For the most recent news on BofA and the foreclosure moratorium, see the October 2010 first tuesday article, The foreclosure machine grinds again
Due to processing irregularities, Bank of America (BofA) is halting foreclosures in all 50 states – delaying indefinitely the recovery of the real estate market, and by extension, the economy as a whole. The nation-wide BofA moratorium on foreclosures is reportedly the result of intense pressure from the mortgage goliath Freddie Mac, who has urged BofA to stop all foreclosures nationally.
Freddie cites concerns over possibly faulty foreclosure documents due to the much maligned robo-signers and the slap-dash efforts to process massive amounts of foreclosures as quickly as possible. [For more information on other ways BofA is delaying the economic recovery, see the October 2010 first tuesday article, BofA finds new ways to delay economic recovery.]
Despite widespread concerns of enervating an already fragile housing market, and notwithstanding the fact that BofA has not discovered a single fraudulent or faulty document in their recent review of foreclosures in 23 states, the cacophony of election-year voices from Capitol Hill seems to have drowned-out any attempt at sound economic reasoning. [For more information on the current fragility of the housing market, see the September 2010 first tuesday article, NODs and NOTS continue to stunt California’s real estate recovery.]
With 14 million mortgages on their books, BofA is the largest mortgage servicer in the country, behind Wells Fargo and JPMorgan Chase. Thus far, BofA is the only banking giant to halt all foreclosures on their books and institute a nationwide moratorium. Although other banks have yet to take such drastic measures, the temptation to save face by appearing to care about the millions of underwater and delinquent homeowners languishing on their balance sheets may be too strong to resist.
first tuesday take: We can only hope that Wells Fargo and JPMorgan Chase do not follow the leader in this nationwide foreclosure moratorium debacle. To do so would be devastating to the burgeoning economic recovery.
Unfortunately, the decision to stall foreclosure processing across the country is born out of vacuous political rhetoric and a veiled attempt on BofA’s behalf to appear virtuous. Other than supporting some nebulous sense of morality to “keep people in their homes,” BofA is doing exactly what lenders and the government have proven they do best — delaying the uncomfortable and inevitable moment of reckoning.
The majority of defaulting homeowners on BofA’s balance sheet are either so far underwater it is financially nonsensical to continue paying down their mortgage, or they are members of California’s massive army of the unemployed who are unable to pay their mortgage even if they wanted to. While the vast enclave of robo-signers toiling tirelessly in BofA’s foreclosure mills undoubtedly failed to cross all their “Ts,” no moratorium or administrative review will alter the very obvious truth: these homeowners are in default and, in many cases, have not made a mortgage payment for over a year.
Short of government-mandated cramdowns for underwater homeowners in bankruptcy, BofA’s foreclosure moratorium will do nothing more than continue to delay lender loss reporting, tie-up property in shadow inventory and, last but certainly not least, further damage consumer confidence in the housing market, leading to a disastrous trickle-down effect that may dash all hopes of an economic recovery occurring any time soon. [For more information on cramdowns, see the February 2010 first tuesday article, Spurned homeowners should demand the cramdown.]
Re: “BofA halts foreclosures” from the Wall Street Journal