Bank of America will restart foreclosures despite accusations of flawed documents
Bank of America will resume home foreclosures in 23 states despite claims that documents used in the process were flawed.
The pace of U.S. home foreclosures may not slow much after all.
Bank of America said Monday that it plans to resume seizing more than 100,000 homes in 23 states next week. It said it has a legal right to foreclose despite accusations that documents used in the process were flawed.
Ally Financial Inc's GMAC Mortgage unit is also resuming foreclosures once documents are fixed. Gina Proia, a spokeswoman for Ally, said that "as we review the affected files and take any remediation needed, the foreclosure process then resumes."
Analysts expect other lenders to correct problems with the way they handled documents and proceed with a wave of foreclosures that have depressed the housing market. They are likely to follow because foreclosure practices were similar from bank to bank, said banking analyst Nancy Bush of NAB Research.
"We'll be back to square one by the end of the year," she said.
The bank's move could mean that the costs of the foreclosure-document mess will wind up being less than some investors had feared just days ago. Bank shares sank last week after JPMorgan Chase & Co. said it set aside $1.3 billion in the third quarter to cover legal expenses that include the foreclosure document problems.
Shares of Charlotte, N.C.-based Bank of America had been flat earlier Monday but jumped on the news. They rose 36 cents, or 3 percent, to close at $12.34.
Bank of America Corp. said it's confident of its foreclosure decisions. The bank is still delaying foreclosures in the 27 states that don't require a judge's approval. It said it's still reviewing its cases in those states.
The bank's move comes two weeks after it began halting foreclosures nationwide amid allegations that bank employees signed but didn't read documents that may have contained errors. These employees have earned the nickname "robo-signers."
The company said it plans to resubmit documents with new signatures in the 23 states that require judicial authorization to restart the foreclosure process. It will delay fewer than 30,000 foreclosures.
"The basis for our foreclosure decisions is accurate," Dan Frahm, a Bank of America spokesman, said in announcing the bank's new approach.
Bank of America had been the only lender to halt foreclosures in all 50 states. Other companies, including Ally Financial Inc.'s GMAC Mortgage unit, PNC Financial Services Inc. and JPMorgan, have halted tens of thousands of foreclosures after similar practices became public.
Analysts at FBR Capital Markets said in a note to clients that the bank's announcement demonstrates that the foreclosure document issue may be "overblown."
Still, more problems surfaced Monday that suggest the controversy may be far from over.
A deposition released by the Florida attorney general's office revealed that the office manager at a Florida law firm under investigation for fabricating foreclosure documents signed 1,000 files a day without reviewing them. The manager also would allow paralegals to sign her name for her when she got tired, the deposition said.
Cheryl Salmons, office manager at the Law Offices of David Stern, would sign 500 files in the morning and another 500 files in the afternoon without reviewing them and with no witnesses, former assistant Kelly Scott said in a deposition released by the Florida attorney general's office.
Jeffrey Tew, an attorney for Stern's firm, didn't immediately return a phone call.
In some states, lenders can foreclose quickly on delinquent mortgage borrowers. By contrast, the 23 states in which Bank of America is restarting foreclosures use a lengthy court process. They require documents to verify information on the mortgage, including who owns it.
Those states are:
Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.