Another lender stalls foreclosures
JPMorgan Chase orders a review of foreclosure paperwork to be sure legal requirements are met.
First was GMAC Mortgage, a subsidiary of Ally Financial, which halted some foreclosures a week ago to double-check its work. Today came JPMorgan Chase (JPM), which has some 56,000 loans in foreclosure.
The affidavits are required so that judges can clear the foreclosures and allow lenders to take possession of the properties.
The employees apparently are looking at thousands of files each month and rely on others to say the packages are accurate. And the sheer volume means more chances of error, especially as states try to speed up their foreclosure processes.
According to Marketwatch, Dustin Zacks, a Florida lawyer, deposed a Chase employee who said she and eight others in her department signed about 18,000 foreclosure-related documents a month, including affidavits of indebtedness. But when Zacks asked if she'd had read the materials in the files, she said she hadn't.
Some experts don't expect the delays to reduce the number of foreclosures over the long run.
"It will probably slow things down for a couple months while these documents are reviewed," said Rick Sharga, a senior vice president at foreclosure listing service RealtyTrac, told The Associated Press. "It won't stop things."
But if the problems turn up at more of the largest mortgage companies, a foreclosure crisis that's already likely to drag on for several more years could persist even longer.
The way mortgages are packaged and sold to many investors as securities can make it hard to determine who has the right to foreclose on a homeowner.
In some states, lenders can foreclose quickly on delinquent mortgage borrowers. But 20 states use a lengthy court process for foreclosures. They require documents to verify information on the mortgage, including who owns it. Florida, New York, New Jersey and Illinois are the biggest states with this process.
After GMAC's announcement, attorneys general in California and Connecticut told the company to stop foreclosures in their states until it proves it's complying with state law. The Ohio attorney general this week asked judges to review GMAC foreclosure cases.
And in Florida, the state attorney general is investigating four law firms, two with ties to GMAC, for allegedly providing fraudulent documents in foreclosure cases.
The issue is also gaining attention on Capitol Hill. Last week, Rep. Barney Frank, D-Mass., and two other lawmakers wrote to Fannie Mae, urging the government-controlled mortgage giant to stop working with so-called "foreclosure mill" law firms under investigation for document fraud.
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