Bank of America Halts Foreclosures

October 18, 2010

Realty Times - Real Estate Outlook: Bank of America Halts Foreclosures by Carla Hill


It's announcement has been received with mixed reviews. Many homeowners on the brink of foreclosure are breathing a temporary sigh of relief, as Bank of America announced it would become the first major bank to halt both foreclosure proceedings and sales. This will take effect in each of the 50 U.S. states.

The decision comes on the heels of mounting political pressure, namely that from Senator Christopher Dodd, chairman of the Senate Banking Committee, and the impending November 16th hearing on foreclosures.

The temporary cessation of foreclosure proceedings will give Bank of America time, in the wake of the mortgage crisis, to review its own methods, to ensure fairness and that no predatory practices are in place.

Zillow.com is reporting that the foreclosure rate climbed again in August and became an even larger portion of monthly transactions. Foreclosure resales as a percentage of all sales in August were 19%, up 2 percent from July.

In an housing market that is already anemic, however, will this halt bring more paperwork, pressure, and slowed sales?

Vicki Cox Golder, NAR President, notes, "There are valid foreclosures that should move ahead quickly, and we shouldn't lump them in with mortgages that are suspect. That would cause deep problems in an already fragile market and throw many families into uncertainty."

The National Association of Realtors also reports that "thousands of first-time and move-up buyers who hoped to make a foreclosed property their new home now face uncertainty, anxiety and possibly remorse as they worry that closing on their desired property could be in jeopardy."

This temporary halt could also put more pressure on an ailing job market. Remodelers, contractors, and other workers employed to rehab newly purchased foreclosures may now find themselves without work.

Last week it was reported that U.S. Payrolls had already dropped 95,000 in September.

Will the Fed take action under this mounting pressure when it meets up on November 2nd and 3rd? Time will tell and we'll keep you posted of any changes that may coming your way.

For now, the market remains mostly unchanged. According to the NAHB/Wells Fargo Housing Market Index, results remain "dismal." They report that new job formations slowed in the second and third quarters and both businesses and consumers pulled back on purchases. Overall uncertainty over economic growth has become the latest impediment to a resurgence in new housing -- even with historically low interest rates, leveling house prices and pent-up demand from unformed households.

Zillow predicts that a bottom in national home values will happen later this year or early next year at the latest.

It looks like for now, the housing market will continue on its weakened path.

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