VIP Properties Jeree C Rogers

By now I am sure you have heard the Texas Attorney General's office has halted all foreclosures, all sales of properties previously foreclosed upon, and all evictions of persons residing in previously foreclosed upon properties, until mortgage companies have completed a review of their processes, including whether employees or agents "robosigned” affidavits and other documents recorded in Texas.

The attorney general sent the demand letter to halt foreclosures to the 30 lending institutions.  What exactly is a demand letter?

A demand letter is a tool lawyers use to ask someone to do something.  The demand letter by itself does not have the force and effect of law.  A demand letter typically will describe possible future legal action against the recipient of the letter if the recipient does not take certain actions.  In this case, Texas Attorney General Abbott has noted possible violation by these banking institutions of the Texas Deceptive Trade Practices Act, the Texas Debt Collection Act, the Texas Penal Code, the Texas Property Code, the Texas Government Code, and the Texas Constitution.

So how will the banks now respond to these letters?

We don’t know.  The issue has snowballed during past two weeks as four banks -- Bank of America, JP Morgan Chase, Ally Financial's GMAC mortgage division and PNC Financial -- have all suspended home seizures in the 23 states where courts oversee foreclosures. PNC added itself to the list on Friday while Bank of America announced it was halting foreclosures in all 50 states to examine its process.

If an institution chooses not to respond to or honor the demand letter, then the transaction should proceed as if no demand letter was sent out.

If an institution chooses to respond to the demand letter, then the transaction could be affected in various ways.  The 5 possible outcomes are the following:

1. Foreclosures – Institutions that honor the AG’s request will likely postpone foreclosures that have already been posted and will likely not post additional foreclosures until the dispute has been resolved.
2. Foreclosed Properties that are listed for sale – Institutions that honor the AG’s request will likely not enter into a sales contract for a listed foreclosure until the dispute has been resolved.
3. Foreclosed properties that are under contract for sale – Institutions that honor the AG’s request may delay closing a sales contract for a listed foreclosure under contract until the dispute has been resolved.
4. Short sales – Institutions that honor the AG’s request may choose to delay closing on a pending short sale transaction until the dispute has been resolved.
5. Evictions of persons residing in previously foreclosed upon properties – Institutions that honor the AG’s request will likely not evict previous homeowners who continue to live in the foreclosed house until the dispute has been resolved.  The institutions could, however, attempt to convince the occupant to leave the property by offering cash for keys.
   
   Simultaneously to all of this foreclosure mess, title insurer Old Republic Nation has said it will stop insuring the sales of homes foreclosed by JP Morgan Chase & Co or GMAC Mortgage until questions about documentation are cleared.  An inability to get title insurance has the potential to stop home sales altogether.
   
   Now, my advice to you as a consumer if you are interested in purchasing a short sale or foreclosure or are in that process or if you are a distressed homeowner and face your own short sale or foreclosure situation…I recommend that you only use a Realtor that you trust that stays on top of Texas Housing news and is knowledgeable about short sales and foreclosures. I have closed many short sale and foreclosure transactions and there are a lot of Realtors that cannot say that.  If you find yourself in this situation you want someone that can take care of your transaction every step of the way especially now.
   I will continue to follow this concerning situation on my blog and update you as new information is released.