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BOA Sorts Foreclosures As Investors Threaten

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BOA Sorts Foreclosures As Investors Threaten

Business

BOA Sorts Foreclosures As Investors Threaten

BOA Sorts Foreclosures As Investors Threaten

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Mediation might not come soon enough for homeowners facing foreclosure on their Bank of America mortgages. The bank halted all foreclosures earlier this month while it sorted out its paperwork problems. This week, the bank said the review is complete and it will resume foreclosures. But there's new pressure now from investors who want to force banks to buy back problem home-loans. Host Scott Simon talks with Joe Nocera, who writes the Talking Business column for The New York Times.

SCOTT SIMON, host:

We're joined now by our friend from the world of business world, Joe Nocera, who's in New York.

Joe, thanks so much for being with us.

Mr. JOE NOCERA (New York Times): And thanks for having me, Scott.

SIMON: Joe, Bank of America says it reviewed all the foreclosure affidavits in question and the facts in them were accurate.

Mr. NOCERA: That's right. They reviewed 102,000 affidavits in three weeks.

SIMON: Can they do that?

Mr. NOCERA: That's pretty good work. That's pretty short work, don't you think, Scott?

SIMON: Well, I'm impressed. And does that suggest something to you?

Mr. NOCERA: Well, it suggests to me that theyre trying - they would like to foreclose a little bit faster. They're basically claiming that the underlying facts are that the homeowners in these cases have not been making their payments and ought to be foreclosed on.

They're probably right about that. The problem that they face is, is it the Bank of America that owns the properties and has the right to take them back? And that's what this affidavit scandal has been all about.

It's not just, you know, somebody signing a bunch of documents without looking at the underlying paperwork. It's how real is the paperwork. And what happened, Scott, is that during the era of the bubble when all these loans were being sold to Wall Street and passed around to investors and going from one hand to another, it really kind of became confusing about who owned what.

So the banks really need to start proving that they own these properties that they want to reclaim.

SIMON: And does Bank of America have the legal standing to simply say these affidavits are legitimate and then move on to foreclosure?

Mr. NOCERA: It depends on a lot of things. There are certain places where the judicial system is basically saying we don't trust you guys anymore and you have to prove you have the underlying documentation in every single case.

There are other judges in other districts who are so overwhelmed by the sheer caseload here that all they want to do is look at the affidavit and send it through, which just adds to the general unfairness of the whole situation.

SIMON: The general unfairness being?

Mr. NOCERA: The general unfairness being, you know, people who might have a legitimate claim that the bank doesnt really have the right to take over their property will lose the property. And in other cases it will get a good strong look by a judge.

I was just going to say, this is not an issue of a legal technicality, Scott. They say this is just a technicality, these people really should lose their homes. But there is this thing called due process. And it's sort of like saying, well, you know, if you've committed a crime and I saw you do it, we don't even need to have a trial because you're obviously guilty. And you can't really do that in this country.

SIMON: Let me ask you about this other legal challenge. And these are large investors, including the Federal Reserve, who say they want to sue the Bank of America unless they pay them back for loans that were backed by mortgages that allegedly violated their underwriting standards.�

Mr. NOCERA: Right. This is a mounting issue as investors begin to organize and begin to kind of fight back. It's very simple. When an investor buys a bond that have underlying mortgage loans there's also an agreement that basically say that those loans conform to certain standards.

And what these investors are now saying is these loans did not conform to standards. They were terribly underwritten. They were problem loans. And therefore the banks should be forced to buy them back.

And so what you're going to see, Scott, I think, is a rising movement by the investment community, the owners of the mortgages, saying to the banks: we want you to buy these loan backs. And it's going to be a brutal, long, drawn-out war in the courtrooms.

SIMON: That can't be good for business.

Mr. NOCERA: It's not good for anybody. It's not good for the courtrooms, for that matter. You know, everything that clogs up the system like this, both in the foreclosure area and in this buy back area, makes it harder for the country to come out of the economic difficulty that we're in. Makes it harder for home prices to stabilize, makes it harder for the real estate market to rebound, which we all desperately want and need to happen.

SIMON: Joe Nocera writes the Talking Business column for the New York Times.

Thanks so much.

Mr. NOCERA: Thank you, Scott.

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