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Foreclosure Chaos May Upend Homebuyer's Dream

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Foreclosure Chaos May Upend Homebuyer's Dream

Foreclosure Chaos May Upend Homebuyer's Dream

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

Bank of America says it will soon resume foreclosure sales in 23 states. The country's largest home lender had halted many such sales nationwide. That's after allegations arose that major banks were filling fraudulent paperwork when seizing homes from delinquent borrowers. State prosecutors are investigating in every state across the country.

As NPR's Chris Arnold reports, it is unclear what today's news means for the struggling housing market.

CHRIS ARNOLD: 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 that's a good sign, but bank stocks got clobbered again today. That was because the new worries that banks might be forced to buy back some of these problematic loans from investors. So there is still a cloud of uncertainty for investors, homeowners and people who are looking to buy a house.

Ms. ALICIA SALOIS: I, like, was going to paint all these walls and...

ARNOLD: Alicia Salois is showing me the condo she was about to buy in Saco, Maine. The property was foreclosed on. It's vacant, and it definitely needs some work. She says the kitchen sink is a bit of a project.

Ms. SALOIS: And, yeah, like...

(Soundbite of machinery)

Ms. SALOIS: ...this leaks.

ARNOLD: Oh, yeah, it's kind of - it's running all over the counter, huh?

Ms. SALOIS: Yeah.

ARNOLD: But Salois is okay with that. She's a nurse, and she's been looking for a good deal - a place she could afford. And she likes this condo. So she paid out more than a thousand dollars for a home inspection, an appraisal and a rate lock for a mortgage. But then, GMAC Mortgage told her that there was a problem.

Ms. SALOIS: I was all ready for it or whatever, and it seemed like the day of or the day before, they're like, no.

ARNOLD: Salois says GMAC pushed back the sale date twice after this latest blowup over faulty foreclosure documents came to light. GMAC says some foreclosure sales are moving forward. But Salois says she doesn't know what's happening with her case. So she's in limbo. She thought she was going to buy this house, and she'd already started buying parts for her new sink.

Ms. SALOIS: I was like, oh, I'll buy a faucet. And now, I have a faucet...

(Soundbite of laughter)

Ms. SALOIS: ...instead of a house.

ARNOLD: Investors and analysts also aren't quite sure what's going on.

Mr. THOMAS LAWLER (Housing Economist): Nobody knows all the facts.

ARNOLD: Thomas Lawler is a housing economist and a former executive at the mortgage giant Fannie Mae. We've been talking to him as he tries to get to the bottom of this latest chapter in the foreclosure crisis.

Mr. LAWLER: I've probably read a thousand pages just over the last five days on various people's takes.

ARNOLD: Lawler says that he doesn't think that this is going to be Armageddon for the banks or the housing market. But...

Mr. LAWLER: With 50 attorneys general probe going on, as well as other probes going on, it's probably going to be quite a few months before there's any clarity as to whether this is a really big deal or yet another delay in the overall process.

ARNOLD: Mark Zandi with Moody's Analytics is a little bit more positive about this latest news from Bank of America. He says it's looking to him like more of a paperwork problem that could be resolved. But like Lawler, Zandi says that all these investigations could turn up some ugly surprises.

Mr. MARK ZANDI (Chief Economist, Moody's Analytics): Well, it's very much like lifting up a rock and seeing what's underneath.

Mr. GARY KLEIN (Attorney): There are an awful lot of worms under the rock.

ARNOLD: That's Gary Klein, an attorney representing homeowners. He says in some cases, banks have foreclosed without having proof that they actually own the mortgage for the house.

Mr. KLEIN: 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.

ARNOLD: Klein says that markets operate on faith. Homebuyers, title insurers, mortgage lenders, they all need to believe that the foreclosure and home buying process is proper and legal, or they'll get scared and back away, and more investors will sue banks. And right now, it's proving pretty hard for the banks to restore people's confidence.

Chris Arnold, NPR News.

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