RISMEDIA, December 28, 2010—(MCT)—A Bank of America freeze on foreclosure sales spread Friday to the Inland Empire in California after the biggest bank in the U.S. announced it was broadening an investigation into its foreclosure practices to all 50 states.
The halt, which took effect yesterday, adds to growing concerns that lenders have been repossessing homes without following proper protocol.
Housing analysts said the moratorium could prolong a housing recovery in the Inland Empire, dragging out the foreclosure process for many homeowners and muffling buyers interested in purchasing distressed properties.
“(A halt on foreclosure sales) would have a chilling effect I think on the market, especially if other lenders follow suit in California because foreclosure sales make up a significant portion of all sales occurring in the state,” said Daren Blomquist, spokesman for foreclosure tracking firm RealtyTrac.
The Inland Empire has one of the highest foreclosure rates in the nation, with one foreclosure for every 113 homes.
In the Riverside-San Bernardino metropolitan area, about 30 percent of home sales are of bank-owned homes, or REOs, according to RealtyTrac’s most recent numbers. Statewide, foreclosed properties make up 25 percent of sales.
A week ago, Bank of America announced a stop to foreclosures in the 23 states that require court approval in the process. Ally Financial and JPMorgan Chase have gone ahead with similar plans. California does not require a court order for foreclosure.
But Friday’s moratorium represents the first move by a bank to halt foreclosures in all states to review foreclosure documents. Bank of America’s decision comes after widespread calls from consumer advocacy groups and public officials for a nationwide moratorium on foreclosures.
Assemblywoman Wilmer Amina Carter, D-Rialto, said Friday that she supported the bank’s moratorium.
“This will give us an opportunity to work out a plan so people can be helped and the banks can become stable enough to help the community thrive by providing resources for people to become homeowners again,” Carter said.
While the action does not stop the foreclosure process on delinquent borrowers, it prevents a foreclosed home from going to sale. Bank of America expects the moratorium to last “a few more weeks” while it assesses foreclosure documents, said Rick Simon, a Bank of America spokesman, in an e-mail. Simon said, so far, the assessment shows the bank’s foreclosure decisions were correct.
“Based on our review thus far, we are confident that the basic facts about debt and delinquency represented in past foreclosures are accurate,” Simon said.
Real estate experts said homeowners on the verge of foreclosure sales would temporarily be saved from eviction. But the moratorium only prolongs their problems, depending on how long the action lasts.
“This is just going to lengthen the time that this problem takes to correct itself,” said Tim Adams, Realtor broker associate at Century 21 Lois Lauer Realty in Redlands. “All we’re doing is extending the pain as far as I’m concerned.”
But sellers in the Inland Empire who have been competing with bank-owned homes in the real estate market could benefit from the halt, Adams said. Bank-owned homes, which sell at lower prices, have brought down property values for non-distressed homes in inland neighborhoods, he said. Buyers also can use the time to get themselves financially ready to buy next year, he said.
News of the moratorium brought relief to Prakash Bhakta, a Fontana resident, who said he has been fighting a foreclosure sale by Bank of America set for next month. The moratorium gives him and his family at least a temporary reprieve from the sale, he said.
He said he has known that lenders improperly foreclose on homeowners, and the moratorium only brings attention to the issue. Bhakta last year filed a lawsuit against his former bank, Wilshire Credit Corp., for fraud in the foreclosure process. The notes on his property now belong to Bank of America, he said.
“Two years I’ve been fighting the system,” Bhakta said. “Now it’s being brought to the light.”
“They’d have to go find another house,” Green said.
The Associated Press contributed to this report.
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