On Friday, Bank of America announced it was freezing foreclosures in all 50 states. http://mediaroom.bankofamerica.com/phoenix.zhtml?c=234503&p=irol-newsArticle&ID=1480657&highlight=. The issue stems from some court cases where banks that were doing foreclosures, admitted that some of the time notaries were not present when the court documents were signed and that the signers relied upon others to review the file instead of doing it themselves.
The original freeze by a few banks was for 23 states that require a judicial foreclosure. However, this is an election year so everything becomes melodramatic and blown out of proportion; thus, the 50 state freeze. It is important that laws be followed, but the politicization of this is going to do great damage. The core issue is that borrowers didn’t make their payments and as a result are losing their house. The harder we make it for lenders to remedy the situation, the more difficult (and expensive) it will be in the future to get a loan on a house.
The biggest problem we have right now is short-term thinking. The leaders of this great country can’t think beyond November 2nd and the impact will last for years.