JPMorgan Chase & Co., the third-biggest U.S. mortgage servicer, said it’s asking courts to delay judgments in pending foreclosure cases while the bank reviews and possibly resubmits statements.
JPMorgan began to “systematically re-examine” foreclosure filings after learning that employees may have signed affidavits without personally reviewing underlying records, relying instead on other personnel, said Thomas Kelly, a spokesman for the New York-based firm. The review includes at least 56,000 loans and covers 23 U.S. states in which courts oversee the foreclosure process, a person briefed on the matter said.
“We have requested that the courts not enter judgments in pending matters until we complete our review,” Kelly said yesterday. The review is expected to be finished in “a few weeks,” he said.
Attorneys general in at least five states are investigating borrowers’ claims that some of the nation’s largest home lenders and loan servicers are making misstatements in foreclosures. Ally Financial Inc. said last week it found a “technical” deficiency in the foreclosure process at its GMAC Mortgage unit allowing employees to sign documents without a notary present or with information they didn’t personally know was true.
Misstatements may stall foreclosures in some states and exacerbate losses for bonds backed by home loans, Fitch Ratings said in a statement yesterday. Fitch is reviewing how servicers handle foreclosures and may downgrade them if they aren’t taking adequate steps to avoid lapses, Diane Pendley, a managing director at the ratings company, said in the statement.
“Any servicer with a significant portion of their portfolio in judicial foreclosure states will be either directly or indirectly impacted by the attention focused on this problem,” she said.
In a May 17 deposition, a Chase Home Finance operation supervisor said she was among eight managers who together sign about 18,000 documents a month, according to a transcript of her comments provided by lawyers for a Palm Beach County, Florida, homeowner. Asked how documents were prepared for signature, the supervisor said she relied on other people at the firm.
Moody’s Investors Service yesterday placed Chase Home Finance and JPMorgan Chase Bank’s servicer-quality ratings on review for possible downgrade, citing “irregularities in Chase’s foreclosure process that have recently come to light.”
“These incidents could result in delayed foreclosures and longer REO timelines,” Moody’s analysts Linda Stesney and Francis Wissman wrote in a report, using an acronym that refers to a bank’s repossession of property. “The timelines may be extended should certain jurisdictions require restarting the foreclosure process of loans already in foreclosure.”
JPMorgan believes the accuracy of statements about loans wasn’t affected, Kelly said. The bank will resubmit affidavits where it is “appropriate,” and it asked attorneys to review its process for preparing and signing affidavits, he said.
As of June 30, JPMorgan serviced $1.35 trillion of U.S. home mortgages, or almost 13 percent of the market, according to industry newsletter Inside Mortgage Finance. The other servicers in the top five are Bank of America Corp., Wells Fargo & Co., Citigroup Inc. and Ally.