With Floridas already troubled housing market roiled by a widening moratorium on foreclosures, Attorney General Bill McCollum called Tuesday for a meeting with major lenders, saying he fears a shockwave that could rock the states fragile economy.
McCollum sent letters Tuesday to Bank of America, JP Morgan Chase, GMAC and other big lenders who have halted pending foreclosures in recent weeks and temporarily stopped taking ownership of properties in all or many states. In Florida, where sales of such distressed properties account for roughly half of all home sales, McCollum said the freeze could undermine the states slow economic recovery.
Title insurers and state banks 25 of whom have already closed in Florida this year could quickly become victims of any foreclosure moratorium, McCollum warned.
I cant foresee the results exactly of this, McCollum conceded. But if the big institutions are saying, look, were not going to do any more foreclosures for an extended period of time in Florida and we have title insurers saying were not going to write title insurance, then that means weve got trouble in River City. It means problems for our system.
It certainly is not good for the homeowner or the consumer in getting this economy going again in this state, he added.
McCollum, a Republican leaving office in January, is effectively siding with President Obama in opposing the foreclosure moratorium, which is dividing lawmakers heading toward Election Day. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid have broken with the White House and support a full nationwide moratorium on home foreclosures.
McCollums request also comes as attorneys general from 40 states are preparing to announce a joint investigation into faulty foreclosures. McCollum in August began an investigation into three South Florida law firms to determine if they engaged in unfair and deceptive practices in handling foreclosures, and said this week he will appeal a Palm Beach County judges ruling that blocked his effort to subpoena a Tampa law firms records.
Lenders are under fire for how they have handled home foreclosures, with many using automated processes to speed documentation needed to repossess homes from delinquent borrowers. One of the firms being investigated by McCollum is headed by Plantation attorney David J. Stern, who filed more than 70,000 foreclosure cases last year, records show.
The action by lenders threatens to undermine home sales in Florida, which have climbed steadily for more than a year driven largely by declining prices and the flood of foreclosed properties. Still, analysts say that foreclosures continue to outstrip sales in Florida, and a large share of the 300,000 unsold homes on the market are in foreclosure, blunting Floridas economic recovery.
The uncertainty surrounding foreclosures was a contributing factor Tuesday in Standard & Poors issuing a forecast that home prices nationwide will tumble as much as 8 percent through November 2011.
Alex Sanchez, president of the Florida Bankers Association, said the moratorium is going to hold back our recovery. He also said it could further stagger state banks trying to sell foreclosed properties to buyers whose loans may be halted by lenders honoring the moratorium.
I think this could have repercussions across the board, Sanchez said.
Marla Martin, a spokeswoman for the Florida Association of Realtors, said the decision by major lenders to halt foreclosures has had mixed effects across the state. Some sales have been put on hold, but the impact cant really be known right now.
Some experts, however, say that by reducing the stock of foreclosed properties hitting the Florida market, the moratorium could stabilize prices.
These lenders took a lot of inventory off the market right away, said Tim Becker, director of the University of Floridas Bergstrom Center for Real Estate Studies. In essence, you may see prices stay at or near their current level as the supply diminishes. If you can get equilibrium in prices, that may help stop us from bouncing along on the bottom.