WASHINGTON — The pressure on servicers and lenders to voluntarily cease foreclosures continues to build and shows no sign of slackening.
The latest call came Friday from San Diego City Attorney Michael Aguirre, who asked Bank of America Corp. to agree to a voluntary moratorium on foreclosures of certain mortgages originated by Countrywide Financial Corp.
It followed a string of such requests, including one last week from House Financial Services Committee Chairman Barney Frank, who said lenders should delay foreclosures if struggling borrowers may be eligible for a refinancing program due to start up in October.
Servicers have largely resisted calls for a blanket foreclosure moratorium, but industry representatives said the chorus of voices urging one is liable to get louder.
"They are going to continue to increase," said William Longbrake, vice chairman of Washington Mutual Inc. "As the number of the foreclosures continues to escalate, the pressure will only get greater for [a] moratorium. It's tough times."
Consumer groups and many public officials have argued that a blanket moratorium is needed because servicers are not moving fast enough to modify loans.
But bankers say a blanket halt of foreclosures would only prolong a bad situation and is not really feasible. Instead, they say, modifications must continue to be made case-by-case.
"We're already working hard to do it, and there are market circumstances at play. Each borrower's circumstance is different," said Scott Talbott, the senior vice president for government affairs at the Financial Services Roundtable. "A blanket call for a moratorium is a one-size-fits-all, and it's a case-by-case analysis."
Mr. Aguirre sent a letter to B of A's legal counsel in Los Angeles asking the company to halt foreclosures in San Diego related to certain loans originated by Countrywide, which the Charlotte company bought in June.
"While Bank of America did not create the problems associated with Countrywide's predatory lending practices, it is uniquely positioned to rectify Countrywide's past conduct as well as further enhance its standing as a community leader," Mr. Aguirre wrote.
On July 23, he filed a civil complaint against Countrywide and B of A alleging that the Calabasas, Calif., lender had engaged in a "pattern of unlawful, fraudulent, or unfair predatory real estate lending practices." This has put some San Diego residents "in jeopardy of losing their homes through foreclosures," he wrote. The lawsuit, which listed several questionable underwriting practices, is similar to others against Countrywide in California, Illinois, Florida, and Washington.
On July 31, Mr. Aguirre asked B of A to freeze foreclosures on a range of adjustable-rate mortgages. He has said his goal is to create a foreclosure-free zone in the San Diego area.
In an interview on Friday, Mr. Aguirre said he has not heard a response from Bank of America but is optimistic it would comply because his lawsuit gives the company a legal motive to offer modifications instead of foreclosing. In some cases, he said, servicers are reluctant to modify because many loans in securitization are limited by their terms from pursuing that option.
"This is a great opportunity for them to get some legal space to put the thing on hold and get some workouts," he said.
He also said he expects other cities and states to imitate his tactic. If Bank of America agrees to a moratorium, he said, he will ask that it be extended to the entire state.
A Bank of America spokesman said the company would respond to Mr. Aguirre in due course, but bankers and industry lawyers said they did not expect it to agree to a moratorium.
"I don't think there will be a wholesale forbearance on the foreclosures," said Gil Schwartz, a partner at Schwartz & Ballen LLP.
Robert Gnaizda, the policy director and general counsel of the Greenlining Institute, holds out hope.
"They have applied a higher standard," he said, referring to B of A's advertising tagline. "It's quite possible the pressure … will result in a positive resolution. Plus, B of A does have a brand name at stake."
At the federal level, Rep. Frank has also called for lender forbearance. He urged B of A and Wells Fargo & Co. at a hearing two weeks ago to avoid foreclosing on any borrower who may qualify for the Federal Housing Administration refinancing program that was part of a housing package recently signed into law. The FHA program is to begin operation on Oct. 1.
"I would hope that no one would be foreclosed upon between now and October 1st who would have qualified for this program, had the effective date been immediate," Rep. Frank said. "And that is within your power to do. You can show some forbearance."
Industry observers appeared more willing to accept Rep. Frank's request because it is limited in scope. "Congressman Frank's approach addresses the short-term availability of a possible remedy for everyone," said Joseph Lynyack, a partner at Venable LLP. "Absent that, you have a far more complicated analysis about an open-ended moratorium... If you simply declare no more foreclosures, with no remedy in place, I think you do some harm to the housing market."
Robert Davis, the executive vice president of government relations for the American Bankers Association, agreed. "Chairman Frank is reminding bankers that it is prudent to consider an important option and tool they have around the corner, and I think bankers will take this into consideration."
States are also pursuing bills that would ban foreclosures but have had only limited success.
In June Minnesota Gov. Tim Pawlenty vetoed a bill that would have imposed a one-year moratorium on foreclosures, telling legislators it was "not an appropriate solution" to the mortgage crisis.
Monday, the California Assembly Banking Committee is to hold a hearing on the issue. Consumer groups said they are willing to pursue legislation if the industry does not agree voluntarily.
"B of A must be forced to take the lead, and since I am dubious they will, we're going to need legislation," said Mr. Gnaizda.
