One of the problems plaguing the housing market is a large backlog of foreclosures - the shadow inventory. For numerous reasons it has been taking forever for this foreclosure backlog to clear. Every month when RealtyTrac releases their monthly foreclosure market report they lament the fact that the process takes so long and that we are still recovering from various government initiatives that stopped the entire pipeline dead in its tracks. On the one hand it means that this shadow inventory is hanging over our heads a really long time. But on the other hand the trickle of foreclosures at least prevents us from drowning in distressed property sales.
Well, on Friday the American Banker reported that once again more sand has been thrown into the gears of progress with a recent Office of the Comptroller of the Currency's release of new guidance pertaining to foreclosure sales. In response to this new guidance Wells Fargo, Citigroup, and JP Morgan Chase halted "the vast majority" of their foreclosure sales in "multiple states", though JP Morgan Chase has since resumed their normal activity. Interestingly the OCC has not indicated that they have any reason to suspect malfeasance on the part of mortgage servicers and the three mortgage servicers above have not indicated that they have any reason to believe that they are not currently in compliance with these recently clarified minimum standards for foreclosure sales. If you look at the list a lot of these requirements are pretty basic. I'm sure lots of people are covering their asses here.
I obviously can't say whether or not these foreclosure sales needed to be stopped or not. On the one hand these lenders/ servicers can be pretty damn incompetent. On the other hand you've got the government reasserting themselves on the foreclosure process again. In the end it's just going to take longer to get these foreclosures done with.