The recent news informed that one of the nation’s leading banks, J.P. Morgan Chase has announced to freeze foreclosures in approximately half of the country regarding the fault paperwork. According to Wall Street analysts, the action taken by J.P. Morgan Chase will pressure the rest of the industry to follow suit.
If the action is finally executed, it will affect 56,000 borrowers in 23 states, but the bigger impact may happen if other banks take the same strategy because the foreclosures process in many parts of the nation may stop abruptly. According to officials at Fitch Ratings, the flawed paperwork at J.P. Morgan Chase are industry-wide so this will be necessary to lower the grades given to mortgage servicing divisions of the country’s largest lenders.
In details, the problems found in J.P. Morgan Chase’s documents also unearthed the other problems at another large mortgage lender, Ally Financial. However, the decision taken by J.P. Morgan Chase is hoped to give significant effect on the affiliated industry since its peers hold in high regard over it.
Furthermore, the investigation will be conducted by both firms especially related to the issue whether the foreclosure files were unacceptably assembled as well as whether their employees didn’t make further review of the documents even after they sign them.
Speaking of the problems on the documents of J.P. Morgan Chase, one of the bank’s employees, Beth Ann Cottrell, confessed that she and her team had signed off on approximately 18,000 foreclosures a month without giving further check. Meanwhile, Tom Kelly, the bank’s spokesperson, stated that the firm hopes not to discover further factual problems or other problems regarding its customers, but if there are any problems appear the firm will immediately take necessary actions.
In more specific details, California, Connecticut, Colorado, and Illinois are the four states needed a moratorium related to all foreclosures initiated by Ally, whereas seven other states’ attorney general have taken the action to open civil or criminal investigations regarding to the flawed foreclosures.
On another given opportunity, Mark Paustenbach, treasury spokesperson, claimed that officials have made further communication with Ally and they hope it will lead to a solution like taking action to correct any errors. Responding the Treasury Department’s statement about beginning their inquiry which will be carried out together with relevant federal agencies, the director of National Association of Consumer Advocates, Ira Rheingold said that the action taken has not been approaching what kind of solution will be carried out to remedy the current situation.
Meanwhile, other consumer advocates argued that if the officials decide there is no reason to take action, they may receive judgment for not helping homeowners, on the contrary the action of taking extreme measure like calling for a national moratorium on foreclosures may negatively affect the economy and hurt the housing market.
The flawed foreclosures process may take longer length of time from 3 years to a decade and this long holdup can result in some consequences such as the bank may be unwilling to extend credit to household or small business owners. Other investors may also refuse to buy foreclosures. Commenting the predicted situations above, Ally officials argued that there are not significant result occurs related to the processing errors of improperly foreclosures.