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A Writer's Den: Banks Under Fire. Again.

Wednesday, October 06, 2010

Banks Under Fire. Again.

Is Halting Foreclosures Delaying the Inevitable?

Update: October 8, 2010: Bank of America extends halt on foreclosure sales in all 50 states, meaning borrowers' homes currently in foreclosure will not proceed to judgment or a foreclosure sale.

Recently, Bank of America, the largest bank in the United States, announced it was halting foreclosures in the 23 states[1] where court approval is required. Although Bank of America has not announced how many homeowners will be affected, the voluntary halt on foreclosures comes in the wake of Bank of America officials admitting to signing foreclosure affidavits without verifying whether these legal documents contained accurate information. JP Morgan Chase and Ally (formerly “GMAC”) have also joined Bank of America in halting foreclosures in those 23 states. Foreclosures are still proceeding in the remaining 27 non-judicial foreclosure states, requiring no court approval, such as California, Georgia, and Texas.[2]

What Does Halting Foreclosures Mean for Homeowners?
Halting foreclosures doesn’t mean foreclosures will not continue at a later date. Banks are simply reviewing their processes. It should also be noted that no allegations have been made that these homeowners are not behind on their mortgage payments, and are being wrongly foreclosed upon. It comes down to a technicality of whether the information in the foreclosure papers is totally accurate. For instance, whether the lender’s name is correct on the documentation, or whether the correct lender is foreclosing upon the property. These inaccuracies unfortunately, have nothing to do with the more serious issue of homeowners failing to make their mortgage payments.

Things to Consider
Lastly, we should consider whether we are prolonging the recovery process by encouraging banks to halt foreclosures. Congress has been encouraged to look into ways of halting foreclosures in an attempt to force banks to work with homeowners. It has been reported that 52 million homeowners have outstanding mortgages on their homes in this country. Of that 52 million, 10% or roughly 5 million are delinquent or in foreclosure. Do you simply delay foreclosures for all these people, when the other 47 million homeowners are struggling to make their payments to avoid foreclosure? Has the government missed the ball by encouraging banks to help delinquent homeowners, essentially ignoring the homeowners that have continued to make their payments on time?

What are your thoughts on halting bank foreclosures?

[1] The 23 states include: Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.
[2] The Attorney General’s in California, Connecticut, New York, Texas, and Massachusetts, are paying close attention to this situation, some taking steps to suspend all foreclosure proceedings until servicers have completed internal reviews.

Rooney, Ben, “Push to halt foreclosures gains steam,” CNNMoney.com, http://rss.cnn.com/~r/rss/money_realestate/~3/2VSg7rR5BVc/index.htm, (accessed October 6, 2010).

Shapiro, Adam, “Major Banks Suspend Foreclosures,” FoxBusiness.com, http://video.foxbusiness.com/v/4358465/major-banks-suspend-foreclosures, (accessed October 6, 2010).

Zibel, Alan, “Bank of America delays foreclosures in 23 states” The Washington Post, http://www.washingtonpost.com/wp-dyn/content/article/2010/10/01/AR2010100105392.html (accessed October 6, 2010).

Associated Press, "BofA halts forelcosure sales in 50 state," YahooNews.com, http://news.yahoo.com/s/ap/20101008/ap_on_bi_ge/us_foreclosure_mess, October 8, 2010. 

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