Things heat up as banks may have "cut corners" in foreclosing on homes.
Most likely you've been hearing reports over the last week or two about concerns surrounding the legality of certain foreclosures by several of the major national lenders including JP Morgan Chase, Ally Financial (formerly GMAC) and Bank of America. The primary issue raised is that banks may have used fraudulent documents and signatures to justify hundreds of foreclosures. The severity of these claims have prompted banks to voluntarily suspend foreclosures and evictions in 23 states and just today, Congress has called upon the Justice Department for a full investigation.
To demonstrate the magnitude of this situation, banks took possession of over 95,000 homes just in August and issued foreclosure filings to almost 340,000 home owners or one in every 381 households. While each state has it's own foreclosure and eviction process, lenders, loan servicers and even title companies could face litigation on multiple fronts. This was happening despite a $50 billion bailout from the Obama Administration targeted at helping reduce foreclosures.
These allegations could cause thousands of homeowners to contest foreclosures that are in the works or have been completed. The impact that this may have on foreclosed homes that have already been resold to new buyers and on the real estate market in general could be devastating. At a minimum, we expect this investigation to slow down efforts to reduce the inventory of lender-mediated homes currently on the market.