* W.House worried about "unintended consequences"
* NY AG: robo-signing "slap in the face of New Yorkers"
* Wells Fargo reviews documents, GMAC finds no negligence
* 40 state AGs to announce joint investigation
(Adds mortgage bond reaction)
By Caren Bohan and Corbett B. Daly
WASHINGTON, Oct 12 The Obama administration
rejected calls for a nationwide moratorium on housing
foreclosures amid fears that such a move could cripple an
already slow recovery of the U.S. housing market.
White House spokesman Robert Gibbs signaled on Tuesday the
administration's wariness of backing populist calls to halt
evictions. A moratorium would benefit only a small minority of
homeowners while risking a backlash if it impeded the economy.
"There are a series of unintended consequences to a broader
moratorium," Gibbs told reporters.
Industry experts warn that a ban would add to lenders'
losses, raise the cost of new mortgages, and create a backlog
of homes that would further depress real estate prices.
Take a Look-U.S. foreclosures under fire [ID:nN11106777]
Breakingviews-Foreclosure fiasco [ID:nN11132857]
The push for the moratorium has rapidly gathered momentum
in the past week.
Senate Majority Leader Harry Reid, who faces a tough fight
in Nevada in the Nov. 2 congressional elections, has joined
some other Democratic lawmakers in pushing for the largest
mortgage lenders to suspend foreclosures in all 50 states.
Forty state attorneys general, many facing re-election, are
also expected to announce a joint investigation on Wednesday
into the allegations that some banks used shoddy paperwork to
kick struggling borrowers out of their homes.
New York Attorney General Andrew Cuomo said on Tuesday he
was expanding a state-wide investigation into foreclosures. He
called "robo-signing", a method used by some banks to speed
through paperwork, a "fraud upon our courts and a slap in the
face of New Yorkers struggling to get by in this economy."
Iowa Attorney General Tom Miller told CNBC television the
investigations were not aimed at collecting evidence for future
lawsuits but to improve lenders' foreclosure practices.
Nevertheless, at least three law firms are known to be
already exploring filing class-action lawsuits.
MORTGAGE BONDS STEADY
Prices of U.S. residential mortgage bonds were steady,
despite numerous warnings of the effect of delayed foreclosures
on these investments. Investors were still buying the riskiest
of these instruments, analysts said. [ID:nN12252211]
Bank of America Corp (BAC.N), the largest U.S. mortgage
servicer, has temporarily halted evictions nationwide while it
reviews its processes. Other lenders have declared more limited
suspensions or left their foreclosure policies in place.
GMAC Mortgage, a unit of Ally Financial and one of the
nation's largest mortgage servicers, said on Tuesday an
independent review had found no evidence of any inappropriate
Wells Fargo & Co (WFC.N), another major mortgage servicer,
said it was doing additional reviews on all pending
foreclosures. "This is in response to requests for information
from elected officials, customers and other agencies," said
spokeswoman Vickee Adams.
The "robo-signing" furor has refocused attention on the
foreclosure crisis, one of the most visible signs of the U.S.
recession, just weeks before elections in which Democrats are
widely predicted to suffer major losses because of voter
unhappiness over President Barack Obama's economic policies.
Gibbs said the administration was determined to "get to
the bottom" of the foreclosure problem.
"We want to take the just and necessary steps to ensure
that the process is being followed legally," he said. "At the
same time, we don't want to see broader harm done to the
housing market and to the housing recovery."
Nearly 3 million homes were repossessed by banks between
January 2007 and August 2010, according to real estate data
company RealtyTrac Inc. Banks are expected to take over a
record 1.2 million homes this year alone, it said.
REGULATORS UNDER PRESSURE
U.S. regulators face heavy pressure to prevent a repeat of
the 2007-2009 financial crisis that began when the U.S. housing
bubble, over-inflated by banks lending cheap money to people
with poor credit histories, burst.
The government-run mortgage finance giants, Fannie Mae and
Freddie Mac, which own many of the nation's mortgages, have
asked 2,000 servicers to complete internal reviews.
Analysts say a moratorium would stop banks from quickly
reselling foreclosed homes. Banks would also likely pass on the
increased costs of a longer foreclosure process to new
borrowers in the form of higher mortgage interest rates.
Foreclosures have sent home prices lower as banks dump
their inventory. It has begun a vicious cycle where homeowners
left with no equity are walking away from their properties, or
have become ineligible to refinance at the lowest rates on
The impact of foreclosures on house prices is one reason
why housing is not playing its usual role in helping the
economy recover from periods of slow growth or recession.
(Writing by Ross Colvin, additional reporting by Al Yoon in
New York and Dan Levine in San Francisco; Editing by Tim