Banks Resume Foreclosure Sales
Just in time for Christmas*, banks have cranked up the foreclosure machine and resumed many of their practices. After concerns about robo-signing and illegal foreclosure operations in state courts, banks are shrugging this off. Bank of America will go back to foreclosure sales, expecting to sell 16,000 this month.
“We have identified areas of our process that can be improved and while we make these improvements, it’s important that we move ahead with efforts to reduce the number of abandoned properties across the country,” said Barbara Desoer, president of Bank of America (BAC, Fortune 500) Home Loans, in a statement. “The properties can drag home values in neighborhoods and slow the eventual recovery of the housing market.”
Similarly, GMAC will press on with foreclosure sales and evictions after winning a case in Maine, where residents sought a restraining order on future actions. The judge in the case said that the federal courts have limited authority over foreclosures. Cleverly, GMAC moved the suit to this federal court.
The companies are stressing sales and abandoned properties to make it sound less horrifying, but this is really about evictions. As we’ve seen, foreclosures are a cash cow for the big bank servicers, and they would much rather do that than modify loans.
But I cannot see their end game here. With almost 11 million properties in negative equity – over 1 in 5 of the outstanding mortgages in the United States – it’s not like the problem is showing signs of abating. And contrary to myth, foreclosures exacerbate the problem, perpetuating a vicious circle that does lower prices. Even if a foreclosed home doesn’t go back on the market, increasing supply, a vacant home brings down the prices of all the other homes around it.
Not to mention the fact that the fallout from robo-signing continues in state courts, in the offices of the Attorneys General investigating foreclosure fraud, and particularly in the corporate boardrooms, where institutional investors are trying to get out of the losses from mortgage-backed securities. The foreclosure crisis hasn’t ended; it’s really only just begun.
* – Historically, banks refrain from actual evictions in a short window around the holidays, usually from December 20 to January 2.