US Mortgage And Foreclosure Issues
I’ve talked a few times about how the US Real Estate market still has plenty of turbulence to go through before it recovers. This recent 60 Minutes report points out some new issues that may create an even more of a problem for the market in the very near future.
The extra fraud questions this brings about could have repercussions on the US mortgage market for years and the reputation of the very lenders in charge of the market. It’s stories like these that remind us that the Canadian banking industry (although far from perfect) is so tightly regulated in comparison that it’s no wonder we escaped the meltdown with minimal damage compared to the US.
Real Estate Investor Perspective
How will this affect an investor? If you are purchasing in the US this could have a drastic affect on the financial industries for the next several years and potentially lead to another meltdown South of the border.
If tens of thousands of mortgage documents are found to be fraudulent and leave the banks holding the bag this could create a new wave of bailouts, shutdowns and panic. This doesn’t sound like just a couple banks, it sounds like it was rampant and may cause a general lack of trust in the banking industry ( a well founded lack of trust apparently).
For Canadian investors this could be a very positive experience, if they keep their money in Canada. If it appears the US market is looking at another setback, more of the investment capital out there will look to safe havens (woohoo Canada) to park their money while the ramifications play out.
Watch for even more foreign capital to be diverted to Canada from the US which will lead to jobs, a growing economy, RE values to increase and even more optimism. Of course this will be tempered by our largest trading partner potentially reducing even more imports, so watch any investing you do in manufacturers that export only to the US!
I had heard rumors of this problem in October 2010 but didn’t know the extent of it. Whew, this is incredulous. It seems all the major banks are implicated as well which further undermines the credibility of the US banking system. I just wonder how many Canadians who bought foreclosed properties are caught in the middle of this mess. Unbelievable.
Think of the repercussions if you did buy a foreclosed property (either as a Canadian or an American), if the foreclosure was invalid, will you have to return the property? Would the original sale have been illegal and would you be out any of your costs as well? If it’s the banks fault and they are on the hook for millions or even billions, they won’t have funds to reimburse people full costs, so where would that money come from if it come from anywhere?
Long term will this fill the US courts with numerous appeals and cases against banks? Will it tie up property and make people even more hesitant to purchase foreclosures increasing bank losses? There is currently a huge backlog of foreclosures already, will this increase that backlog even more? This might just be the tip of the iceberg and help establish Canada as an even more important location for foreign money to end up. Ironically, this i also at a time when many of the reports are talking about more Albertans looking at buying in the US. It reminds me of the book Acres of Diamonds by Russel Conwell.
Holy crap! What a mess!! With the State Attorney Generals involved, Banks won’t see daylight for a very long time. This information is not only vitally important to Canadians who are considering buying in the US, but I would suggest the repercussions could cross the border. As a US recovery in many of its sectors, including housing, is vitally important to our economic health, we are umbilically tied to the health of the US consumer. The US government census estimates there are 75 million homeowners in US. 2008 saw an incredible 120% increase in foreclosures over 2007. Over 2.5 million homeowners received a foreclosure notice in 2009 and 2.87 million in 2010. Forecasters are now suggesting that foreclosures may jump another 20% in 2011 as compared to 2010. Overall at least 20% of the homeowners in the US are impacted to some degree to a foreclosure process, estimating what portion of those homeowners were fraudulently removed from their homes due to forged documents is staggering to comprehend and ludicrous to imagine. All I can say is, make sure you by title insurance for your home in Canada, and don’t buy in the US!