In late 2010, a number of banks with mortgage servicing operations declared moratoriums or suspensions on some aspects of foreclosure proceedings, a move that appears to have been prompted by revelations about the banks’ alleged substandard foreclosure practices. By mid-October 2010, it was reported that the Office of the Comptroller of the Currency and the attorneys general of all 50 states were launching investigations into issues surrounding the mortgage foreclosures.
Meanwhile, the foreclosure suspensions were announced at approximately the same time that mortgage servicing was coming under increasing scrutiny by investors in mortgage-backed securities (MBS). These investors have seen a substantial decrease in the value of their MBS holdings over the last few years, which has led some to pressure the banks that sold the mortgage loans securitized in the MBS into repurchasing some of the loans.
In this paper, Foreclosure Suspensions and Other Mortgage Disputes, we address the history of this episode of foreclosure suspensions; discuss economic implications of the suspensions; look at other areas where the banks are facing allegations of mortgage documentation issues; examine where put-backs may occur; and consider some potential litigation related to these issues.
The full paper is available for download here.