By Jordan Heller
DNAinfo Reporter/Producer
MANHATTAN — In the middle of his campaign for New York State governor, Andrew Cuomo announced Tuesday that the Attorney General's office would expand its probe of foreclosure proceedings — and asked the banks to suspend all foreclosure sales until he is finished.
On the surface, the announcement sounds like a stick in the eye of the big banks that are foreclosing on the little guy. But real estate professionals warn that a prolonged disruption of foreclosure proceedings will only delay the recovery of the housing market.
The attoney general's concern is a practice known as "robo-signing," where major mortgage banks file affidavits that falsely attest to personal knowledge of the facts presented in home foreclosure proceedings.
"I will not allow New Yorkers to lose their homes due to mortgage goliaths that buck the system," Cuomo said in a statement.
The attorney general-cum-gubernatorial candidate added that four major mortgage services — including Bank of America, JP Morgan Chase, Wells Fargo and GMAC Mortgage/Ally — have been asked to suspend current foreclosures and refrain from filing new ones until they can provide assurances to the AG's office that their procedures comply with New York law.
Prior to the announcement, Bank of America, JP Morgan Chase and GMAC announced they were halting foreclosures pending their own reviews. Wells Fargo has not issued such a statement.
"Such conduct is a fraud upon our courts and a slap in the face of New Yorkers struggling to get by in this economy," Cuomo said of the practice of robo-signing.
New York real estate professionals disagree.
"I haven't heard of a single example where someone has been foreclosed on and evicted from their home erroneously," said Robert Knakal, chairman of Massey Knakal Realty Services, a full-service real estate sales company in New York City.
"I think this is political maneuvering," he said. "This issue is one that politicians are using to make a political statement moreso than to help consumers."
Knakal and other real estate professionals warn that a moratorium on foreclosure proceedings will only delay the housing market from achieving its natural bottom.
Currently, many of the sales that have seen some life return to the American housing industry have been homes that the banks are selling in foreclosure. Last quarter, RealtyTrac said 23 percent of sales in the US were due to foreclosure.
The market needs to clear, say real estate professionals, until it can make a sustainable recovery.
"To not go through the foreclosure process because the wrong person signed a document doesn't make a heck of a lot of sense," said Knakal.
