Update October 15, 2010: Wells Fargo says it will not halt foreclosures even though one of its employees admitted in a deposition to signing affidavits for 500 foreclosure files she never bothered to read.
Looks like we're getting closer to a national freeze on foreclosures.
Bank of America posted the following statement on its website this morning:
"Bank of America has extended our review of foreclosure documents to all fifty states. We will stop foreclosure sales until our assessment has been satisfactorily completed. Our ongoing assessment shows the basis for foreclosure decisions is accurate. We continue to serve the interests of our customers, investors and communities. Providing solutions for distressed homeowners remains our primary focus."Bank of America CEO Bryan Monihan spoke at the Press Club today in Washington, D.C., saying that the bank is working to "clear the air" with regard to foreclosure freezes. With more than 25,000 bank employees working on foreclosures and loan modifications, the company "hasn't found any errors yet" but is "checking their work."
Dan Frahm, Bank of America spokesperson, said that the bank has already finished checking the foreclosures that were frozen in the first 23 stats and is now working on the remaining 27 states.
"A foreclosure sale is different from the foreclosure process. People get a notice of a foreclosure sale and there will now be a delay before those [dates] are set. But it won't take more than a few weeks," Frahm said, adding that the only "irregularities" that have been found have to do with fees listed on the affidavit that do not match up with the documents, which is because those fees are limited by the state.
The foreclosure freeze is "not going to eliminate foreclosures. For Bank of America, our average customer who reaches that point has not made a mortgage payment in at least 18 months. That is solid demonstration of the validity of the foreclosure sale process," Frahm added.
Meanwhile, my best guess is that now that Bank of America has extended the foreclosure freeze to all 50 states, all of the other lenders will have to do the same.
(As of October 13, 2010, J.P. Morgan Chase extended its foreclosure freeze to 41 states, while Ally Bank extended its foreclosure freeze to all 50 states. And the 50 Attorneys General joined forces to investigate "robo-signers" and to determine whether the banks and mortgage loan servicers lied on their foreclosure affidavits.)
Alain Sherter, an award-winning business journalist and contributor to BNET (which, like CBS MoneyWatch is part of the CBS Interactive Group) and who has written for The Deal, MarketWatch and Thomson Financial Media agrees.
"For what it's worth, Bank of America's move is the practical equivalent of declaring a national moratorium on foreclosures. The company is easily the biggest mortgage lender, and for legal and PR reasons other banks will have no choice but to follow suit. Also notable is that the freeze is expanding to nonjudicial foreclosure states, which suggests that Bank of America is trying to cut the private lawsuits off at the pass," Sherter said.
"We expect all the major servicers to freeze foreclosures to ensure the paperwork is correct," said Jaret Seiberg, a policy analyst with investment research firm Concept Capital. "To do otherwise risks an even bigger backlash if a servicer were to mistakenly foreclose on a borrower."
Indeed, there's growing pressure from Capitol Hill for a Justice Department investigation, and the Ohio Attorney General filed fraud charges against GMAC Mortgage, part of Ally Bank.
"We know that as Ohioans were fighting to save their homes, this loan servicer benefited financially from the dire circumstances," said Richard Cordray, the Ohio Attorney General. "Instead of stepping up and assisting those at risk of losing their homes, it is clear that GMAC chose to compound the problem through fraudulent and unfair and deceptive practices."
"Every lawyer representing a homeowner in a foreclosure related matter knows that Bank of America and all the major lenders have been unlawfully foreclosing since this crisis began," said Gerald Wolfe, an Irvine, Calif., bankruptcy attorney who represents borrowers at risk of losing their homes. "However, homeowners being foreclosed upon simply do not have the resources to appropriately fight these institutions. The banks know this and take advantage of this.
"I am confident there will be a number of brave and well-funded law firms filing class-action lawsuits against these lenders. The question is whether the settlement amounts will be sufficient to compensate the homeowner for the pain, suffering, misrepresentation, and shear horror that these banks have perpetrated on the public."
Update: I just received this statement from Edolphus "Ed" Towns (D-NY), chairman of the Committee on Oversight and Government Reform:
Chairman Edolphus "Ed" Towns (D-NY) today released the following statement in response to Bank of America's announcement to stop foreclosure sales nationwide pending an internal review of foreclosure documents. Yesterday, Chairman Towns called on the top ten mortgage banks and lenders to immediately and voluntarily suspend foreclosure proceedings in all 50 states and the District of Columbia until the banks complete internal investigations into their company's mortgage servicing and foreclosure practices.Senate Banking Committee Chairman Chris Dodd announced hearings today on the foreclosure crisis and the foreclosure freeze instituted by some of America's largest banks.
"I applaud Bank of America for their swift action today to halt foreclosure proceedings nationwide pending an internal review. Bank of America clearly understood the urgency to take this action. The implications of ignoring the foreclosure problems are far too great to be ignored. Bank of America did the right thing today and I expect to see every other responsible banking institution follow their lead."
"American families should not have to worry about losing their homes to sloppy bureaucratic mismanagement or fraud," Sen. Dodd said in his announcement of the November 16 hearings. "I am deeply troubled by recent revelations and allegations of practices by some of the nation's largest lenders."Senator Harry Reid (D-Nev), announced his support for Bank of America's extending its foreclosure freeze to all 50 states:
"I thank Bank of America for doing the right thing by suspending actions on foreclosures while this investigation runs its course. I urge other major mortgage servicers to consider expanding the area where they have halted foreclosures to all 50 states as well. My primary focus is to protect Nevada homeowners who have been hardest hit by foreclosures in the most recent economic downturn."
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.