Foreclosures. We have a love hate relationship with them. We generally love the rock bottom prices that they command, but that often comes along with a 15 page bank addendum offering the bank the right to harvest your organs for use by the CEO’s of the banks.
You’ve all heard of MERS, the Mortgage Electronic Registration System. This is the system that banks used to funnel and split up mortgage notes to investors without recording the change with the counties. Why should you care? Well, beside the serious legal ramifications, you should care if you plan to buy or sell in the next 5 years because of distressed inventory.
Last year, 2010, 48% of the notice of defaults served in Salem proper were by MERS. 48%. So far this year, only 6%. On March 5th of this year, it was reported that MERS foreclosure filings were stopped while the legalities were worked out. What this means is that we would automatically see a drop in notice of defaults as MERS holdings aren’t going to be filed. It looks like distressed inventory is going down, but in reality it was just pushed forward into the future a bit. In the first quarter of this year, 297 NOD’s were filed for Salem homes. If they were on pace for the same percentage as last year, that number should be around 421 with the missing MERS filings. While this would still be down from the peaks of 2009, we don’t have a really good gauge on what that inventory is doing and how long it will take to hit the market.
With the legal issues surrounding MERS ability to serve foreclosure notices, that leaves transferring the title with the seller at the helm. It seems to me that the only “easy” way for MERS to handle their legal debacle is to get the sellers to sell or legally transfer them the property with a deed-in-lieu of foreclosure. I have noticed that banks are really interested in the deed-in-lieu’s these days, as I would expect that it corrects for the legal issues that they created with MERS. I can also say that the banks responsiveness on short sales has improved significantly.
The take away from my ramblings here? Bargain hunters don’t worry. The market isn’t going anywhere fast and this may have pushed out those offerings that might have hit the market this year, into next year. This is good news for people that sold short due to a job loss or some other hardship. When you are eligible to buy again in a couple of years, there should still be some bargains out there in the distressed property market. Sellers? Still don’t have good news for you.
If you are thinking of buying a foreclosed home in Salem, watch the slide show below for a sample of the current inventory.