The largest bank in the country has halted forecloses in 23 states following the discovery and disclosure of the notorious “robo-signers” infiltration of its ranks[1]. Bank of America joins JP Morgan Chase and GMAC/Ally in the foreclosure freeze thanks to evidence of “rubber-stamping” foreclosure approvals without appropriate verification of validity. BofA has not, at this time, disclosed how many foreclosures the suspension affects nor has it stated that any illegitimate foreclosures were, in fact, approved. Interestingly, though, BofA is going much farther in its efforts to preemptively deal with this issue by amending “all affidavits in foreclosure cases that have not yet gone to judgement” rather than taking the GMAC/Ally and Chase route, which simply requires the lenders to “amend paperwork only in cases they think were improperly done” (only a handful, thus far)[2].
BofA could be putting tens of thousands of foreclosure cases on ice for months or even years while the lender and the consumers in default battle things out in court. State attorneys general are getting in on the action as well, with the Connecticut attorney general, Richard Blumenthal, who had already submitted calls for a moratorium on GMAC/Ally pending an investigation, asked for a comprehensive, 60-day foreclosure freeze in the state. Blumenthal is running for senator in Connecticut and has said that a freeze “should stop a foreclosure steamroller based on defective documents and enable effective remedies.” Jerry Brown, AG in California and gubernatorial candidate, has made similar requests of GMAC and Chase, demanding that they freeze foreclosures until they prove that they are “following the law.”
As of today, Citibank and Wells Fargo, the other two major lenders in the United States, have issued statements to the effect that “they have no problems with their [foreclosure] cases.”
The ramifications of these moratoria could be severe. Mark Stopa, a Florida attorney, told The New York Times that “If [title] firms begin to shy away from insuring foreclosed properties because they think those properties are vulnerable to claims the entire housing market could suffer.”
Title insurance company stocks fell on Friday, and one firm has issued a statement refusing to issue policies on GMAC foreclosures until further notice.
[1] http://www.dsnews.com/articles/bank-of-america-suspends-foreclosures-in-23-states-2010-10-01
[2] http://www.nytimes.com/2010/10/02/business/02mortgage.html?src=mv
