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Bank of America is halting foreclosures across U.S.

Bank of America, the biggest U.S. lender, extended a freeze on foreclosures to all 50 states on Friday as concern spread among federal and local officials that homes are being seized based on false data.

The announcement came on the day N.C. Attorney General Roy Cooper had given the Charlotte-based bank a deadline for suspending foreclosures in North Carolina. Cooper has asked 13 other large mortgage servicers also to halt foreclosures in the state until they prove their processes are legal.

Bank of America's new policy makes it the first lender to halt foreclosure sales nationwide, and the announcement spurred more demands from public officials for other banks to follow suit.

"All mortgage providers should follow the example of Bank of America and review their practices to ensure that they are not unfairly targeting homeowners," Senate Majority Leader Harry Reid, a Democrat from Nevada, said in a statement.

Cooper said Bank of America "has done the right thing. ...Other banks that have questionable procedures should do the same while the investigation continues."

At least seven states are investigating claims that home lenders and loan servicers took shortcuts to speed foreclosures.

Friday evening, Bloomberg News, citing a source, reported that attorneys general in about 40 states are in talks to announce next week a joint investigation into foreclosures at the largest banks and mortgage firms.

In Washington, dozens of lawmakers have called for a freeze on foreclosures and are seeking investigations. Sen. Christopher Dodd, D-Conn, chairman of the Senate Banking Committee, said he would hold a hearing on the issue next month.

Bank of America chief executive Brian Moynihan expects the issue to be resolved in three to four weeks, he told a reporter Friday at the National Press Club in Washington.

Moynihan said he's not concerned about any Bank of America foreclosure filings being fatally flawed. He said he's confident it is only a paperwork issue.

"You have to remember, we've been working with these people for three years, trying to resolve these issues," he said.

The move by Bank of America came as PNC Financial Services became the fourth major bank to announce that it would stop foreclosures in at least some states. Bank of America had said a week earlier it would stop foreclosures in the 23 states where the process must be approved by a judge. Ally Financial and JPMorgan Chase had announced similar plans.

Bank of America's halt will apply to homes the bank is taking back itself and those for which it has transferred the papers to mortgage buyers Fannie Mae and Freddie Mac.

The foreclosure process varies from state to state. At issue are instances in which banks use so-called "robo signers" to rapidly approve documents without verifying the information they contain. In other cases, questions have been raised about the notarization of the documents.

In a deposition obtained by Cooper's office, a Bank of America employee in Texas testified she would sign as many as 8,000 documents in a month, often in batches. In another case, a Wells Fargo supervisor based in Fort Mill, S.C., testified to signing 50 to 150 documents per day. A Wells spokesman noted a judge reviewed the bank's procedures and dismissed the borrower's case, confirming the foreclosure as valid.

Wells Fargo spokeswoman Vickee Adams said the lender is still processing foreclosures and referred to a statement the bank put out earlier this week, saying "our affidavit procedures and daily auditing demonstrate that our foreclosure affidavits are accurate."

Bank of America did not say how many foreclosure cases would be affected but estimated the figure would be in the tens of thousands. The bank said in a statement that its "ongoing assessment shows the basis for our past foreclosure decisions is accurate....Providing solutions for distressed homeowners remains our primary focus."

The decision should help Bank of America manage its image during a dicey time for the industry, said Michael Robinson, a crisis communications expert with Levick Strategic Communications. Banks have been the target of widespread public anger since the financial meltdown.

"All the other banks are going to end up there anyway, either because they're going to be forced, or by political pressure," he said. "Americans, otherwise known as customers and voters, aren't over the economic crisis. You don't want to become a political piñata."

Lenders took possession of a record 95,364 homes in August and issued foreclosure filings to 338,836 homeowners, or one of every 381 U.S. households, according to RealtyTrac Inc., an Irvine, Calif.-based data vendor.

Banking and housing analysts fear the foreclosure document problems could prolong the already slow recovery in the housing market. Even if foreclosure is inevitable for tens of thousands of homes, the process could now drag out for years.

"If you are looking at the key in this country to economic stability, it's the housing industry," said banking analyst Nancy Bush of NAB Research. "This is a huge mess that helps nothing."

And some analysts and real estate agents worry the uncertainty about the document mess could make potential buyers change their minds about purchasing foreclosed properties. That's because of fears that the former owners could turn around and sue.

"It's going to make people even more cautious: 'Gosh, do I go in on a foreclosure?'" said San Diego real estate agent Jerry Adams Jr., who said he has seen one sale put on hold. "It concerns me a lot."

The suspension in foreclosures could prop up home prices in the short term because fewer cheap homes would pour onto the open market in coming months. When those properties are ultimately for sale, the overall economy could be in better shape.

"The irony is, it may actually support the recovery," said Mark Zandi, chief economist at Moody's Analytics. "It may be that when those properties actually hit the market, the economy is in a better place."

Staff writers Kirsten Valle and Rick Rothacker, Mark Seibel of McClatchy Newspapers, and The Associated Press and Bloomberg News contributed.

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