Bank of America Resumed Default Notices Last Year After Brief Halt

NEW YORK — Bank of America Corp. confirmed Tuesday that during its nationwide moratorium on foreclosures last fall, it also stopped delivering notices to delinquent homeowners that typically inform borrowers the bank is starting foreclosure.

The bank resumed foreclosures it had halted, along with notices of disclosure, in December.

That the bank specifically stopped issuing notices of default to borrowers during its moratorium is a new line in a story the bank longs to close. It is also not terribly surprising, given it was unlikely the bank would have initiated foreclosures during its review of its processes.

Earlier Tuesday, CNBC reported the bank had stopped notice of defaults in some states, along with the halt to foreclosure sales in the rest of the country that had been the focus of most reports on the problem. That report followed an article in the American Banker that highlighted notices of default as another possible legal headache for banks. The story said lawsuits have started pointing to issues in notices of default that echo issues found in foreclosure files that caused waves in the industry.

Last October, the nation's largest bank by assets first moved to stop foreclosure sales in 23 states where courts have jurisdiction over the process, citing an epidemic of potentially fraudulent paperwork.

The bank, along with its giant lending peers, was caught using so-called robo-signers, employees who rapidly authenticated the massive piles of foreclosure paperwork without checking the facts behind the pages. Affidavits and signatures of the robo-signers had indicated they had, in fact, checked the documents, causing a legal stir for the banking industry.

A week after the initial halt, Bank of America imposed a nationwide moratorium on foreclosures and the sale of foreclosed homes, including the non-judicial states that don't require court oversight.

That expansion, to the 27 non-judicial states, led the bank to stop sending new notices of default.

Bank of America spokeswoman Jumana Bauwens said in an emailed statement the bank restarted the process, in both judicial and non-judicial states, in December, as it had said at that time.

"The foreclosure process was restarted after a review of procedures including notices of default in non-judicial states," the statement read. "Moving through the foreclosure backlog is a critical step to restoring the housing market and the nation's economy."