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Four major banks have halted foreclosures amid a probe of procedures used for processing documents. Questions and concerns have been raised about whether or not bank officials improperly signed and processed foreclosure documents without reviewing the information.

Bank of America, which previously halted foreclosures in certain states, said in a statement:

“Bank of America has extended our review of foreclosure documents to all fifty states. We will stop foreclosure sales until our assessment has been satisfactorily completed. Our ongoing assessment shows the basis for our past foreclosure decisions is accurate. We continue to serve the interests of our customers, investors and communities. Providing solutions for distressed homeowners remains our primary focus.”

Other banks that have halted foreclosures in 23 states include JPMorgan Chase, Ally Financial’s GMAC Mortgage Unit, and PNC Financial Services. According to the New York Times, PNC Financial has suspended sales of foreclosed homes for 30 days and is reviewing its mortgage servicing procedures.

Attorneys general in several states are investigating the banks’ handling of foreclosures, and other lawmakers and consumer advocates are calling for investigations.  Will there be more banks joining those already being investigated?

Almost twice as many people dropped out of the government’s mortgage loan modification program in June as those who received permanent modifications, according to the Treasury Department.

There were 91,000 dropouts  in June, which means that 530,000 homeowners have left the mortgage program without a permanent loan modification, reported Reuters. Only 49,000 borrowers received permanent mortgage modifications, for a total of 389,000.

The Home Affordable Modification Program (HAMP) has been criticized for not helping enough homeowners who are at risk of foreclosure. The Department of Housing and Urban Development (HUD) and the Treasury Department released the Obama administration’s July housing scorecard this week and acknowledged the challenges with helping homeowners. 

HUD Assistant Secretary Raphael Bostic said in a statement: “The housing market is performing better than the predictions made over a year ago. We’re absolutely not claiming victory, but due to the Obama Administration’s efforts, improved home affordability is continuing to provide opportunities for prospective, qualified, home buyers, while promising neighborhood stabilization efforts are helping hard hit neighborhoods start to recover.”

The housing market is still struggling to recover and the numbers could mean that more foreclosures are on the horizon. If you find yourself struggling to hold on to your home, talk with a housing counselor as soon as possible to discuss your situation. Like many Americans you may not qualify for a permanent mortgage loan modification, but there may be other options that can help your situation.

If you are planning on just walking away from your home even though you might be able to afford it, a recent rule change by Fannie Mae may make you think twice about it.

Fannie Mae announced that they are changing the rules so that there is a seven year lockout for borrowers who are considered “strategic defaulters”.

WASHINGTON, DC — Fannie Mae (FNM/NYSE) announced today policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure. Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. Borrowers who have extenuating circumstances may be eligible for new loan in a shorter timeframe.

“We’re taking these steps to highlight the importance of working with your servicer,” said Terence Edwards, executive vice president for credit portfolio management. “Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting. On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time.”

In addition to the lockout period, Fannie Mae will take whatever legal action is allowed to recoup any unpaid balance of a loan as a result of a strategic default. So it is more important than ever to try to work with your servicer if you are having mortgage problems – and if you are one of those who cannot afford your monthly mortgage payment, there are also workout options such as a short sale or deed-in-lieu of foreclosure where you could be eligible for a new mortgage loan in three years and in as little as two years depending on the circumstances.