Make us your home page
Instagram

Why Bank of America stopped foreclosures and how it could affect you and others

Why is Bank of America doing this?

Because of the controversy over so-called "robo-signers." Employees of mortgage lenders or servicers submit affidavits saying they have verified all the paperwork supporting foreclosures. Because of the huge flood of foreclosures, these signers spend only seconds on each document. One such person estimated she signs about 750 foreclosure-related documents a week. With so many foreclosures to process, there's concern that the affidavits are signed without anyone verifying whether loan documents and other records have the correct information. If a judge is deciding whether to kick someone out of a home, he needs to be sure of the integrity of the documents he's looking at. In addition to Bank of America, JP Morgan Chase and Ally Financial also recently put tens of thousands of pending foreclosures on hold in select states.

What are the impacts on...

HOMEOWNERS IN FORECLOSURE?

If you're in default on your BofA mortgage, you just got a nice reprieve. And when the foreclosures start up again, you can be sure they're going to go very slowly. The bottom line is while there may be some serious problems with the paperwork, the foreclosures are not illegal. "Ultimately, this can't change the fact you've defaulted on your mortgage, and someday you will lose your house," said Guy Cecela, publisher of Inside Mortgage Finance, an industry newsletter. "All it will do is delay that day of reckoning."

THE HOUSING MARKET?

Distressed properties, many of which are in foreclosure, make up about a third of all home sales. If those deals do not happen, the market could suffer its own freeze. Housing prices could fall even further.

In the short term, however, the lack of new foreclosed properties coming onto the market means there will be less competition for homes already on the market.

In the long run, the housing market cannot fully heal until the troubled loans work their way through the system.

BUYERS AND SELLERS?

The reviews are throwing into limbo hundreds of thousands of foreclosures and pending home sales, analysts estimate. Some buyers have been about to complete the purchase of a foreclosed house when it was suddenly pulled off the market.

The revelations about the sloppy paperwork are emboldening homeowners and law enforcement officials in many states to question whether lenders rightfully hold the notes underlying foreclosed properties — further chilling the housing market.

Old Republic National Title Insurance, the fourth-largest title insurer in the country, announced it will not write new policies for foreclosed homes handled by the four major institutions that disclosed possible paperwork improprieties.

And Stewart Title Guaranty Co. is clamping down on sales of foreclosed homes that may be linked to flawed documentation. Houston-based Stewart is issuing guidelines to its agents that make it hard to write policies on property foreclosed upon by the banks whose process is in question: JP Morgan Chase, Bank of America, OneWest Bank and Ally Financial.

COURTS?

Of the 23 states where foreclosures need court approval, Florida has by far the most trouble — about a half-million cases clog its courts — and the moratoriums are having a noticeable effect.

Bank of America foreclosures will continue, but the process will stop before sales of seized properties go through. In Florida, the process will stop before supporting documents are presented for judicial review, a spokesman at Bank of America said.

Many judges are surmising that they may have to vacate the foreclosure judgments and start all over. Lawyers are preparing to petition the courts to put foreclosed homeowners back in their properties until this is resolved.

THE BANKS?

Bank of America shares closed at $13.18 per share, down 13 cents for the day.

All the banks involved insist the problems are administrative and can be cleared up soon. But if questions arise over who actually owns a home, banks may face more legal expenses and potential new actions from investors trying to force them to repurchase previously sold mortgages.

Information from the New York Times, the Wall Street Journal, the Sun-Sentinel, MarketWatch and other Times sources was used in this report.

Why Bank of America stopped foreclosures and how it could affect you and others 10/08/10 [Last modified: Friday, October 8, 2010 11:22pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. SeaWorld shares drop Monday to 2017 low after disclosure of federal subpoena

    Tourism

    The Orlando parent company of SeaWorld and Busch Gardens theme parks saw its stock drop 3.5 percent Monday to $15.10, its lowest price of this year.

    Killer whales perform at Shamu Stadium at SeaWorld in Orlando in 2011, before public pressure was placed on the theme park company to curtail its orca shows.SeaWorld has since announced an end to the traditional killer whale entertainment  at its theme parks. [AP Photo/Phelan M. Ebenhack]
  2. Rick Scott appoints longtime ally Jimmy Patronis as Florida CFO

    State Roundup
    Rick Scott appoints Jimmy Patronis (background) as CFO. [STEVE BOUSQUET | Tampa Bay Times]
  3. Local gas prices plummet as Fourth of July holiday travel approaches

    Tourism

    TAMPA — Local gas prices are enjoying an unseasonal dip around the $2 mark just in time for the hectic Fourth of July holiday travel weekend.

    The price of regular unleaded gasoline has dropped to $1.99 at a Rally station on Pasadena Ave. South and Gulfport Boulevard South, South Pasadena.
[SCOTT KEELER   |   Times]

  4. Air bag recalls, lawsuits lead Takata to file for bankruptcy

    Autos

    Shattered by recall costs and lawsuits, Japanese air bag maker Takata Corp. filed Monday for bankruptcy protection in Tokyo and the U.S., saying it was the only way it could keep on supplying replacements for faulty air bag inflators linked to the deaths of at least 16 people.

    Japanese air bag maker Takata Corp. CEO Shigehisa Takada bows during a press conference in Tokyo on Monday. Takata has filed for bankruptcy protection in Tokyo and the U.S., overwhelmed by lawsuits and recall costs related to its production of defective air bag inflators.
[(AP Photo/Shizuo Kambayashi]
  5. Airbag maker Takata bankruptcy filing expected in Japan, U.S.

    Corporate

    DETROIT — Japanese airbag maker Takata Corp. has filed for bankruptcy protection in Tokyo and the U.S., overwhelmed by lawsuits and recall costs related to its production of faulty air bag inflators.