The foreclosure crisis may hit full speed just in time for the November midterms as Senate Majority Leader Harry Reid (D-Nev) today called on major lenders to halt foreclosures nationwide. The announcement occurred literally minutes after Bank of America announced it was suspending foreclosure sales to assess it’s own entanglement with firms that had executed fraudulent affidavits in support of lenders efforts to remove homeowners and sell foreclosed properties.
Bank of America may be trying to get ahead of the narrative as Senator Christopher J. Dodd (D-Conn) also announced that the banking committee will hold Congressional hearings beginning Nov. 16 to wade into the foreclosure fraud allegations.
Bank of America’s announcement makes it the first bank to put a hold on foreclosures in all states. Several other banks had made similar decisions, but on a state-by-state basis. It’s unclear whether others such as JPMorgan Chase would follow suit.
A national moratorium is the best thing that can happen right now. There is overwhelming evidence that suggests a widespread and systematic failure in the foreclosure process. There is a very real possibility that homeowners were improperly thrown out of their homes or not given an opportunity to redeem loans that were in fact salvageable. Hearings and investigation can get to the tip of the problem of just what were the banks and loan processors doing, but we need to be prepared for the potential ripple effect from their actions, including the possibility that thousands of other homeowners who think they own properties in fact do not because the foreclosed owner was illegally evicted.
In short, this mess is no where near finished.
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