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Crisis In The Housing Market

Multiple Messes: Mortgages, Foreclosures And The Banks

We're in the middle of multiple, housing-related messes. Here's a quick update.

First, there's the foreclosure mess — the one brought on by the revelation that mortgage companies improperly rushed through the paperwork on thousands of foreclosures.

Lenders have been suggesting this week that they're pushing through that one. Bank of America and GMAC Mortgage, two of the companies at the center of this particular mess, said that they were re-starting many of the foreclosures they suspended a few weeks ago. (GMAC is owned by Ally, a Planet Money sponsor.)

But the companies may not be through with this particular mess as quickly as they'd like.

Several federal agencies are investigating the big mortgage companies, this morning's WSJ noted this morning. And that's on top of the ongoing investigation by attorneys general in all 50 states.

There's also a mortgage-bond mess that's separate from the foreclosure mess.

The basic idea here is that companies that put together mortgage bonds (like Toxie) during the housing boom overstated the quality of the mortgages, or didn't do everything they were supposed to to make sure the loans were sound.

When that happens, investors can force the banks to buy back the bonds.

This has been going on for a while, but it jumped into the news this week when a bunch of investors — including the New York Fed — sent a letter to Bank of America, calling on the bank to buy back billions of dollars in bonds.

In a conference call yesterday, B of A's CEO said the company would fight the request — even if it meant going through each of the thousands of mortgages in contention.

"It's loan by loan, and we have the resources to deploy in that kind of review," the CEO said on a conference call. "We have thousands of people who are willing to stand and look at these loans."