National

Oct 11, 2010 10:31 AM by Associated Press

Foreclosure freeze could undermine housing market

Karl Case, the co-creator of a widely watched housing market index, was upbeat three weeks ago. Mulling the economy while at a meeting at a resort near the Berkshires, Case thought the makings of a recovery were finally falling into place.

Today, Case's mood is far more subdued. In scarcely two weeks, he and other housing analysts have watched as the once-staid world of back-office bank procedures has spawned a scandal that threatens to further unhinge the housing market.

Allegations of possible mortgage fraud against major banks read like a corporate thriller: forged documents, phantom titles and disappearing paper trails.

The uncertainty could gum up the foreclosure process for years and delay a recovery in prices.

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