Monday, October 18, 2010

Bank of America to Restart Foreclosures in 23 States

Bank of America to restart foreclosures in 23 states

By Zachary A. Goldfarb and Ariana Eunjung Cha
Washington Post Staff Writers
Monday, October 18, 2010; 10:13 PM

Just 10 days after announcing a nationwide halt to foreclosure sales, Bank of America, the nation's largest bank, said Monday that it would begin resubmitting paperwork on Oct. 25 to restart foreclosures on borrowers who missed their payments in 23 states.

If judges approve the new filings, the bank expects that the sales of foreclosed properties will start up once again in the states where a court order is needed to foreclose on a home.

The bank said it will continue to freeze foreclosure sales and review files in the District of Columbia and the other 27 states, including Maryland and Virginia, which do not require a judge's action. Reviewing its process in those jurisdictions will take several more weeks, the bank said in a statement.

But it is unclear whether the courts will accept the new paperwork. Some judges have said in interviews that they are considering throwing out entire cases and making the banks file new ones, which would be costly and time-consuming.

"The companies are overstating the ease of withdrawing these affidavits and then resubmitting them," said Judge Lynn Tepper of Florida's 6th Circuit Court.

Amid reports of forged documents, faulty notarizations and "robo-signers" - who signed off on thousands of evictions every month without reading the files as required by law- Bank of America announced its nationwide freeze Oct. 8 to review its procedures. Lawmakers cheered the move and called on other lenders to follow suit. A few days later, the Obama administration argued that a national moratorium would be harmful to the fragile real estate market.

The bank found during its review that, paperwork errors notwithstanding, nobody had been wrongly foreclosed upon, said spokeswoman Jumana Bauwens. "The foreclosure decisions have been accurate," she said.

Filing the new foreclosure paperwork in 102,000 cases will begin Monday and will take several weeks, according to a statement by the bank, which reports earnings Tuesday morning.

Bank of America's announcement doesn't resolve the challenges it and other banks face from the foreclosure mess.

These companies are now confronting newly energized housing lawyers and more skeptical judges. They must also wrestle with differing legal interpretations from state to state.

It is also not clear how Bank of America and other banks will resolve the other flaws with the foreclosure process that have surfaced in recent weeks, including questions about whether banks in some cases lost the paperwork proving that they have the legal right to foreclosure as they sold the mortgage loans to Wall Street investors.

Bank of America said it had consulted with its biggest mortgage investors before making Monday's announcement. Investors have a lot on the line, since they lose income when borrowers stop paying their monthly mortgages and don't reclaim any of that money until a home is sold at foreclosure.

Bank of America said it imposed the moratorium "to give customers confidence they are being treated fairly," according to a statement.

The bank's stock has been taking a beating recently. Last week, it fell 9 percent to hit its lowest level for the year. On Monday, it rebounded, closing at $12.34, up 36 cents, or 3 percent.

J.P. Morgan Chase has delayed 115,000 foreclosure sales in 41 states and says it expects to resume foreclosures in a few weeks. Wells Fargo says it doesn't plan to freeze any foreclosures. PNC Bank has halted some foreclosures in 23 states. Staff writer Jia Lynn Yang contributed to this report.

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