Recently on the Family Law Listserv participants discussed how long people can remain rent-free in their homes after foreclosure. The length of time varies from one property to the next, depending upon the amount of acreage and, often, contractual issues. However, an important aspect of this is that the owners must actually be residing in the home. A bank can take possession immediately if the homeowner abandons the property. An article in the New York Times today describes techniques foreclosure specialists are touting and using to evict residents who try to stay in bank-owned property, a process they call “cash for keys.”
A recent convention of real estate agents and property managers in Palm Desert, California attracted about 3,000 attendees of people cashing in on the boom in foreclosed properties. Reomac is the industry group that serves the mortgage default trade, specializing in selling the busted-up American dream.
According to one attendee, their business is booming, and they call it the "R.E.O. tsunami" which has flood the market with as many as 700,000 bank properties nationwide. Although the tide has been stemmed in recent months because of foreclosure moratoriums imposed by major banks and the Obama administration, opinion expressed at the conference is that real estate agents shouldn't worry because the flood probably has not reached its peak, but will likely continue for several more years.
This is bad news for homeowners in foreclosure and also for homeowners who wish to sell their homes because of relocations as they are transferred by their employers to other parts of the country or have accepted employment in other states after plant closures or a loss of employment.
Frankly, the gloating and seemingly insincere comments about how these R.E.O. agents don't want to profit from other peoples' misfortunes - offered up over drinks and caviar at poolside parties - ring false. This is especially true when in the next breath the speaker says there isn't enough inventory of distressed properties. This is a mess that makes divorce and separation all the more difficult and a family lawyer's task in guiding the client even more dicey.
You may read the New York Times article, Homeowners’ Hard Times Are Good for the Foreclosure Business here.
Your observation that the worst is yet to come is probably spot on. Typically, two to three years is required for all the "hanger's on" to run out of resources and finally lose out to divorce. With jobs disappearing as fast as they are and a market bias against older workers, the trend seems dire, especially for women and children. The current government programs seem to be targeted at larger entities and not at individual homeowners. The programs aimed at individual homeowners are not widespread enough. Without reforms to mortgage instruments, including the ending of the due on sale clause, it is nearly impossible to sell one's home without a new mortgage. When so many houses are being bought by speculators, that drives prices down. To change things, the rules that created the mess have to change, because human nature is not likely to.
Posted by: John Mertz | 04/06/2009 at 09:56 AM