Most of America learned in the last two weeks that the flood of home loan defaults was more than the banking industry could apparently handle. As we now know, the largest lenders in the country, including Bank of America, GMAC and JP Morgan Chase, were too busy pushing borrowers through their foreclosure pipelines to bother checking whether or not they were actually following state laws in Oregon and elsewhere. Bank of America, the nation's largest home lender, announced last week that it was suspending work on more than 100,000 home foreclosures while it examined its internal processes. The announcement followed recent revelations that, faced with an unprecedented wave of home loan defaults, the nation's largest banks were using unqualified staff to process hundreds of home loans a day. The staffers, who have since been dubbed "robo-signers," often had little or no knowledge of the loans that they were handling and processed paperwork without the supporting documents, losing information along the way and falsifying signatures when necessary.
This news, and Bank of America's subsequent decision to suspend foreclosure proceedings, has brought the already fragile housing industry to a grinding halt in many places as wary buyers steer clear of foreclosure sales. In Central Oregon, where foreclosure sales are driving the real estate market, insiders say they still aren't sure just how the foreclosure debacle is going to impact the fragile housing market. In Bend, bank-owned homes and short sales, and so- called distressed properties, accounted for roughly half of all sales between June and September, according to numbers compiled by Bratton Appraisals. In Redmond, distressed sales were even more prominent, accounting for 77 percent of all home sales there.
"Bank foreclosures are running the market," said Valerie Hunter, a Happy Valley- based broker who works almost exclusively with bank-owned properties in Portland and Central Oregon.
However, Hunter said that she has yet to see a measurable slowdown in her understandably booming business since the foreclosure scandal broke just two weeks ago. Hunter has several dozen bank-owned listings active at any one time and closed almost 300 bank-owned sales in Central Oregon last year. She said that Bank of America initially pulled about a half-dozen listings, but that new listings have continued to trickle in.
"Right now, about 10 percent of the properties have been pulled off the market to make sure that foreclosure proceedings have been done properly," Hunter said.
Rather than a problem, Hunter said the foreclosure delay has allowed her office to catch up on paper work and get a breather from the heavy workload that characterizes the foreclosure industry right now.
But it's that same workload that has caused huge problems for the banking industry over the last few weeks as more details emerge about the slipshod work that was happening at some of the nation's largest lenders where under-trained and unqualified staff were pushed to process the paperwork that evicted homeowners, sometimes, as it turns out, mistakenly. The scope extends far beyond Central Oregon. Nationwide, more than two million homeowners are facing foreclosure as a result of the housing bubble and resulting recession. Last week, all 50 state attorney generals, including Oregon's John Kroger, opened a joint investigation into the mortgage industry practices. But President Obama has thus far refused to enact a foreclosure moratorium as some have called for already. And it appears that some of the nation's biggest banks, led by Bank of America, are now moving to put the crisis behind them. Both GMAC and Bank of America announced on Monday that they were moving forward with foreclosure proceedings in 23 states where judges are required to review foreclosures. Oregon is not among those states. Rather, Oregon requires only that lenders notify buyers that they have the opportunity to seek a loan modification before moving on a foreclosure. Documents confirming that the offer has been extended are supposed to be filed at the county clerk's office in the form of an affidavit. It's those documents that the attorney general's office wants to review, said Kroger's spokesman, Tony Green.
"What we don't know is if this is sort of a procedure thing or is this failure to follow the process allowing there to be illegal foreclosures? So I would caution about pre-judging the process," he said.
Green added that there is a large volume of work associated with the investigation, but said that the office is moving expediently because of the fact that people may be wrongly forced from their homes.
"Delaying isn't going to help homeowners in distress. So we want to make sure we move as quickly as possible, but we also want to make sure that we are as thorough as possible," Green said.