While a foreclosure freeze has been suggested to ensure invalid filings have not been taken by large mortgage processors, the Obama administration refuses to support this action. As told by Federal Housing Administration Commissioner, David Stevens, taking such a major step simply is not “prudent.”
Invalid Foreclosures a Big Issue
On Thursday, we reported that invalid foreclosures may become difficult to challenge as a result of a new bill that had been passed in Senate and was awaiting signature by the president. The bill, known as the Interstate Recognition of Notarizations Act, would require courts reviewing foreclosure initiations to accept notarizations of documents from large out-of-state companies without first validating their authenticity.
This bill struck a nerve with homeowner advocates because it would legally allow companies like Bank of America, GMAC and JPMorgan, which are all in court right now for the presenting invalid foreclosure documents, to present anything they please without having them verified for authenticity.
In other words, a company could foreclose on a homeowner prematurely or unjustifiably and not be required to prove their actions were appropriate. To ensure that no more companies are allowed to do the same until the president decides whether to sign the bill, a freeze on all foreclosures was suggested.
Officials Say Freeze Could Hurt Economic Recovery
While Congress, labor unions and consumer groups have been pushing for the federal government to take action–some in favor of the freeze and some opposed–Obama administration officials say that for them, imposing a freeze would be a hasty decision to make.
In an email statement made by Stevens to the Washington Post on Sunday, he said, “We believe freezing foreclosures for all banks in all states, whether we have reason to believe them to be in error or not, is simply not the prudent step to take in this fragile housing market.”
He, along with other officials, believes that losing the foreclosed homes could indeed hurt the market since approximately one in four homes sold in the second quarter were in foreclosure.
Unfortunately, homeowners with a mortgage loan may have to bite their nails with hope that their large mortgage processor doesn’t decide to foreclose on their home, because if the bill passes, many will soon have fewer protections in their corner.