Oct 13 Questions over the accuracy of legal
documents submitted by mortgage lenders have significantly
slowed U.S. foreclosure proceedings in recent weeks.
The growing controversy has forced at least three banks to
temporarily halt foreclosure or eviction proceedings and
prompted lawmakers and state attorneys general to demand a
moratorium on home seizures until the problems are resolved.
HOW FORECLOSURES WORK
To foreclose on a house, a lender must prove it has a valid
That means it must certify through an affidavit and other
documentation that it clearly holds the right to enforce the
terms of the loan, and that the borrower has actually
Judges approve foreclosures in 23 states. Otherwise,
lenders use an out-of-court process.
Banks are expected to take over a record 1.2 million homes
this year, up from about 1 million last year and 100,000 in
2005, real estate data company RealtyTrac Inc said last month.
WHY "ROBO-SIGNERS" ARE A PROBLEM
Emerging evidence of so-called "robo-signers" has thrown a
wrench into the foreclosure process. These are mid-level bank
executives who signed thousands of affidavits a month claiming
they were knowledgeable of the cases.
An official of GMAC, Jeffrey Stephan, acknowledged signing
an affidavit supporting a foreclosure without reading it or
being in the presence of a notary. That disclosure led a Maine
judge to reprimand GMAC, now known as Ally Financial Inc,
although the court accepted an amended affidavit in the case.
Stephan has testified to signing some 10,000 documents a
Consumer attorneys say they have obtained evidence of
similar practices by other servicers.
BANK OF AMERICA, OTHER FIRMS UNDER THE MICROSCOPE
Last week Bank of America Corp (BAC.N) announced a
temporary, nationwide halt to foreclosures.
Other lenders have announced more limited responses. GMAC
was the first company to publicly address the document problems
last month when it halted evictions and post-foreclosure
proceedings in the 23 states where judges sign off on
JPMorgan Chase and Co (JPM.N) has halted some foreclosure
proceedings and said it is reviewing 115,000 mortgage
affidavits. On Wednesday the company said it identified some
issues in its review of foreclosures, but was "pretty
comfortable" its decisions had been proper.
Wells Fargo & Co (WFC.N) affirmed the accuracy of its
affidavits on Tuesday, saying it had no plans for a foreclosure
Citigroup (C.N) had no plans to suspend foreclosures as of
earlier this month.
PUBLIC OFFICIALS STEP IN
All 50 U.S. states launched a joint investigation of the
mortgage industry on Wednesday.
Several lawmakers and state attorneys general have also
called for a suspension of foreclosures in all 50 states.
The White House, however, has rebuffed those demands,
fearing it would harm the economy.
The U.S. Department of Justice is examining whether
financial institutions improperly foreclosed on houses,
Attorney General Eric Holder said last week.
That announcement followed a letter signed by lawmakers
including U.S. House of Representatives Speaker Nancy Pelosi
urging the Justice Department to look into the situation.
Ohio Attorney General Richard Cordray sued Ally Financial
and Stephan last week, alleging fraud and violations of Ohio's
(Reporting by Dan Levine, editing by Dave Zimmerman and Leslie