Banks freezing foreclosure proceedings and sale to review their foreclosure proceedings is hardly news. The truth is, though, that not everybody knows where the issue really stemmed from and what foreclosure freezing could mean to the housing industry and the economy as a whole. The following will shed light to some commonly asked questions about the latest buzz on foreclosure delays.

Some owners have cried foul over some foreclosure proceedings and when their lawyers looked into the matter, that’s when they unearthed the fact that robo-signing – or signing thousands of affidavits without checking accuracy of supporting papers or having a notary present – has been present in almost all major lender companies. Getting depositions from officials preparing legal documents for foreclosure court approval who confirm this practice indeed exists has been the root of the current foreclosure mess. Through the press, claims of fraud – such as forged signatures and backdated documents – also surfaced.

Because of these depositions and lawyer claims, a lot of things have happened. Major banks have stopped foreclosure proceedings – Bank of America suspended foreclosures in all 50 states while some like JPMorgan Chase and GMAC Mortgage did the same but only for the 23 states where foreclosures call for a judge’s approval. PNC Financial Services and Litton Loan Services may not have stopped foreclosure but both claim they are currently undergoing review of current processes. Even the Senate Banking Committee has scheduled a hearing on the 16^th of November.

But it’s not only the banks that are looking into the matter. Just a week ago, state attorneys general have launched joint investigation into the claims of foreclosure fraud and the Justice Department is doing its own inquisition.

It’s not enough though to know that foreclosure fraud exists, it is also wise to look at how the effect (which is foreclosure freezing) will affect the housing market recovery. President Obama has already given a bit of a preview: he said no to a national foreclosure as it could damage the fragile housing market recovery. And he does have a point.

On one hand, the current fiasco has allowed homeowners to stay in their homes longer. On the other, it will postpone sales of abandoned and repossessed homes, keeping those properties vacant for long. Such delay is costly not just for the banks but for the taxpayers as well, since the government-owned Fannie Mae and Freddie Mac would have to keep paying for the maintenance on properties that fail to sell.

The issue makes one wary of buying foreclosed properties. Don’t fret, says analysts: it is still okay to buy foreclosed homes, just make sure you do so along with title insurance policy.