Many purchasers of foreclosed houses are suddenly finding themselves stranded thanks to the new twist in the crisis. One of the victims was Jim Durden. PNC Financial Services Group was about to sell him a foreclosed house in Weed, California last October when the mega banks came under public glare, for wrongly repossessing houses of borrowers. Now his address is a motel.
In a state of limbo he cannot winterize his house, install the missing water heater, trim the long grasses and attend to all the things a house owner has to do. He has been living in this state of uncertainty from 7thOctober.
When Bank of America took a pause from their foreclosures nearly two months previously because of robo-signing scandal, an increasing number of potential buyers are waiting anxiously to finalize deals. It is an indication that the mess in paperwork is definitely dragging the market. The sale of existing houses fell more than what the pundits had forecasted. According to the National Association of Realtors it fell by 2.2%.
PNC said that it had conducted internal reviews and found that there was nothing faulty there had been no instances of wrong foreclosures; the system was full proof against this. The potential buyers are being unnecessarily held up. Rick Sharga of RealtyTrac said, "We heard of virtually none of this happening until the so-called robo-signing scandal and subsequent foreclosure freeze".
Some of the employees of the mega banks resorted to signing thousands of documents each day making it impossible for them to check the contents; notarization was not done properly done either. This came to be nicknamed as robo-signing.
The judiciary, the legislature and housing advocates has become very concerned that these robo-signings are just the tip of the iceberg. Were thousands wrongfully evicted? Did the banks have the right to foreclose? If so where are the original documents? The banks contend that the error was only technical and the real fact is that the borrowers were defaulting. Whatever the issue the reality is that the housing market is being battered again.
At the end of October 2010 the banks were in repossession of over 950,000 properties an increase of 25% from what it was the previous year as per RealyTrac. Sharga thinks that the impact on the deals that have been stalled "will be minimal" if the logjam is cleared within a month or two.