another point - there is a national mortgage market, but each state has their own foreclosure laws. Mortgages should probably be priced based on the local foreclosure laws (higher rates for judicial states), and on whether the mortgage is recourse or non-recourse. Different mortgage rates would probably push the states to more uniform foreclosure laws.