Bank of America partly lifts foreclosure freeze
CHARLOTTE, N.C./BOSTON (Reuters) - Bank of America said on Monday it was partially lifting its nationwide freeze on foreclosures, a sign that a crisis over major banks' mortgage practices may be easing.
The move by Bank of America (BAC.N), the largest mortgage servicer, marked one of the first positive developments for a financial sector under pressure after two weeks of damaging accusations that shoddy paperwork forced some people illegally out of their homes.
The controversy, which has drawn public outrage and sparked government probes, has threatened bank earnings and the health of the fragile housing market, battered by falling prices and foreclosures of nearly 3 million homes since January 2007.
At issue are allegations that banks failed to review foreclosure documents properly or submitted false statements when they foreclosed on properties. Banks could face fines and lawsuits, and may be forced to repurchase faulty loans.
Bank of America, which imposed moratoriums along with some other banks earlier this month as the foreclosure crisis grew, said it would resume foreclosures in state courts in 23 states on October 25, after having reviewed its procedures and decided they were sound.
Bank of America is due to release its quarterly financial results on Tuesday, and faces a likely barrage of questions from Wall Street analysts about foreclosures.
"This is a sign they're feeling relatively confident," said Jefferson Harralson, a Keefe, Bruyette & Woods Inc bank analyst.
Foreclosure sales will resume in states where a judge's approval is required, when the bank begins refilling amended affidavits on 102,000 foreclosures, Bank of America said.
In the other 27 states, where a judge's approval is not needed, the bank will continuing its reviews for an undetermined period, but expects fewer than 30,000 foreclosures sales will be delayed as part of this temporary halt.
"As was the case for our judicial state review, our initial assessment findings show the basis for our foreclosure decisions is accurate," said BofA spokesman Dan Frahm.
There was no immediate word whether other banks that imposed foreclosure moratoriums planned to follow Bank of America's lead.
The White House, despite congressional election-year pressures, has refrained from joining calls for a nationwide moratorium on foreclosures.
John Walsh, acting director of the Office of the Comptroller of the Currency, said earlier on Monday that interagency teams had been dispatched to U.S. banks to check on whether any homeowners had been harmed by foreclosure procedures.
He spoke as investor concerns appeared to ease over the potential exposure of the financial sector to foreclosure problems that rattled the markets last week.
Banks are accused of using "robo-signers" -- to sign hundreds of foreclosure documents a day without reviewing the documents properly, reigniting public anger with an industry blamed for helping cause the 2007-2009 financial crisis and resented for getting billions of dollars in taxpayer aid.
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U.S. stocks rose on Monday, led by gains in financial shares, as Citigroup (C.N) reported stronger-than-expected profits.
Citigroup, which has declined to place a temporary moratorium on foreclosures, said it is "fairly confident" in its procedures. It saw its results boosted by slowing credit losses and reduced reserves for bad loans.
"The financials last week were getting hammered over questions over foreclosure proceedings ... now it doesn't seem to be as all-encompassing," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.
OCC's Walsh, whose office oversees large national banks, told reporters after a speech in Boston that teams from his agency, the Federal Reserve and the Federal Deposit Insurance Corp were working together.
Attorneys general in all 50 U.S. states have launched their own probe and the U.S. Justice Department and the Securities and Exchange Commission are also investigating.
Atlanta Federal Reserve Bank President Dennis Lockhart said on Monday that the U.S. central bank was examining mortgage servicers in an effort to get a better sense of the extent of foreclosure documentation problems around the nation.
"We're doing quite a bit," Lockhart told reporters after a speech in Savannah, Georgia. "We're doing ad hoc exams of the major mortgage servicing institutions as well as other banks that have a significant servicing flow."
The Obama administration says it backs the attorneys general investigation but at the same time it has signaled it is wary of doing anything that could derail any recovery in the housing market, usually a driver of economic rebounds.
Republicans are expected to make big gains in the November 2 midterm elections on the back of growing disapproval over how President Barack Obama and his Democrats are handling the economy.
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