The uncertainty and daily developments surrounding foreclosures have left would-be buyers of foreclosed properties in limbo.
Bank of America says it will soon resume foreclosure sales in 23 states. The nation's largest home lender had halted many sales nationwide after allegations arose that major banks were filing fraudulent paperwork when seizing homes from delinquent borrowers.
State prosecutors are investigating in every state.
Bank of America says it's fixing the paperwork problems behind these foreclosures. JPMorgan Chase and GMAC Mortgage have also both said that some foreclosure sales are going ahead.
Some analysts say that's a good sign. But bank stocks got clobbered again on Tuesday over new worries that banks might be forced to buy back problematic loans from investors. So, there's still a cloud of uncertainty for investors, homeowners and homebuyers.
Looking For A Deal
Alicia Salois was about to buy a condo in Saco, Maine. The property was foreclosed on. It's vacant, and it definitely needs some work. But Salois is willing to take on a project.
She's a nurse and she's been looking for a good deal. So, she paid more than $1,000 for a home inspection, an appraisal and a rate lock for a mortgage. But then GMAC Mortgage told her there was a problem.
Salois says GMAC pushed the sale date back twice after the latest blowup over faulty foreclosure documents. GMAC says some foreclosure sales are moving forward. But Salois says she doesn't know what's happening in her case.
She's in limbo even though she had already started buying parts for a new sink. "I was like, 'Oh, I'll buy a faucet.' And now I have a faucet instead of a house," Salois says.
Investors and analysts also aren't quite sure what's going on.
"Nobody knows all the facts," says Thomas Lawler, a housing economist and former executive at the mortgage giant Fannie Mae. "I've probably read a thousand pages just over the past five days on various people's takes."
Lawler says he doesn't think this is going to be Armageddon for the banks or the housing market.
But he says there still is no clear picture of the situation: "With a 50 attorneys-general probe going on, as well as other probes, it's probably going to be quite a few months until there's any clarity about whether this is a really big deal or just yet another delay in the overall process."
Mark Zandi, chief economist for Moody's Analytics, is a little more upbeat about this latest news from Bank of America. He says it looks like a simple paperwork problem.
But Zandi agrees that all these investigations could turn up some ugly surprises. "Well, it's basically very much like lifting up a rock and looking to see what's underneath," he says.
Gary Klein, an attorney representing homeowners, says: "There are an awful lot of worms under the rock." He says in some cases banks have foreclosed without having proof that they actually own the mortgage for the house.
"The lending community has made such a mess of ownership of mortgages that nobody knows whether any particular foreclosure sale is valid at this point," Klein says. He says markets operate on faith. Homebuyers, title insurers and mortgage lenders all need to believe that the foreclosure and homebuying process is proper and legal or they'll get scared and back away.
Investors might also sue banks, causing further complications. And right now, it's proving pretty hard for the banks to restore people's confidence.