Colli Real Estate

Largest U.S. Bank Halts Foreclosures in All States

Bank of America, the country’s largest bank, said on Friday that it was halting foreclosures in all 50

states indefinitely.
The action is likely to increase pressure on other lenders to declare their own moratoriums.

Lawmakers and state law enforcement officials have been widely calling for such halts.

Representative Edolphus Towns, the New York Democrat who is chairman of the House

Committee on Oversight and Government Reform, applauded Bank of America’s move and said, “I

expect to see every other responsible banking institution follow their lead.”

Senator Harry Reid, the Nevada Democrat who is the Senate majority leader, thanked Bank of

America “for doing the right thing” and urged other lenders to follow suit.

Last week, Bank of America halted foreclosures in 23 states where evictions need court approval,

saying it was reviewing its filings in the wake of disclosures about improperly prepared documents.

Those states include Florida, Illinois and New York.

Bank of America services 14 million loans. More than 14 percent of those loans are past due or

already in foreclosure.

Although the bank issued a statement saying flatly that it would “stop foreclosure sales,” there

was some confusion over the extent of the freeze. A spokesman said the bank would proceed

with the sale of foreclosed properties when the foreclosure process has been finalized, the home

vacated, and the property already listed with a real-estate agency.

It was unclear how this condition would apply to the many loans serviced by Bank of America but

owned by Fannie Mae or Freddie Mac, the mortgage holding companies controlled by the federal

government, or by third-party investors.

Fannie Mae is postponing deals on homes with mortgages previously serviced by Bank of America,

real estate agents said. Fannie Mae representatives declined to return numerous calls for

comment.

Bank of America said Friday that it would resume foreclosures and sales when its assessment was “

satisfactorily completed.” Thought it gave no indication of when that would be, the bank’s chief

executive, Brian T. Moynihan, later suggested that it would be “a matter of a few weeks.” In the

meantime, hundreds of thousands of its customers who are in foreclosure have a little

unexpected breathing room, while foreclosed homes that normally would have come to market

will be delayed.

Last week, the lender halted foreclosures in 23 states where evictions need court approval,

saying it was reviewing its filings in the wake of disclosures about improperly prepared documents.

Other lenders that have frozen foreclosures and foreclosure sales are JPMorgan Chase, GMAC

Mortgage and PNC Financial.

Mortgage lenders are under fire because of evidence that some foreclosure documents were

improperly prepared as lenders tried to reclaim as many houses as possible. The revelations have

prompted a growing furor, including investigations by a half-dozen state attorneys general and a

federal investigation.

Friday’s action by Bank of America imposes the freeze in several of the states where foreclosures

are the highest, including Arizona, California and Nevada.

“Our ongoing assessment shows the basis for foreclosure decisions is accurate,” the lender said in

a statement.

The foreclosure crisis comes at a particularly vulnerable moment for the housing market. Sales

slumped this summer, despite the lowest mortgage rates in decades. Most economists expected

housing prices to start falling again this winter.

Distressed sales, including foreclosures, make up about a quarter of the market. If those deals do

not happen, the market could suffer its own freeze.

“The impact could very well be a decline in housing prices,” said Anthony Sanders, a professor of

real estate finance at George Mason University. “Halting foreclosure sales limits the inventory

coming back on the market, but uncertainty about future housing prices usually results in a

decline. More households will stay out of the housing market.”

Mr. Moynihan, speaking at the National Press Club in Washington, said he did not believe the bank’

s action would disrupt the housing market. “We haven’t found any problems with the foreclosure

process and what we’re saying is that we’ll go back and check our work one more time,” he said.

On Thursday, the White House said that President Obama would not sign a bill that critics

suggested could facilitate foreclosure fraud. His pocket veto effectively kills the measure, since

lawmakers, who are out of town until after the Nov. 2 midterm elections, are not in position to

override his decision with a two-thirds vote of the House and Senate.

The bill would have mandated that notarizations of mortgages and other financial documents

done in one state, including those done electronically, be recognized in other states. By the time

the bill arrived at Mr. Obama’s desk, however, it was caught in the controversy over major

institutions’ acknowledgment of problems in processing documents for tens of thousands of

foreclosures.

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