One of the country’s largest banks, J.P. Morgan Chase, has just announced that it will suspend foreclosures in 23 states where there are a lot of troubled homeowners fighting court-ordered evictions with allegations of faulty documents and forged signatures on mortgage foreclosure papers.
Last week, another large bank, Ally Financial, announced the same problem and suspended post-foreclosure processes and evictions by its mortgage unit, GMAC Mortgage, in 23 states. It did not, however, suspend foreclosures. In Ohio, the state attorney general has asked courts in the state to review all GMAC foreclosure cases after GMAC admitted that some of its employees were filing foreclosure affidavits without first verifying the documents.
Ally Financial, formerly known as GMAC, is still 56.3-percent owned by the U.S. government as it has not paid its $17-billion bailout debt. Among other states investigating GMAC Mortgage practices are California, Connecticut, Colorado and Illinois.
In May this year in Florida, law firm Ice Legal got a deposition from a JPMorgan executive wherein she admitted that she was part of an eight-person group that signs 18,000 foreclosure documents every month without first reviewing the papers personally.
With these foreclosure suspensions, distressed homeowners and housing advocates could be more emboldened to fight foreclosure proceedings. The filing of class-action lawsuits is a possibility if it’s found that a large number of homeowners were harmed by the faulty foreclosure reviews and if more large banks are found to be deficient in how they document their foreclosure cases.
What’s certain for now is the temporary relief experienced by seriously delinquent homeowners in the 23 states where JPMorgan suspended its foreclosures and where Ally suspended its post-foreclosure processes. While investigations are made by banks and by states, troubled homeowners can take advantage of the time to pursue the best foreclosure alternatives that match their situations, or to craft Plan As and Plan Bs in case foreclosure is inevitable.
According to GMAC and JPMorgan officers, they don’t expect a lot of homeowners being harmed by the faulty documentations as they believe the facts stand. Nevertheless, they pledged to make the appropriate actions in favor of homeowners found to have suffered unjustly by the lack of reviews.
In the larger scope of things, according to analysts, the nationwide housing market and again the national economy could be further harmed if foreclosures ground to a halt, mortgages remain unpaid, investors leave the mortgage market, and mortgage banks refuse to lend. Already, Fitch and Standard & Poor’s announced their intentions to downgrade the mortgage servicing units of the country’s largest banks after JPMorgan and Ally announced their suspensions. They said that the documentation problem is not industrywide and is not limited to Ally and JPMorgan.
With these developments, what then for troubled homeowners? The best move is still the often repeated advice, which is to gather one’s financial documents and analyze options with the help of a certified housing counselor. The extra time provided by the suspensions can be used to add a Plan C or strengthen one’s Plan A and Plan B.