Consumers Urged To Hold Off On Buying Foreclosed Homes

New revelations related to some lenders' foreclosure procedures have created obstacles for both distressed homeowners and prospective homebuyers. Thousands of foreclosures and evictions have been suspended nationwide pending investigations into erroneous and fraudulent foreclosure documents.

Although suspended proceedings may provide some relief to homeowners at risk of losing their properties, buyers who have agreed to purchase some foreclosed properties may see negative ramifications. Many individuals who are facing foreclosure have hired legal representation to challenge the proceedings against them. If the homeowner wins the lawsuit, it will leave consumers who agreed to purchase the foreclosed home vulnerable to claims, according to The New York Times.

As a result, some prospective buyers are turning away from foreclosed properties until the issues are rectified. J.P. Morgan Chase, Bank of America, Wells Fargo, Citibank and Ally Financial are among the largest lenders who have been asked by the government to conduct a review of their foreclosure procedures.

Mortgage professionals are also cautioning homeowners who are filing lawsuits against lenders that the measure may only suspend the proceedings and buy them more time, not provide debt relief.