Strategic default just got a lot more attractive
Has Bank of America’s PR department been taking lessons in gnomic utterances from Alan Greenspan? Here’s their announcement today in full:
“Bank of America has extended our review of foreclosure documents to all fifty states. We will stop foreclosure sales until our assessment has been satisfactorily completed. Our ongoing assessment shows the basis for foreclosure decisions is accurate. We continue to serve the interests of our customers, investors and communities. Providing solutions for distressed homeowners remains our primary focus.”
The quote marks are theirs: this is a “statement”, I guess, as opposed to a press release which might actually pretend to explain what’s going on here. But it actually gets even more ridiculous than that: BofA CEO Brian Moynihan is talking at the National Press Club today, and, according to the WSJ, “a person close to him said he isn’t expected to discuss the moratorium decision”.
If the biggest bank in the country announces that it has halted every single foreclosure proceeding in the country, you’d think it would spend a minute trying to explain what it’s doing and why. Instead, we just get meaningless pablum: “We continue to serve the interests of our customers, investors and communities. Providing solutions for distressed homeowners remains our primary focus.”
I can only conclude, here, that this decision was taken in a panicked manner, that it was pretty much imposed upon the CEO rather than decided by him, and that he wants to have some important conversations in Washington before saying anything specific about the bank’s foreclosure strategy.
But now that Bank of America has taken this step, expect GMAC/Ally to follow suit sharpish — it is owned by the government, after all, and should therefore be taking the lead in terms of trying to do foreclosures right instead of trying to push them through in a legally-dubious manner. And if those two firms end all foreclosures, the rest of the industry is going to be under a lot of pressure to do the same.
How long is the moratorium going to last? BofA says “until our assessment has been satisfactorily completed” — which could mean absolutely anything at all. But if I had to guess, I’d say through the end of this year at least. If you’re in default on your BofA mortgage, you just got a nice reprieve. And when the foreclosures start up again, you can be sure they’re going to go very slowly. Strategic default just became a lot more attractive.