Fear of Foreclosure Fraud Driving Down REO Sales, Home Prices

After the extreme amount of outright fraud in mortgage origination, you would have thought that nothing could dissuade homebuyers from purchases. But the geniuses in the mortgage industry have managed to finally keep buyers sitting on their wallets, because of the scandalous level of foreclosure fraud.

"The ongoing controversy surrounding foreclosures is taking its toll as homebuyers refused to look at distressed properties in October, and foreclosure sales suffered from delays, according to the latest Campbell/Inside Mortgage Finance Monthly Survey.
Both the share of home purchases involving distressed properties and average prices for foreclosed properties fell last month, the survey found."

14 percent of owner-occupant homebuyers and 6% of real estate investors refused to look at foreclosed properties last month. In short-sale properties the numbers jumped to 30% of buyers and 20% of investors. Given the worsening of the problem, and the very real possibility that originators never conveyed the mortgages into the trusts who now claim to own them, I can’t see this getting better in the near-term.

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