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Bank of America and GMAC Start Up Foreclosures Again

Posted on Oct 25, 2010
As you have probably been reading in the news, several national mortgage banks have been in hot water over "robo-signers," document review people that are signing off on foreclosures without reading the underlying documents to see if that step was appropriate.  This practice was called "blind stamping" and forced these banks to stop foreclosures in 23 states, including New Jersey.  It was hoped that this hiatus would give homeowners some time to either modify their loans or arrange a short sale.  Well, unfortunately, it may appear that time is up.

The New York Times reported yesterday that GMAC and Bank of America have started up the process again.  This will result in many a homeowner scrambling for cover with less time to find a solution than they may have thought they had.  On top of that, banks, particularly Bank of America, continue to be resistent to short sales.  This appears to be for several reasons, according to the article:
  • Fear of fraud by the homeowner, i.e. their "hoodwinking" the bank into thinking that their financial situation, or the value of the home v. the amount owed, are much worse than they really are.
  • Fear that the sale is really a sham sale to a friend or relative, that will just sell the property back to them later
  • Availability of personal mortgage insurance (PMI) that could pay a claim for the shortfall should the property not bring enough at foreclosure sale
  • The thinking that if you foreclose on the property and hold it for a few months, the price will rebound sufficiently to cover the note.
  • If they lose money in a foreclosure sale, the bank does not have to write off the loss until the sale itself; if it goes to short sale, it must be written off immediately.
Options can well be limited, and anyone facing this situation has to realize that they need to focus on a solution and soon!

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