Last week, the Texas Attorney General Greg Abbott gave 30 mortgage banking and servicing institutions until this Friday (Oct. 15) to respond to a request for information about their foreclosure processes.
A letter was issued by Abbott’s office on Oct. 5 causing concern in the real estate industry when it called for the banks to “suspend all foreclosures, all sales of properties previously foreclosed upon, and all evictions of persons residing in previously foreclosed upon properties.” In addition, the attorney general’s office asked the lenders to take eight steps to correct possible past mistakes in mortgage documentation practices.
What was confusing to many people was that the action by the state was a request, not a requirement, to cease foreclosures. “The letter was technically a demand letter asking the mortgage companies to stop the process until their foreclosure methods could be evaluated,” explains Michael Clapp, general manager of Keller Williams Realty Northeast. ” I believe that it will take a court action to stop the foreclosure process.”
Clapp advised agents who have pending transactions on foreclosed properties and foreclosed listings to continue as usual, until more information is released. “For those agents who have buyers that previously closed on a foreclosure and may be concerned that their purchase might be invalid, tell them to stay the course until we have more information,” he recommended.
The Texas Association of Realtors also issued a facts and questions sheet to its members last week regarding the state’s action towards foreclosures. The TAR reaction gave possible outcomes on how foreclosure transactions could be affected if a bank responds to the demand letter.
As of last Friday (Oct. 8), at least five institutions have announced that they are reviewing their foreclosure procedures and possibly putting some foreclosures on hold. They are: Litton Loan Servicing LP, Ally Financials GMAC Mortgage unit, PNC Financial Services Group Inc., Bank of America, and JPMorgan Chase.