Foreclosures Grind to a Halt. What's the Impact on Bank Stocks?

bigdog posted on 10/12/10 at 09:38 AM

What do you make of the news that Bank of America (BAC) halted foreclosures last week, pending investigation into so-called "robo-signer" employees who were churning out foreclosures without complete documentation? The WSJ nicely summarizes the story in its article, BofA Halts All Foreclosure Sales by Dan Fitzpatrick and Damien Paletta.
PNC Financial (PNC)Ally Financial (GJM) and JPMorgan Chase (JPM) halted their own foreclosures for a month in 23 states, according to the Associated Press
So what does this move mean for financial stocks and the housing sector generally? 
In his article Foreclosures, ForestalledWSJ reporter Robbie Whelan goes macro in his commentary. He wants the foreclosure process to be streamlined at the federal level, since the 23 states where foreclosures must be approved by a judge are way behind in terms of processing their backlog. The longer this drags out, Whelan contends, the slower our housing recovery will be.
Over at Seeking Alpha, Reuter's Felix Salmon could be more doomsday in his prediction of where all this is leading. His article, Where is the Foreclosure Mess Leading?, will have you wanting to hit the hard stuff for relief, but it's a must-read to get a handle on the worst-case scenario. 
Over at the Washington Post, financial columnist Ezra Klein interviews Janet Takavoli, the so-called "Cassandra of Credit Derivatives" who saw the storm clouds on the horizon well before others in her field. That interview's title gives you her take on the whole thing: a full-bore disaster. "This is the biggest fraud in the history of the capital markets," she says. Wow, that's strong stuff! This forum thread about Takavoli's take on foreclosures is a great way to go deeper into the analysis on this subject - and speak your mind yourself. 
If you're looking for a super-simple breakdown, Annie Lowrey of the Washington Independent does a nice, concise job in her article, Who are the Winners and Losers in the Foreclosure Fraud Crisis? Taking the stock-investing angle, TheStreet's Laurie Kulikowski outlines a few more stocks impacted by this development.
What are you making of this news?
[image: Padlock 1 & Key 5 by Brenda Starr on Flickr]

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Posted by bigdog on 10/12/10 at 09:38 AM

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