Following in the heavy and reverse-motion steps of GMAC Mortgage, JPMorgan Chase has stopped foreclosures in 23 states to review the accuracy of its filings.
According to the bank, the cases may contain “defects” and “flawed paperwork” which could give homeowners reason to contest court-ordered evictions. JPMorgan’s foreclosure suspension affects some 56,000 borrowers.
GMAC triggered what looks like it could be a domino effect when the company announced last week that it was suspending foreclosure actions and REO sales in judicial states because of some paperwork (and human) errors in its filings.
The sheer volume of foreclosure cases materializing out of the housing crisis seems to have given rise to what’s being called the “robo-signers” – servicing execs that mechanically sign off on foreclosure actions and push them through the assembly line thousands upon thousands a month, without abiding by clearly defined laws, such as having the signature notarized and ensuring they have personal knowledge of the information’s accuracy.
Analysts say they are expecting more lenders to follow GMAC and JPMorgan and make their own foreclosure
freeze announcements in the coming weeks. These robo-signers may be commonplace fixtures in a growing number of servicing shops struggling to keep up with large numbers of foreclosure cases.
According to Mark Anaya, they are more prevalent than the industry would like to admit. Anaya is with Veritas, which performs federal and state compliance audits of mortgage loan documents.
Anaya singles out several prolific robo-signers by name with what he says are clear discrepancies in their paperwork, including John Kennerty with the Wells Fargo division America’s Servicing Company who has signed off on foreclosures bearing a number of different banks’ names; and China Brown, who has approved foreclosure cases for about 20 to 30 different banks as an officer of MERS (Mortgage Electronic Registration Systems, Inc.)
Anaya says his examinations have uncovered inconsistencies in case numbers for a single borrower; missing ownership assignments on loans that have been securitized; contradictions in the penned job titles of foreclosure approvers, some using different titles in documents signed on the same day; and flat-out fraud in instances where foreclosure was filed by a company that did not legally record a Substitution of Trustee until months later.
The repercussions of so-called robo-signers have cast a dark shadow over banks’ foreclosures practices and put the servicing business under the microscope.
Fitch Ratings issued a notice to servicers this week. The agency said, “These probes may highlight weaknesses in the processes, controls, and procedures of certain…servicers and may lead to servicer rating downgrades. 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.”
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