Foreclosure Paperwork Problem Broadens
by Marian WangProPublica, Oct. 4, 12:17 a.m.
Three of the nation’s largest mortgage servicers have halted foreclosures as scrutiny increases over whether they verify the required paperwork [1]. Several other servicers have also been faulted for foreclosure affidavits that were signed without much authentication, but they have not yet halted foreclosures.
Last week, we noted that the discovery of “robo-signers” [2] — employees who signed off on thousands of foreclosure documents without much, if any, knowledge of their accuracy — had caused Ally Financial’s GMAC mortgage unit to freeze foreclosures in 23 states where foreclosures require a court order.
Since then, Bank of America [3] and JPMorgan Chase [4] have joined GMAC in halting foreclosures in those states. Together with Wells Fargo and Citigroup, these make up the nation’s top five mortgage servicers, with a 71 percent market share [5], as Bloomberg has noted. (Wells Fargo and Citi both have faced questions [6] about their foreclosure affidavits.)
The Associated Press reported late Sunday that a Wells Fargo executive acknowledged in a May deposition that he had signed hundreds of foreclosure documents each week without verifying any information aside from the date [7]. The company, nonetheless, told AP it had no plans to halt foreclosures and was confident of the documents’ accuracy. (As we’ve noted, other banks — including those that have chosen to halt foreclosures — have also expressed confidence in the accuracy of their documents and played down the likelihood of mistaken foreclosures, despite the flawed paperwork [2].)
The Wall Street Journal reported today on a homeowner who was engaged in a foreclosure proceeding with IndyMac [8], which is now called OneWest Bank. A judge threw out the case after ruling that the servicer’s use of a robo-signer meant the affidavit — which establishes basic facts such as the bank’s ownership of a mortgage — had not been properly reviewed. The judge also concluded that the affidavit was incorrect; IndyMac didn’t own the mortgage and therefore did not have standing to foreclose.
The broadening scope of these problems shouldn’t be surprising. Officials at Fitch, a credit rating agency, recently noted that the processing “defects” are industrywide [9].
The breadth of these problems could initiate a Justice Department investigation or, for public companies like JPMorgan and Bank of America, a civil investigation by the Securities and Exchange Commission over the servicers’ disclosures to investors, according to Peter Henning [10], a securities law expert and blogger for The New York Times’ White Collar Watch.
More homeowners will likely challenge servicers’ foreclosure cases in court, which may ultimately prolong the housing slump [11], as Bloomberg pointed out.
We’ve noted that the paperwork flaws are only one of the many types of problems [12] experienced by homeowners fighting foreclosure. For example, our reporting on the mortgage modification process has also uncovered instances in which banks failed to follow the rules [13] and were sloppy with the handling of paperwork. In some cases, homeowners being helped by one part of a bank have been foreclosed on by another part of the bank.
Wednesday, October 6, 2010
Tuesday, October 5, 2010
What is Really For Sale?
BofA Will Delay Foreclosure Cases to Ensure Documents Are Valid
By David Mildenberg - Oct 1, 2010 6:01 PM ET
Bank of America Corp. became the latest firm to delay foreclosures as state officials stepped up pressure for a moratorium on evictions because lenders may have submitted faulty documents.
Bank of America will investigate all affidavits in cases that have not yet gone to judgment in 23 states where courts have jurisdiction over home seizures, spokesman Dan Frahm said. He estimated “tens of thousands” of the documents will be studied and the process will take from “several days to a couple of weeks.”
Banks are under pressure to halt foreclosures after court documents showed JPMorgan Chase & Co. and Ally Financial Inc. employees may have submitted affidavits supporting their claims without confirming their accuracy. Federal lawmakers and state officials have said such practices could amount to fraud. JPMorgan has said it will ask judges to postpone foreclosure rulings, while Detroit-based Ally said Sept. 21 its GMAC Mortgage unit would halt evictions.
Bank of America’s freeze “hopefully will give peace of mind to those monitoring the industry that we’ve used an abundance of caution that those foreclosures in process are handled correctly,” Frahm said in an interview. The Charlotte, North Carolina-based firm is not acknowledging that its associates have made errors in the foreclosure process, Frahm said.
“The extent of the problem is enormous,” said Max Gardner, a Shelby, North Carolina attorney who is involved in several lawsuits representing borrowers alleging improper loan servicing practices by banks. “It’s totally unrealistic for the bank to say they can complete this study in a couple of weeks.”
State Action
Attorneys general in at least six states are investigating borrowers’ claims that some of the nation’s largest home lenders and loan servicers have taken improper legal shortcuts to speed foreclosures. In Washington, Acting Comptroller of the Currency John Walsh asked the nation’s seven biggest lenders to review foreclosures for defective documents, according to the Housing Wire website.
Home foreclosures in Connecticut should be frozen for 60 days because of “defective” documents, Attorney General Richard Blumenthal said today in a request to the state Judicial Department. In California, Attorney General Jerry Brown said JPMorgan should be asked to prove its home foreclosures are legal, and must stop the practice if it can’t.
Citigroup, Wells Fargo
Citigroup Inc., the third-largest U.S. bank by assets, constantly reviews its document processes, “and we have strong training to ensure that appropriate employees are fully aware of the proper procedures,” said spokesman Mark Rodgers in an e-mailed statement. “Foreclosures are monitored to make certain that staffing is adequate to review the affidavits properly.”
Wells Fargo, ranked fourth by assets and the nation’s biggest home lender, said its “policies, procedures and practices satisfy us that the affidavits we sign are accurate,” according to an e-mailed statement yesterday from Vickee Adams at the San Francisco-based bank. “We will stand by our affidavits and, if we find an error, we will take the appropriate corrective action.”
To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net To contact the editor responsible for this story: Alec D.B. McCabe in New York at amccabe@bloomberg.net.
By David Mildenberg - Oct 1, 2010 6:01 PM ET
Bank of America Corp. became the latest firm to delay foreclosures as state officials stepped up pressure for a moratorium on evictions because lenders may have submitted faulty documents.
Bank of America will investigate all affidavits in cases that have not yet gone to judgment in 23 states where courts have jurisdiction over home seizures, spokesman Dan Frahm said. He estimated “tens of thousands” of the documents will be studied and the process will take from “several days to a couple of weeks.”
Banks are under pressure to halt foreclosures after court documents showed JPMorgan Chase & Co. and Ally Financial Inc. employees may have submitted affidavits supporting their claims without confirming their accuracy. Federal lawmakers and state officials have said such practices could amount to fraud. JPMorgan has said it will ask judges to postpone foreclosure rulings, while Detroit-based Ally said Sept. 21 its GMAC Mortgage unit would halt evictions.
Bank of America’s freeze “hopefully will give peace of mind to those monitoring the industry that we’ve used an abundance of caution that those foreclosures in process are handled correctly,” Frahm said in an interview. The Charlotte, North Carolina-based firm is not acknowledging that its associates have made errors in the foreclosure process, Frahm said.
“The extent of the problem is enormous,” said Max Gardner, a Shelby, North Carolina attorney who is involved in several lawsuits representing borrowers alleging improper loan servicing practices by banks. “It’s totally unrealistic for the bank to say they can complete this study in a couple of weeks.”
State Action
Attorneys general in at least six states are investigating borrowers’ claims that some of the nation’s largest home lenders and loan servicers have taken improper legal shortcuts to speed foreclosures. In Washington, Acting Comptroller of the Currency John Walsh asked the nation’s seven biggest lenders to review foreclosures for defective documents, according to the Housing Wire website.
Home foreclosures in Connecticut should be frozen for 60 days because of “defective” documents, Attorney General Richard Blumenthal said today in a request to the state Judicial Department. In California, Attorney General Jerry Brown said JPMorgan should be asked to prove its home foreclosures are legal, and must stop the practice if it can’t.
Citigroup, Wells Fargo
Citigroup Inc., the third-largest U.S. bank by assets, constantly reviews its document processes, “and we have strong training to ensure that appropriate employees are fully aware of the proper procedures,” said spokesman Mark Rodgers in an e-mailed statement. “Foreclosures are monitored to make certain that staffing is adequate to review the affidavits properly.”
Wells Fargo, ranked fourth by assets and the nation’s biggest home lender, said its “policies, procedures and practices satisfy us that the affidavits we sign are accurate,” according to an e-mailed statement yesterday from Vickee Adams at the San Francisco-based bank. “We will stand by our affidavits and, if we find an error, we will take the appropriate corrective action.”
To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net To contact the editor responsible for this story: Alec D.B. McCabe in New York at amccabe@bloomberg.net.
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