Breaking from Moneynews.com Billionaire investor Wilbur Ross said Thursday that reports of improperly handled foreclosure documents and a subsequent halt in evictions by top U.S. mortgage lenders will slow down the lending process. Ross, who manages $10 billion and is an active investor in the banking sector, said that mortgages likely will be more difficult to obtain as lenders — worried about their ability to act on loan defaults — pull back from writing new mortgages. "I think it's more of a clogging of the system and introducing another note of uncertainty," Ross said at the Reuters Restructuring Summit in New York. "I have some real concern that all of these things that are being thrown up against lenders are going to make it harder to get mortgages in the future," he said. "Why would you make a loan if you weren't even sure that, if the guy defaulted, you could at least foreclose?" The U.S. Justice Department on Wednesday said that it was probing reports of improper evictions based on shoddy foreclosure orders. In a court case in Maine, for instance, one GMAC official testified that he had signed some 10,000 foreclosure documents a month, so-called "robo-signing." So far at least three banks have halted eviction proceedings and various lawmakers have called for an industrywide moratorium on home repossessions until the problems are fixed. The moves come as the U.S. housing market continues to struggle with overcapacity and mortgage rates remain at record lows amid the economic downturn. SHADOW FORECLOSURE OVERHANG Ross said that the "robo-signing" of foreclosure documents is "obviously a very inappropriate activity." But he said that despite those problems, the properties likely still deserve to be seized when homeowners are in default. "If the borrower can't pay, eventually it will get foreclosed anyway," he said. In the meantime, the delays are creating an overhang of shadow foreclosures, he said. That could have negative repercussions for the companies that specialize in mortgages, such as mortgage servicers and in particular for lenders, Ross said. "Since we believe we are still in somewhat of a declining market for single family home prices, the longer you delay things, the more severe the losses are going to be," Ross said. It could also drive up other costs, he said. "To the degree that there is more litigation about the foreclosure, it not only takes more time but now you are running up legal bills," Ross said. Ross has been actively investing in small, regional banks. He was among the buyers of collapsed Florida lender BankUnited last year and this summer bought a stake in New Jersey's Sun Bancorp Inc. He told the Reuters summit that he continues to look for new banking assets both in the United States and overseas in Ireland, the U.K. and Germany. © 2010 Thomson/Reuters. All rights reserved.
Ross: Foreclosure Scandal Will Slow Mortgages
Friday, 8 October 2010
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