The growing scandal over the improper, and perhaps fraudulent, foreclosures on homes by US banks is becoming both a financial and a political hot potato. Wall Street is being forced to admit to yet more unsavoury practices linked to mortgage bonds and President Barack Obama has been dragged into the affair.
Several US banks, including Bank of America, have been forced to halt foreclosures in 23 states that require banks to go to court to repossess delinquent borrowers’ homes after it emerged that the documents were being rubber-stamped by “robo-signers” – officials who signed up to 10,000 a month, hardly glancing at them.
The banks and their defenders mutter that this is all a bureaucratic technicality and much ado about nothing. Almost all the borrowers had defaulted on their mortgages, they point out, and the problem is simply of the paperwork being improperly prepared, which can be corrected.