| By :
Frank Patrick
Economic Experts Decry Push to Freeze Foreclosures; Inventory Still Huge REO sales have become an increasingly important sector of the real estate market, especially in states that have been hardest hit by the housing crisis. For example, foreclosure sales made up 56 percent of all home purchases in Nevada and 47 percent of them in Arizona this past August, while in Michigan, Rhode Island and Florida, they accounted for about a third of the share. That's why any attempt to slow down the foreclosure process could imperil the beginnings of a fragile housing recovery. Some numbers in August pointed to the possible start of such a recovery; sales of previously-owned homes increased for the second month in a row. Now, because of some paperwork irregularities by overwhelmed REO sellers and election-year posturing, some legislators have called for a halt to all foreclosures. Economists and real estate experts are mostly in agreement on what the effect of that action would be: "It will have an immediate negative impact on house sales volume, house prices, private label MBS investors, bank earnings, mortgage servicing values, and much more," says mortgage consultant Mark Hanson. Guy Cecala, Inside Mortgage Finance comments, "Instead of having a ton of mortgage borrowers who haven't made any payments in at least a year, we would have a ton who haven't made a payment in a year-and-half. Do we seriously believe that a foreclosure moratorium can change the outcome of potentially 5 million or more homeowners losing their homes over the next two years? Ultimately, if we don't do something to handle distressed properties more efficiently (and faster), the housing market is going to remain stuck in limbo with no recovery in sight." And foreclosure expert Rick Sharga from RealtyTrac agrees as well. "If foreclosure sales are prohibited, home sales would tail off dramatically...foreclosures and REOs accounted for over 30% of all sales during the (third) quarter. Fewer home sales will put more pressure on home prices, reduce tax receipts for already-strapped municipal and state governments, and put even more pressure on an already-moribund economy. This could cause at least a temporary loss of jobs in a number of sectors. A 90-day moratorium would also extend the housing market downturn, pushing the anticipated recovery from early 2014 into late 2014 - and possibly even longer." Finally, even David Axelrod, the senior adviser to President Obama, doubts the need to stop foreclosures. Axelrod said it would throw "a lot of uncertainty into the housing market that is, you know...is already fragile. ...there are, in fact, valid foreclosures that probably should go forward." Fortunately, there is already a huge inventory of REO listings of over half a million REO homes that already need to be sold. And no matter what the outcome of the current foreclosure debate is, there is also no question that the pending foreclosures are inevitable and bound to keep an extremely active REO market booming.
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