Foreclosure ruling may be good news for homeowners, Lenders may become more willing to cut deals with homeowners

Here is a much read for those thinking about buying a foreclosure property. Since banks are up against the wall behind regulations and rules, they are now more willing to get these properties off their books.

Here is the article by

Amy Hoak, MarketWatch

CHICAGO (MarketWatch) — A ruling against two lenders in Massachusetts on Friday sends a warning to the industry: Before foreclosing on what is for many Americans their most valuable asset — their home — lenders must have proof they have the authority to do it.

“What banks are going to have to do is make sure they’ve dotted their I’s and crossed their T’s before going through with a foreclosure,” said Stuart Rossman, director of litigation at the National Consumer Law Center. The center submitted a brief in the case, on behalf of the homeowners.

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“It’s similar to the problem with the ‘robo-signing’ case,” he said, referring to employees of lenders or servicers assigned to sign off on thousands of foreclosure affidavits in a short amount of time.

Extra caution with the paperwork could mean a slower pace of foreclosures ahead, said Roy D. Oppenheim, senior partner at Oppenheim Law, based in Weston, Fla.

And lenders may be likelier to consider other cures before deciding to proceed with a foreclosure, he said.

In the Massachusetts case, the court upheld an earlier ruling that two foreclosures were not valid because U.S. Bancorp (USB 26.14, +0.09, +0.35%) and Wells Fargo & Co.(WFC 31.20, -0.20, -0.64%) didn’t follow appropriate steps to show that they had the authority to foreclose on the properties.Read more: Bank stocks fall on Massachusetts foreclosure ruling.

“Expediency does not trump the practices and procedures that have been in effect for all these years,” Rossman said. “Because there is an emergency, it doesn’t permit the mortgage servicers to expedite or use self help to come up with a solution to the problem they’re finding themselves in,” referring to the high volume of troubled mortgages currently in the system.

The ruling is a positive for homeowners, not only if they’re in the middle of a foreclosure process, but also as they try to work out modifications, refinances and short sales to avoid foreclosure, Rossman said.

“You need to have the confidence that the party you're dealing with has the authority to cut a deal with you," he said.

Cutting a deal might become easier in the wake of the decision, in Oppenheim’s opinion.

“I am expecting the banks to do fewer foreclosures and to engage in serious conversation in pre-foreclosure with borrowers. We’re already seeing [some] modifications that included for the first time principal reduction,” Oppenheim said.