Roost Realty

Thawing the freeze in foreclosures

October 19, 2010 by · Leave a Comment 

I’ve had several calls in the past week asking me to clarify all the chatter in the news about freezing foreclosures.

There have been allegations that lenders repossessed homes without using proper procedures and verifying documents. Home loans get bought and sold regularly. Years ago there was an electronic system, known as MERS, in place to keep track of all of this buying and selling. They call this “robo-signing.” The main issue is that during all of these electronic transfers, the mortgage (collateral) and note (IOU) get separated. So a bank goes to foreclose on a home. They have the note but they can’t necessarily put that together with the mortgage documentation.

Specifically, Bank of America has been in the headlines lately after being accused of making mistakes in foreclosure proceedings. In response Bank of America put a freeze on foreclosures in all 50 states. That was followed by several other big banks freezing procedures in 23 states. As of October 18th Bank of America began thawing their freeze and planned to resume seizing homes within the week. It is expected that others lenders will follow.

There is no expected effect on the public or on borrowers. It is not expected that any borrowers will get their homes back. The errors made were not those types of errors. There were lots of fears that this would stall the housing market even more. It sounds like banks are going to get back to foreclosure business as usual pretty quickly. Hopefully what will come of this is major changes in the backside procedures that banks use.


photo credit: Kyle May

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