Yesterday the Oregon
Supreme Court handed down its ruling on the validity of MERS
participation in a property foreclosure. The high court’s opinion appears to
favor the lenders and should mark a return of the lenders pursuing non-judicial
foreclosures.
For those who have not followed the mortgage/distressed
property scene, MERS is a entity created by some of our nation’s largest banks
to assist in parsing mortgages into palatable pieces that are re-engineered
into saleable securities. The issue resolved by Oregon’s highest court was
whether or not MERS could act on behalf of the lenders in a foreclosure
proceeding. It was contended that since MERS was not named in the original
loan
documents they had no rights for pursuing a foreclosure on a distressed
property. The high court has opined that MERS may not initiate the foreclosure
action but they can participate in its execution.
In Oregon a lender has two methods of
foreclosing on a property. Previously the most popular and least painful
for all parties concerned was the non-judicial process. When the MERS issue was
forced to the high court, lenders pulled out of non-judicial foreclosures at a
record rate. Lenders then switched to the more lengthy and involved process of a
judicial hearing to resolve the foreclosure. The foreclosure process when
combined with the legislations creation
of SB 1552 that allows for distressed property owners and their lender to
mediate a solution was brought to a screeching halt. This in turn helped create
a void in the amount of properties available for sale.
Today there are five bank owned
properties actively listed for sale in the Bend real estate market. There are
another five bank owned properties that are pending sales. It will be
interesting to see how long it takes the lenders to refill the pipeline. At the
height of the distressed market we would have 50 -70 bank owned properties on
the market. I do not expect those numbers to return but for awhile I think that
it would be plausible to see 25 – 40 properties available for sale.
Another interesting affect will be if distressed property
owners feel more obligated to attempting a short sale. These numbers have also
dropped off dramatically with only twelve homes actively available
for sale in our multiple listing service, another twenty six have offers
but are accepting back up offers and a whooping sixty three that awaiting the
determination of the lender to their worthiness.
Considering how ineffective lenders are at moving through
their processes quickly, I would not expect a big surge of distressed properties
in to the active market but a more methodical and consistent filling of the
pipeline. This would complement our recovering
market quite nicely and add balance to our topsy turvy world.
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