Bank of America executives said that the decision will allow them to review the documents that it uses to process foreclosures. Just a week earlier, they halted sales of foreclosed homes in 23 states.
"We will stop foreclosure sales until our assessment has been satisfactorily completed," Bank of America spokesman Dan Frahm said in a statement. "Our ongoing assessment shows the basis for our past foreclosure decisions is accurate."
Bank of America is not alone. Today, PNC Financial Services Inc, said that it will halt most foreclosures and evictions in 23 states for a month to review their documents.
It's not as if foreclosures weren't a big enough mess already.
In recent days major lenders--including JPMorgan Chase, Ally Financial's GMAC Mortgage unit and Bank of America--have conceded that paperwork supporting an unknown number of foreclosures contain errors ranging from wrong dates to forged or inconsistent signatures. In many cases, mortgage company employees signed foreclosure documents without first verifying the information in them.
A document obtained last week by the Associated Press showed that one Bank of America official acknowledged in a legal proceeding that she had signed thousands of foreclosure documents a month. The official, Renee Hertzler, said that she signed 7000 to 8000 foreclosure documents a month and typically didn't read them.
Whether sloppiness or deceit is the greater culprit remains to be determined.
Senator Christopher Dodd, chairman of the Senate Banking Committee, said that he will hold a hearing on the issue next month.
"American families should not have to worry about losing their homes to sloppy bureaucratic mismanagement or fraud," Dodd said. "Regulators at the federal, state, and local levels have a responsibility to uphold the law and protect consumers from unfair foreclosure, and lenders have a duty to not cut corners around the law."
The halting of foreclosures comes at a time when a record number of Americans are filing for them.
In August alone, according to real estate data firm RealtyTrac, lenders foreclosed on 95,364 U.S. properties--the highest monthly total since May 2005, when the company first began its tracking. In 19 states the number of homes seized by lenders at least doubled: in seven states it more than tripled. The number of loans 60 days or more past due now stands at 5.2 million.
"I don't see how we come out of this," says Professor Christopher Mayer, vice dean of the Columbia Business School. Working through the problem could take two years or longer.
"It's a terrible human cost," says RealtyTrac vice president Rick Sharga, "terrible for the families and for their communities."
Foreclosures, he notes, not only depress prices of surrounding homes; they erode the municipal tax base, reducing the dollars available for local services. Safety suffers, too. "Having a vacant home in your neighborhood is a hazard," he says.