Bad News for Bank of America; Worse News for the Consumer

Jason Grodensky paid cash for his house in South Florida last December. With no mortgage and sole ownership, the last thing he worried about was the possibility of foreclosure. Nevertheless, Bank of America foreclosed on the house seven months later. It wasn’t until Grodensky brought his problem to the attention of the Sun Sentinel, that it began to be resolved. Bank of America has said it will straighten out the mess at its own cost.

According to The New York Times, this may be just the tip of the iceberg. In order to feed the investment community’s insatiable hunger for mortgage-backed securities, many banks — including JP Morgan Chase and GMAC Mortgage — took short-cuts and made errors in the recording of deeds. As a result, they’re putting a temporary halt to foreclosures. It’s a step in the right direction, but clearly not the total solution to a complex public relations problem that could continue to haunt lenders, their customers and investors for a long time to come.