Bank Of America Foreclosure Notices Reportedly Spike In August
This post has been corrected.
Nearly a year after announcing plans to halt foreclosures in all 50 states, Bank of America reportedly is ramping up foreclosures of delinquent homes in a move that other banks may be paralleling.
In August, Bank of America sent over 200 percent more notices of default to homeowners compared to the previous month, according to CNBC. A notice of default marks the first stage of the foreclosure process in states such as California and Nevada, where foreclosures do not go through a judge.
The influx of discounted foreclosed homes on the housing market would drive down housing prices and weigh on the general economy.
Bank of America could be only one of many banks foreclosing on homes that were delinquent but not taken away this past year, since a number of major banks halted their foreclosures last fall once it came to light that they had used shoddy mortgage paperwork to foreclose on homes. Banks foreclosed on fewer properties earlier this year largely because of processing delays, as banks sought to put their mortgage paperwork in order after the robo-signing scandal came to light last fall.
Now, the number of homeowners who owe more than their property is worth has declined. But that's because banks have increased foreclosures of those properties, according to a CoreLogic report released on Tuesday.
Bank of America has been plagued by a barrage of lawsuits and a plummeting stock price. The bank has suffered from a 50 percent drop in its stock price this year, and it recently announced plans to cut 30,000 jobs in a cost-cutting move. The Federal Housing Finance Agency has sued Bank of America for alleged fraud, insisting that the bank buy back a portion of more than $50 billion in mortgage-backed securities. AIG has sued Bank of America for $10 billion with claims that the bank sold them residential mortgage-backed securities that were overvalued.
Gus Faucher, director of macroeconomics at Moody's Analytics, said he expects that as more foreclosed homes enter the market, housing prices are likely to decline for the rest of the year. He added that since consumers who feel less wealthy are likely to spend less, lower housing prices coupled with lower stock prices could contribute to a double-dip recession.
"Given the weakness in the economy," Faucher said, lower house prices "could be enough to push the economy into a recession when combined with other things."
Although home values have begun to stabilize, according to the real estate company Zillow, they remain depressed in much of the country, dragging down the health of the economy.
Correction: A previous version of this post incorrectly paraphrased CNBC by implying BofA foreclosures had only doubled In August. CNBC reports that they rose by over 200 percent in August. It also incorrectly described Bank of America's balance sheet as "tumbling."
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The Huffington Post Bonnie Kavoussi First Posted: 09/13/2011 10:09 pm Updated: 11/13/2011 4:12 am