Last week, Bank of America announced that it was halting foreclosures in all fifty-states while it reviewed its foreclosure process for defects. Now several lawmakers on Capitol Hill are calling for other banks to initiate nationwide foreclosure freezes—a move which the Obama administration is currently opposing.
So what’s going on here? Why is the foreclosure machinery of our nation’s largest banks suddenly grinding to a halt? What does this mean for the financial sector and the economy?
Let’s start with the most basic questions first. Then I’ll explain some of the possible implications for homeowners, banks, and the economy.
How did this thing get started?
Ever since the housing bubble burst, there have been signs that there are serious problems with foreclosure practices. In some cases, the financial institution claiming it owns the mortgage has not been able to produce the underlying loan documents. In 2007, a federal judge held that Deutsche Bank lacked standing to foreclose in 14 cases because it could not produce the documents proving that it had been assigned the rights in the mortgages when they were securitized.
This decision was followed by similar rulings in other states stopping foreclosure proceedings. Typically the judges would find that the banks that were servicing mortgages pooled into bonds weren’t able to prove they owned the mortgages.
Keep reading the FULL story by John Carney at https://www.cnbc.com/id/39617381/
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