Bank of America puts sales on hold
Bank of America, the nation's largest lender, said Friday it will suspend foreclosure sales across the country, a decision that could confound some Texans at risk of losing their homes and put further pressure on an already-struggling housing market.
The Charlotte, N.C.-based bank, which already had stopped repossessing homes in 23 states where fore- closures require court approval, expanded its freeze Friday amid growing concern over flaws in foreclosure documents.
Texas does not require judicial foreclosures, but Bank of America was among 30 lenders that received letters this week from Texas Attorney General Greg Abbott, asking that they put foreclosures on hold and review the way they document the procedures.
Bank of America is the No. 2 lender in the state behind Wells Fargo, with a market share of just under 10 percent, according to estimates from the Texas Mortgage Bankers Association. JPMorgan Chase ranks third.
Tens of thousands
Bank of America said it would take a few weeks to tackle the problem, and estimated foreclosures involved would be in the tens of thousands, the Associated Press reported.
"We will stop foreclosure sales until our assessment has been satisfactorily completed," spokesman Dan Freed said in a statement, adding that an ongoing review shows the basis for past foreclosure decisions is accurate.
Bank of America owns or services many of the financially distressed mortgage loans in Harris County.
Of the 4,035 properties posted for the monthly foreclosure auction this week, 1,226 were filed by Bank of America or its subsidiary BAC Home Loans, according to data from Foreclosure Information & Listing Service of The Woodlands. So far this year, Bank of America and its subsidiary have posted 31 percent of the Harris County foreclosures.
Real estate observers say more lenders could follow suit with freezes, leading to a buildup of distressed properties that could flood the market next year.
"Unfortunately, since real estate has such a strong influence in the overall economy this announcement will only delay any nascent recovery," said Amanda LeCureux, managing partner of the Foreclosure Listing Service.
The mounting scrutiny of foreclosures has ramifications to the title industry, too.
The AP reported Friday that it obtained an internal memo showing that Houston-based Stewart Title Guaranty Co. has issued guidelines to its agents that make it difficult to write policies on property foreclosed upon by JP Morgan Chase, Bank of America, OneWest Bank or GMAC.
Title insurance provides protection to a homebuyer and mortgage provider in the case of any unpaid taxes, challenges to ownership or other problems.
Want their homes back
A Stewart spokesman said the company responded to AP's inquiries with a statement that its bulletin to its offices and underwriters was intended to provide guidelines so they can issue policies in jurisdictions where foreclosures are continuing.
"I think the title industry is the one who stands to take the biggest hit," said Houston real estate agent Shad Bogany. He's started getting calls from people who have been foreclosed on asking if they could get their homes back.
Depending how long Bank of America delays its foreclosure sales, distressed borrowers could find themselves with extra time to bring their loans current.
"It could be a silver lining for them," LeCureux said.
Mortgage lenders have been under fire since an employee of Ally Financial, a large mortgage lender, acknowledged signing thousands of foreclosure documents without reviewing them as required a shortcut nicknamed robo-signing.
Ally has since suspended foreclosures on certain properties in 23 states, as have JPMorgan Chase, Bank of America and PNC Financial.
Litton Loan Servicing, a Houston-based mortgage servicer, said Friday it has suspended foreclosure proceedings in certain cases while it completes a review of its procedures.
The federal government is looking into the allegations, too.
The Senate Banking Committee is planning a hearing on Nov. 16 to investigate allegations of improper and fraudulent mortgage servicing and foreclosure processing.
"American families should not have to worry about losing their homes to sloppy bureaucratic mismanagement or fraud," committee chairman Sen. Chris Dodd, D-Conn., said Friday.
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