JP Morgan Chase Suspends Foreclosures

JP Morgan Chase is suspending 56,000 home foreclosures to review legal procedures. The move comes just days after <"">GMAC Mortgage suspended an undisclosed number of foreclosures in order to do the same.

According to The New York Times, JP Morgan Chase said it is taking the action because some of its employees might have improperly prepared the necessary documents. As was the case with GMAC, the foreclosure suspension applies to 23 states where foreclosures require a court order.

Both JP Morgan Chase and GMAC employed people who could sign documents so quickly they popularized a new term for them: “robo-signer,” the Times said. In depositions taken by lawyers for embattled homeowners, the robo-signers said they or their team had signed 10,000 or more foreclosure affidavits a month. Those affidavits say the preparer personally reviewed the files, but in their depositions, the workers acknowledge they had no time to actually do that.

GMAC issued a two-page “urgent” memo dated September 17 telling brokers to immediately stop evictions, cash-for-key transactions, lockouts and to suspend sales of properties already taken back by the bank in foreclosure in 23 states. GMAC also began withdrawing affidavits in pending court cases.

According to the Times, JP Morgan Chase has not withdrawn any affidavits and is allowing sales to proceed.

Both lenders have characterized the issues technical problems that will soon be remedied with new filings. But according to the Times, lawyers representing homeowners in default are seizing on the lapses, and say they will work to have the cases thrown out.

Several states attorneys general have already opened investigations into foreclosure lapses. California, Connecticut, Illinois and Colorado have asked GMAC’s parent company, Ally Financial, to suspend foreclosures in those states. According to the Times, the Florida attorney general’s office – one of the states hardest hit by the mortgage meltdown – says it is investigating four so-called foreclosure mills.

According to a report in the Minneapolis Star Tribune, Senator Al Franken (D-Minn.) sent a letter Wednesday to the heads of a half-dozen federal agencies — including the Treasury, Federal Reserve and Justice Department — calling for an investigation of Ally Financial’s foreclosure practices. Franken wrote that homeowners who “have been forced to defend against illegitimate foreclosure actions” should be identified and “must receive proper restitution and compensation.” Franken also asked that the federal agencies improve their industry-wide oversight.

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