White House urges banks to keep foreclosure process moving

The White House is pressing for banks to move quickly to determine whether mistakes were made in foreclosure documentation to avoid delays that could hinder the housing market's recovery.

As several major banks halt the foreclosure process, Obama spokesman David Axelrod urged caution in calling for a nationwide moratorium on foreclosures "because there are, in fact, valid foreclosures that probably should go forward where the documentation and paperwork is proper." 

"But we are working closely with these institutions to make sure that they expedite the process of going back and reconstructing these and throwing out those that don't work," he said Sunday. 

It was Fannie Mae and Freddie Mac that apparently pushed Bank of America for the 50-state freeze to look into paperwork problems, according to The Wall Street Journal. 

Government-run Freddie Mac and Fannie Mae own many of the mortgages serviced by banks.

The issue of bad documentation isn't new — the problem of missing titles first emerged in 2007 in Ohio when Deutsche Bank tried to foreclose on defaulted homeowners, said Anthony Sanders, a real estate finance professor at George Mason University.

Sanders questioned the timing of Freddie and Fannie's decision to halt foreclosures less than a month before the midterm elections, as well as who is ultimately responsible for the documentation issues. 

"It seems to me that Fannie, Freddie and the FHA [Federal Housing Administration] have just as much responsibility for the 'title wave' as the lenders," he told The Hill. "Had Fannie and Freddie slowed down their loan purchases using proper internal controls, many of these title problems would not have occurred."

Maryland Democratic Rep. Chris Van Hollen became the latest lawmaker to ask for an investigation and a 60-day stop of foreclosures as attorneys general in about 40 states are ramping up for a possible joint investigation in foreclosure issues, Bloomberg reported Monday. 

A growing number of states — Delaware, Texas, Maryland, Ohio, Connecticut, Florida, North Carolina, Iowa and Illinois — have asked banks to halt foreclosures until any problems are solved, which could last well beyond the end of the banks' investigations. 

In their preliminary investigations banks have said they haven't found any major, structural problems with the foreclosure process. 

The main issue is with "robo-signers," middle managers who sign affidavits allowing banks to repossess homes that are in default without fully reviewing the documents. 

"The court has already acted to reverse injustices suffered by families across our state as part of this foreclosure crisis, and we ask that the court take whatever action it deems appropriate to suspend foreclosure proceedings in Maryland for at least 60 days to ensure that the cases before them are properly reviewed and examined prior to any foreclosure," Van Hollen said in a statement. 

“Foreclosures are not just a crisis for individuals and families at risk of losing their homes, but also for the entire community.  We must do everything we can to protect Marylanders from fraudulent and illegal practices and make this process as transparent as possible.”