Data released from California-based RealtyTrac Inc. showed that Southwest Florida's foreclosure rate dropped 9 percent last month from August and 4 percent from a year ago.

"We're going to see a huge reduction," said Jack McCabe, a Deerfield Beach-based real estate consultant. "That reduction may not be apparent in the current numbers because banks have only begun to halt foreclosures in the past few weeks. But beginning next month, we should see foreclosures drop by 50 percent or more."

Nationwide, foreclosure filings still increased 3 percent to 347,420 in September from the previous month, and 1 percent from a year ago, RealtyTrac data showed.

In Florida, filings were up 5 percent from August and 8 percent from September 2009.

The situation among Southwest Florida's three counties was mixed, with filings rising sharply in Sarasota and falling sharply in Charlotte.

As many as 9 million U.S. mortgages in the foreclosure pipeline or already through the process may face legal challenges because of questions about the validity of documents, according to Morgan Stanley.

About 2.5 million homes have been repossessed since 2005 and another 6.5 million mortgages are in foreclosure or may be soon, Morgan Stanley’s Oliver Chang, Vishwanath Tirupattur and James Egan wrote in a note today. The validity of documents used to verify ownership and payment obligations may be in question for each of those loans, Chang said.

“We are talking about some pretty big numbers,” Chang, a San Francisco-based housing strategist, said in a telephone interview today. “There’s a lot of developing aspects” to determine the actual impact, he said.

Lawmakers, state attorneys general and consumer groups have pressed mortgage firms to follow Bank of America Corp., which last week suspended all foreclosures to check whether faulty documents were used to confiscate homes. A worst-case scenario, in which questions of legitimacy arise beyond procedural issues and a freeze extends to all states and servicers, would lead to “a torrent” of eventual foreclosures, retroactive litigation on home seizures and a delay in the housing recovery, Morgan Stanley said.

In addition to Bank of America’s halt, JPMorgan Chase & Co. and Ally Financial Inc.’s GMAC Mortgage unit froze seizures or evictions in 23 states. There are about 3.3 million mortgages in foreclosure or more than 60 days past due in those states, according to New York-based Morgan Stanley.

Submitted by Tyler Durden on 09/20/2010 08:39 -0500

• Ally Bank
• Bloomberg News
• Florida
• GMAC

As we pointed out last week, a certain judge in Florida set quite a precedent when he found that JPM, as servicer for a Fannie mortgage, had committed court fraud by foreclosing while not in possession of the actual mortgage. We then concluded that "The implications for the REO and foreclosures track for banks could be dire as a result of this ruling, as this could severely impact the ongoing attempt by banks to hide as much excess inventory in their books in the quietest way possible." Not a week has passed since, and we are already proven right. Today, Bloomberg discloses that GMAC Mortgage, a unit of the affectionately renamed Ally Bank, has halted all foreclosures in 23 states, including Florida, Connecticut and New York. Who would have thought that being caught with your pants down, doing something so blatantly illegal as collecting on something you do not own, would actually have adverse consequences. And GMAC is just the beginning - we expect many more mortgage servicers to scurry now that the light has been shone on their shell game. The silver lining - the permabull pundits will cheer this development now that foreclosures will plunge off a cliff as mortgage holders and servicers scramble to reconcile who owns what, and just on whose balance sheet the mortgage flows should show up.