GMAC/Ally’s robo-signer may have been just the beginning. “Flawed paperwork” and other “technical difficulties” may be leading to what even the federal government ultimately could not fully enforce: a widespread foreclosure moratorium. Immediately following the GMAC/Ally foreclosure freeze, J.P. Morgan Chase, the third volume mortgage lender in the country, has suspended foreclosures in 23 states due to “flawed paperwork”[1].
According to National Mortgage Professional Magazine, the lender will put a stop on approximately 55,000 foreclosures in order to “review how employees in its foreclosure operations sign affidavits about loan documents and review these documents for errors”[2]. This follows a report noting that the foreclosure department signs off on more than 18,000 foreclosure-related documents each month. Incidentally, this decision also follows the decision of a number of labor and religious leaders in Detroit to withdraw millions from the bank in order to protest the lender’s refusal to freeze foreclosures in Michigan[3]. Pastor Alexander Bullock of the Rainbow PUSH Coalition explained the move saying that “this is a matter of life and death” and that “the words of Chase officials that they are willing to help the thousands who are living in undervalued home and facing possible eviction is unconvincing in light of their refusal to seriously consider a moratorium on foreclosures.”
In 2009, JP Morgan Chase did initiate a three-week foreclosure moratorium to avoid “add[ing] to the foreclosure process any new owner-occupied residential loans.” At that time, the lender stated that it believed “three weeks adequate time” to implement a new plan[4]. Now, however, the investigations, as we have seen with GMAC/Ally, could take much longer and may have more detrimental effects on blighted neighborhoods than REO properties would.
[1]http://www.mortgagenewsdaily.com/channels/pipelinepress/09302010-scam-nmls-chase-foreclosure.aspx
[2]http://nationalmortgageprofessional.com/news20823/jpmorgan-chase-halts-55000-plus-foreclosures-amid-robo-signer-probe
[3] http://www.google.com/hostednews/afp/article/ALeqM5inzkeskNH3XB-7hZBTVXT5IiBs_g
[4] http://financialservices.house.gov/press/PRArticle.aspx?NewsID=458
