(NECN: Peter Howe, Boston) In a stunning new turn for the nation's housing mess, Bank of America said Friday it will stop foreclosure proceedings in all 50 states as it sorts out allegations bank executives cut corners on legal paperwork.
Last week, the bank had started a partial moratorium in 23 states, including Maine, Vermont, and Connecticut, states where lenders have to go to court to get permission to seize homes from delinquent borrowers. Friday, the bank extended the foreclosure freeze to the rest of New England and America.
Speaking at the National Press Club, Bank of America CEO Brian Moynihan sought to downplay what was widely taken as a bombshell announcement.
"We have to clear the air. We haven't found any problem with the foreclosure process,'' Monynihan said. "What we're trying to do is clear the air and say we'll work one more time, but we haven't found any errors, and there are technical issues [so] we're checking our homework again, and we're making sure we get it right, after it's been checked multiple times, and after we do, we'll continue the process'' of foreclosing on, seizing, and selling thousands of homeowners' residences.
The move means -- no one knows for how long -- delinquent mortgage holders facing foreclosure by Bank of America get some time and breathing space.
According to The Warren Group, the authoritiative Boston realty-tracking firm that publishes Banker & Tradesman, in Massachusetts there are a total of 2,249 homes Bank of America has put into foreclosure, is trying to put in foreclosure, or has already seized from their previous owners. Those include 263 homes where a public notice to foreclose has been filed, 856 where the case has been filed, 310 where a public notice of auction has been filed, 592 that are in auction, and 228 owned by the bank and presumably being offered for sale, according to The Warren Group.
However, compare those numbers to Warren Group's count of 40,000 to 45,000 homes being sold every year in Massachusetts. CEO Timothy Warren calls the number "a drop in the bucket in terms of the total home sales.''
Warren said the Bank of America move Friday may give some delinquent borrowers time, but won't let anyone off the hook completely. "That just means that people who are in the process will probably stay in the process until they're absolutely certain that all of their procedures and paperwork are in order,'' Warren said.
Massachusetts Attorney General Martha Coakley had pushed Bank of America to stop foreclosures after reports executives were "robo-signing" affidavits by the thousands without actually checking them. "We asked them to stop in Massachusetts because we believe the burden's on them to show that they've complied with our foreclosure laws,'' Coakley said.
Coakley acknowledged that her office has no idea yet how many people will get how much relief and for how long from the Bank of America move. But, she said, "It will give that consumer, the homeowner, the family a chance to look at, first of all, have they followed the rules they're supposed to.''
Late Friday, the Associated Press reported that PNC Bank and Litton Loan were suspending some foreclosures in some parts of the U.S. because of the same kinds of problems reported at Bank of America. Still unknown: How many if any people who bought homes out of foreclosure from banks or mortgage companies now have a nasty legal cloud over their ownership because the lender failed to file paperwork properly? And how big a cloud will this new foreclosure-processing fiasco cast, and for how long, over what remains a deeply troubled housing market.
With videographer Mike Bellwin