Banks Set Foreclosure Record Despite Foreclosure Fraud Moratorium

When the foreclosure fraud mess first broke back in October, a few banks — including Bank of America, JP Morgan Chase, and PNC Bank — instituted foreclosure moratoriums, saying that they would halt foreclosure proceedings until their myriad issues with robo-signed documents and improper notarizations were sorted out.

But this momentary halt from some of the country’s biggest banks didn’t stop them from setting a record for foreclosures in 2010. In fact, it’s highly likely that the foreclosure total for this year will eclipse one million:

The number of U.S. homes taken back by lenders dropped to the lowest level in 18 months in November, the result of foreclosure freezes enacted by several banks following allegations that evictions were handled improperly…The 67,428 homes lenders took back last month were the fewest since May 2009. But even with the decline, it was enough to push the total number of repossessions so far this year to more than 980,000 — the highest annual tally of properties lost to foreclosure on RealtyTrac’s records dating back to 2005.

“It’s almost impossible to imagine that we won’t break a million,” said Rick Sharga, a senior vice president at RealtyTrac. “Unfortunately, it’s a record that we’ll probably break again next year.”


And it seems that the banks haven’t even learned their lesson from the foreclosure fraud episode. In response to the fraud, New York state implemented a law “requiring attorneys in foreclosure actions to certify that they have taken reasonable steps to verify the accuracy of documents they submit to the court.” One New York judge has used the law to strike down 127 foreclosure filings, which, while showing that new enforcement tools employed by concerned judges are helpful, reveals that the banks still don’t hesitate to bring bogus documents before a court.

With one million foreclosures likely on the horizon next year, it’s imperative that the government ramp up its lackluster and ineffective foreclosure prevention efforts. HAMP — the Obama administration’s signature foreclosure prevention effort — has fallen woefully short of its goals and the $50 billion allocated to it won’t come close to being spent. In a final kick in the pants, 2,500 homeowners were foreclosed upon while waiting to see if they qualify for a mortgage modification, in violation of HAMP.

At the same time, the regulator for Fannie Mae and Freddie Mac is refusing to allow the two government sponsored enterprises to write down mortgage principal, even though that is arguably the most effective way to keep troubled borrowers in their homes and avoid all the negative effects of a foreclosure.

Clearly, if RealtyTrac is predicting that the foreclosure record will be met and broken again next year, this is a problem that shows no sign of going away. The lackluster response from policymakers, when viable solutions and the resources to implement them clearly exist, is pretty shameful.