Updated 10/28/10, updates appear below in blue
Don’t blink — with dizzying speed and (supposed) efficiency, Bank of America (BofA) has announced it will resume foreclosures in the 23 states it halted foreclosures in several weeks ago. The other 27 states subject to the foreclosure moratorium, announced by BofA last week and including California, will remain in limbo. [For more information on BofA’s nationwide foreclosure moratorium, see the October 2010 first tuesday article, BofA postpones organic economic recovery by halting foreclosures.]
The foreclosure “pause,” as BofA officials are now referring to it, allowed for a comprehensive judicial review of their foreclosure procedures which has revealed some evidence of minor errors, according to BofA, but no indication of wrongdoing or malfeasance. BofA has pledged that the nationwide foreclosure freeze was not due to any indication of impropriety on their behalf, but rather it was a concerted effort to ensure its customers were being treated fairly.
The fact that BofA has resumed foreclosure processing in 23 states is being taken as a cue from the big bank that fears over another “too-big-to-fail” crisis are unfounded. BofA has pledged foreclosures will recommence throughout the rest of the country soon.
first tuesday take: Is this a sign the foreclosure mills at BofA have regained their operational footing? Or is it a window into just how off-kilter and spastic the banking giant really is? Of course, BofA would like us to believe the former — the negative equity California homeowners (read: soon-to-be renters) should simply overlook this brief hiatus in the determination of their fate. They have waited this long to receive their walking papers, what is a couple more weeks, rent-free nonetheless, while BofA “pauses” to ensure they are, at last, being “treated fairly?” [For more information on how the wounded housing market is affecting the rental market, see the July 2010 first tuesday article, Rentals: the future of real estate in California.]
BofA seems to be woefully unaware of the effect such administrative schizophrenia can have on the housing market and thus the economy as a whole. The individual homeowner who is underwater and has strategically defaulted may not mind if their foreclosure was paused. In fact, many were thankful for the momentary reprieve from the stress of preparing for their impending eviction, negative credit reporting and so on.
But while the homeowner waits to be released from his residential prison, and while BofA halts foreclosures and simultaneously insists nothing is wrong, the economy is grinding to a halt (again) along the seemingly never-ending plateau of an abortive checkmark recovery. [For more information on the abortive checkmark, see the November 2009 first tuesday article, Divining the future: the letters game.]
As the BofA foreclosure machine sputters back to life, we will have to wait and see what happens once all foreclosures, BofA’s and those handled by other banks, are resumed. We can quantify how much housing inventory remains in the shadows. We can anticipate the losses big banks will be forced to report once the huge backlog of home loans in default finally go to the trustee’s auction block. Unfortunately, consumer confidence is not quite so predictable. When the largest bank in the nation freezes all foreclosures in the name of consumer protection, one would hope they would have the good sense to carry on the charade long enough to make it believable.
Re: “Largest Bank Will Resume Foreclosure Push in 23 States” from the New York Times