Bank of America wants to go slow on foreclosures?
As the foreclosure fiasco continues, it's becoming clear that banks are girding for a long fight against bondholders who demand they buyback various RMBS and from activists bent on delaying and even disallowing the foreclosure process. The two are linked in the minds of most. But I think most analysts at this point assume the putbacks we're likely to see stem from misrepresentation and warranty issues. Relatively few, unless some shocking revelations emerge, are likely to stem from botched foreclosures.
But Bank of America sort of confused the two unnecessarily when it suggested that putbacks will force it to speedup foreclosures and kick more people out of their homes. It thus implies that it wants to help more people facing foreclosure stay as long as it can. And to that extent is proceeding with some modifications, which seems logical.
To be sure, Bank of America's pace of modifications has stoked a lot of criticism. But as for foreclosure proceedings, the bank would perhaps be better served to clear the backlog as fast as possible and get homes on the market, thus allowing the market to correct and advance.
If it truly wants to go slow on foreclosures, many will applaud, as it has a populist appeal. But shareholders would be better served by working these issues out quickly.
The arguments are a little muddled right now. Cooler heads need to prevail, and the details need to be worked out.
- here's some background from the New York Times
Bank of America: No capital raise due to putbacks
Bank of America seeks grip on foreclosure risks amid uncertainty
Populist foreclosure issue perfect for media
Fed moves against Bank of America in foreclosure mess