An extended halt of foreclosure proceedings could put additional pressure on an already strained housing market as federal and state officials press banks for answers on possible problems with mortgage paperwork.
The issue has snowballed during past two weeks as four banks — Bank of America, JP Morgan Chase, Ally Financial’s GMAC mortgage division and PNC Financial — have all suspended home seizures in the 23 states where courts oversee foreclosures. PNC added itself to the list on Friday while Bank of America announced it was halting foreclosures in all 50 states to examine its process.
“The moratoriums, both state-mandated and self-inflicted, can be incredibly destructive to the fragile recovery of the housing and housing finance markets,” said Anthony Sanders, a real estate finance professor at George Mason University. “Consumers looking to get back into housing are even more fearful than before. This can lead to further house price declines.”