Last week, Bank of America announced that it was halting all foreclosures in 23 states where lenders need court approval to repossess a property. Issues with foreclosure documents had come to light and the country’s largest bank decided to step back from processing foreclosures in order to check over its paperwork.
The problems with paperwork came out of the fact that the company was reviewing thousands of foreclosures every month, making it impossible for lenders to be personally knowledgeable of the facts in each case or to sign the documents in the presence of a notary public. The current issues could further affect the housing market and lead to litigation against the companies.
As the problems have come to light, lawmakers and law enforcement officials of several states have been calling on banks to stop foreclosures. According to The New York Times, attorney generals in several states and federal regulators have been opening investigations against the financial companies. JPMorgan Chase and GMAC Mortgage have also stopped processing foreclosures in 23 states.
Experts in finance and real estate have been debating how an indefinite freeze on foreclosures will affect the already shaky housing market. A professor at George Mason University told The New York Times that although the freeze on foreclosures would limit the number of houses going on the market, the freeze could actually make housing prices drop further because of uncertainty over future housing prices.
Others close to the issue do not believe that the current moratorium will affect prices in the long-term. Bank of America’s chief executive said that they have not found any problems with the foreclosure process so far and don’t necessarily expect to; they simply wanted to recheck their work.
Largest U.S. Bank Halts Foreclosures in All States (The New York Times)