THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING

Wall St. against foreclosure halt

White House also has concerns

By Nishad Majmudar and Tom Keene
Bloomberg News / October 12, 2010

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

Your article has been sent.

Text size +

NEW YORK — Calls for a total freeze on foreclosures ran into opposition from Wall Street and the White House amid predictions that clearing up faulty paperwork and resuming evictions may take as little as two weeks.

A complete halt would be “catastrophic’’ for the US economy and hurt home sales, said a statement from Tim Ryan, president at the Securities Industry and Financial Markets Association, Wall Street’s biggest lobby.

A day earlier, David Axelrod, a senior adviser to President Obama, said a moratorium would damage the housing market.

Bank of America halted foreclosures in all 50 states last week, while lenders including JPMorgan Chase and Ally Financial have stopped evictions in 23 states where courts supervise home seizures.

They’re checking allegations that employees used unverified or false data to speed the process. Lawmakers, attorneys general, and community groups have called for banks to follow Bank of America’s example.

“It would be catastrophic to impose a systemwide moratorium on all foreclosures and such actions could do damage to the housing market and the economy,’’ said the association. “The mortgage market, investors, and the health of the economy are all inter-related.’’

The association, which represents Wall Street securities firms, banks, and asset managers, said a moratorium would “unjustly’’ create losses for housing market investors, including workers with pensions, retirement accounts, or mutual funds, and “further constrain consumer credit and spending’’ because of uncertainty in the securitization market.

Brian Moynihan, chief executive officer at Bank of America, has said the bank wants to check its work, which could take a few weeks.

The halt by US lenders to review documents is just a “processing issue’’ and won’t affect bank profits, according to Thomas Brown, chief executive officer of Second Curve Capital. His New York-based investment firm specializes in financial companies.

Brown said he met with JPMorgan officials last week and learned the company expects to clear up its foreclosure review in “a couple weeks,’’ adding that the process for the entire industry could take as long as 30 days.

Axelrod said on CBS’s “Face the Nation’’ program that there are valid foreclosures that ought to proceed, and the White House is urging the industry to get the situation “unwound very, very quickly.’’