Hatteras Island Real Estate: Making sense of foreclosure
By TOM HRANICKA
With recent headlines like “More Bad News in Robo-Signing
Scandal,” “The States Take on Foreclosures” and “Bank of
to Freeze Foreclosure Cases,” it is often a challenge to place current
events in a meaningful context.
To foster an understanding of the issues, here are some of the
realities concerning foreclosure moratoriums.
foreclosures are not new. They have been occurring
periodically since at least the fourth quarter of 2008 when Fannie Mae
and Freddie Mac declared a freeze on foreclosures to give the
government time to develop a response to problems in the housing market.
have a cyclical pattern. Usually, foreclosures will
slow down in the fourth quarter of the year. Banks don’t like to have
families losing their homes during the holiday season, and they try to
avoid the bad publicity associated with such actions. You can
anticipate that foreclosure activity will once again pick up after the
start of the New Year.
almost always followed by periods of increased
foreclosure activity. Freezes do very little, if anything, to solve the
foreclosure problem – they simply delay it. I often think the
historical stop/start pattern of foreclosure activity is like being in
a traffic jam on the freeway. You come to a complete stop.
you speed up, only to slow down or stop again.
- Lenders and
sometimes initiate moratoriums themselves. A good
example is the current “robo-signing” scandal where hundreds of
foreclosure documents were being signed each day by untrained employees
without proper review. This particular freeze was further motivated by
pressure from the attorneys general in 50 states for lenders to
investigate their foreclosure records.
- The major
impact of moratoriums is that they give homeowners
in distress some extra time to work out their problems. For example, a
homeowner facing foreclosure may have more time during a moratorium to
acquire a buyer for their property.
expected to impact the housing market for a long
time. The shortest estimate that I have heard is two years, and the
longest is eight years. My personal opinion is that
will be a prominent factor affecting the real estate market for about
Another important aspect of understanding foreclosure moratoriums is to
identify and to dispel common myths.
is not a “get out of my mortgage free card” as
some homeowners believe. There may be individual cases where this
occurs because of flagrant errors by the lender, but they will not be
- “I will own
free and clear.” In simple terms, this is
not going to happen. Mortgage debts are not going to be wiped away as a
result of the current investigations.
- “Because of
moratorium, I don’t have to do anything about a pending
foreclosure. I have plenty of time.” While it is true that a freeze on
foreclosure activity does grant a temporary reprieve, the moratoriums
can end very quickly as we are seeing in the case of the robo-signing
moratorium is a
sign that the government will step in soon to help
pay or take over my mortgage.” Again, this is not going to happen.
With this national perspective as background, let’s take a look at the
patterns that we are seeing in the Hatteras Island real estate
market. The following chart shows the level of foreclosure
filings between the first quarter of 2008 and the third quarter of this
As you can see, our local trends mirror the national patterns fairly
I also think it is interesting to note that the robo-signing scandal
that has been featured so prominently in press reports and newscasts
has had very little, if any, effect so far in Dare County. That may
change in the future if the North Carolina Attorney General decides to
pursue some of the technical aspects of exactly who has the legal right
to foreclose on a property – the mortgage servicing company or the
actual owner of the debt.
In summary, there is currently a record level of distressed properties
across the country. The number of homeowners who are in the
foreclosure process or 90 days past due on their mortgage payments is
almost equal to the number of new sales projected for the year.
Moratoriums, whatever their motivation or justification, do not solve
the foreclosure problem. They simply push it into the future, slowing
down the prospects for recovery in the real estate market. They do,
however, provide owners in distress with a little more time to resolve
Hranicka is an associate broker with Outer Beaches Realty. Questions,
comments, or suggestions for future articles may be sent to Tom
Hranicka at P.O. Box 237, Avon, NC 27915, or e-mail to [email protected]
Tom & Louise Hranicka. All rights reserved.