Housing Market, Mortgage Crisis | featured news

"It was not the banks that created the mortgage crisis. It was, plain and simple, Congress," said New York City Mayor Michael Bloomberg at an event for business leaders.

Proposed rules sparked by the financial industry meltdown could have the effect of shutting many lower-income buyers out of the mortgage market, critics say.

Bank of America Corp is working to improve profits by reducing its number of problem mortgages and cutting other costs, Chief Executive Brian Moynihan told shareholders on Wednesday. Moynihan, speaking at the company's annual meeting in downtown Charlotte, said the mortgage business of the largest U.S. bank by assets is "still struggling mightily" as it slowly crawls out from under the billions in soured home loans.

That figure, projected through 2013, represents a worst-case scenario that assumes a double-dip recession, the Federal Housing Finance Agency says. The finance giants have so far received about $148 billion in taxpayer funds.

Curtailing a moratorium sooner than expected, Bank of America said it would resume 102,000 foreclosures in 23 states where court approval is needed to go ahead.

Lenders took back more homes in August than in any month since the start of the U.S. mortgage crisis.

In a counterintuitive solution, nonprofits in Boston are selling houses back to owners after foreclosure.

Many critics of the Obama administration's mortgage loan-modification program say it won't work because it doesn't do enough to address "negative equity," the plight of people who owe more on their home loans than the current value of those properties. Without equity in their homes, these critics say, borrowers have little incentive to keep paying and are apt to walk away as soon as things get tough, if not before.

Daverena White took a chance on the American dream of homeownership -- and lost big.

Frustrated by the banks' inability or unwillingness to stop an avalanche of foreclosures, the states are considering lawsuits over the creation and marketing of millions of bad loans as well as the dismal pace of mortgage modifications.

Such cases would have been impossible until recently, because federal regulators had exclusive oversight of national banks. But a 5-to-4 Supreme Court decision in June allowed the states to exercise their own supervision, giving them significant leverage.