Some clarification on Bank of America’s foreclosure hault & a few current stats
I just received this note from the Washington Realtors Legal Hotline Q & A regarding the Bank of America Forclosure hault:
Last week’s Q&A said that nationwide foreclosure problems were not likely to affect Washington state. On Friday, however, Bank of America suspended the sale of its foreclosed home inventory in all 50 states. Has anything changed?
Based on Bank of America’s statement, the bank has postponed the sale of its real estate inventory. acquired through foreclosure, in all 50 states. Bank of America’s policy seems to be an “across the board” policy without characterization of defective processes in any particular state. There is no reason to believe that homes foreclosed in Washington cannot be resold to third party buyers with clear title. Bank of America’s reaction is sweeping and does not account for the foreclosure process in Washington state.
With that said, there was a case decided by one of our state’s appellate courts at the very end of September, that resulted in the overturning of a foreclosure sale, on the courthouse steps, to a buyer (not the bank). In that sale, there were procedural defects in the bank’s handling of the foreclosure process and the buyer who purchased the property, for less than 20% of its value, had reason to know of the defects in the process. Based on those facts, the court concluded that the buyer was not a bona fide purchaser and the court unwound the sale to the buyer.
This case does not appear to alter the way in which Washington title companies will issue policies to buyers of foreclosure properties if the buyer purchases from the bank after the bank takes title to the property through the foreclosure sale. Business as usual should remain the course of business for title policies issued to buyers who purchase property from the bank, even if the bank acquired title to the property through foreclosure. The title policy that may or may not be revised is the policy issued to a buyer who purchases the property on the courthouse steps, at the trustee’s sale, as part of the foreclosure process. Few REALTORS are involved in representing buyers in those purchase transactions but for those who are, buyers should be advised to seek legal counsel for assistance in reviewing the limitations, if any, in any title insurance policy buyer may purchase.
Ultimately, the Bank of America postponement of foreclosure sales and postponements by any other lenders who may follow suit, constitute another difficult situation that our industry must endure in what is proving to be an era of unpredictability and rapid change. However, the Bank of America policy is not indicative of any fundamental flaw in Washington law relative to foreclosures. Washington will land on its feet with respect to this issue.
As any new information becomes available or if any of the information that is discussed here changes, we will bring it to the attention of our members.
How many properties are effected in our area by this?
Not very many.
I took a quick look into it and the NWMLS list Bank of America as the owner of 48 properties that are either Active or Contingent on the market and another 27 properties that are in Pending contracts.
You might ask yourself “Have there been a lot of listing cancellations or temporary removals from the market with this news?”
Nope. Only 4 listings have been cancelled in the last month and none have been temporarily removed from the market.
On whole there have only been 107 closed listings in the past 6 months with Bank of America listed as their owner.
This isn’t a perfect science as real estate agents don’t always input the Owner of a properties name either by written request of the Owner or out of neglect.
The immediate impact of Bank of America’s announcement is fairly minimal generally speaking. The real question is how many other banks will follow suit? We’ll have to wait and see.