If you're trying to buy or sell a home in Florida, you undoubtedly know how many of the houses on the market right now are foreclosures or being sold as short sales. If you're trying to sell your home on short sale or are trying to prevent foreclosure through a loan modification, you may be wondering how the recent news about major banks halting their foreclosure activity could affect you.

Since September, mortgage lenders Bank of America, GMAC Mortgage, Golden West Corporation, HAMP, JPMorgan Chase Home Finance, PNC Financial Services and Wachovia Corporation have each announced that they are halting all foreclosure activities in Florida and other states for various periods of time. The banks "robo-signing" foreclosure process has been found to be legally deficient. All 50 states have also initiated investigations into how both large and small banks are handling the foreclosure process.

Do the Foreclosure Moratoriums Mean Existing Short Sales Are On Hold?

No. For struggling homeowners who haven't yet lost their homes to foreclosure, this could be terrific news. According to some real estate experts, the foreclosure moratoriums are forcing banks to work harder on alternatives to foreclosure such as short sales and loan modifications.

One South Florida real estate lawyer says that both short sales and loan modifications already appear to be going faster.

"We've already seen a few of our short sales go through a little more quickly and a little more smoothly than we've seen before," he said. "So we're hopeful that some good can come out of this in that the short sales and modifications that we're seeing in many cases is really much better."

What If I've Made an Offer on a Foreclosed Home?

The news isn't as great for people trying to get a great deal on a foreclosed home, however. Some real estate agents are reporting that the inventory of bank-owned houses on the market has been severely restricted as the banks try to mop up a tremendous mess.

If the "robo-signing" process is determined to have been inadequate, foreclosures obtained using robo-signed documents could be voided. That could mean big problems for banks, who may not have clear title to properties they have foreclosed upon -- even properties that have already been resold.

"I mean this is a mess," said one South Florida mortgage broker who helps buyers get financing to buy foreclosed homes. Many people trying to buy bank-owned properties are going to be left waiting indefinitely.

"We had a bunch of deals that were supposed to close bank owned properties and the bank halted the sales," he explained. "Now buyers are thinking is it safe for me to buy the property? How did the bank acquire the property? Are there going to be questions down the line?" 

Source: WPBF 25 News West Palm Beach, "Short Sales, Loan Modifications Affected By Foreclosure Freeze," October 14, 2010