Alleged foreclosure fraud at some of the country’s largest banks has brought the already struggling American housing market to a screeching halt, as lenders freeze foreclosures. The allegations involve mortgage loans held by JP MorganChase, GMAC and Bank of America. It is estimated that tens of thousands of foreclosures were approved without proper review.
According to a report by NBC News’ Peter Alexander on the Today Show, authorities in 40 states are currently investigating three major banks for alleged foreclosure fraud. NBC reported JP MorganChase and GMAC have suspended foreclosure evictions and sales in 23 states, while Bank of America has halted foreclosures in all 50 states. It is estimated that 1 in 7 borrowers are behind on their mortgage payments or are already in foreclosure.
In addition to putting mortgage holders in limbo, the freeze also affects buyers who were in the process of purchasing a property that had been foreclosed.
Essentially, the suspension has a negative affect on the overall housing market. NBC News quotes Tara-Nicholle Neslon, a Consumer Advocate with Trulia.com as saying the hold “delays the ability of the American whole housing market to reset,” and that it is “delaying everyone’s house prices from recovering.”