Archive for Tuesday, October 19, 2010

Bank of America starts thaw in foreclosure freeze

October 19, 2010

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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.

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