Saturday, October 9, 2010

The Foreclosure Mess Could Last for Years

The dimensions of the foreclosure crisis keep expanding. Lenders and loan servicers including JPMorgan Chase (JPM) and Ally Financial are facing an explosion in homeowner lawsuits and state attorney general investigations of claims of falsified mortgage documents. Lawmakers in both houses of Congress have called for investigations. And procedural mistakes in the handling of mortgage documents have clouded titles establishing ownership of the homes, a problem that could plague both buyers and sellers for years. "This is going to become a hydra," says Peter J. Henning, a professor at Wayne State University Law School in Detroit. "You've got so many potential avenues of liability. You don't even know the parameters of this yet."

JPMorgan and Ally's GMAC Mortgage unit have delayed foreclosures in 23 states where courts have jurisdiction over home seizures. Bank of America (BAC) suspended foreclosures as well, pending a review of documents. In December 2009, a GMAC employee said in a deposition that his team of 13 people signed about 10,000 documents a month without verifying their accuracy. "My suspicion is that this will wind up being an industrywide issue," says Patrick Madigan, Iowa assistant attorney general. "Many companies were using robo-signers." (more)

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