OfflineNEW YORK (AP) -- JPMorgan Chase has temporarily stopped foreclosing on more than 50,000 homes so it can review documents that might contain errors.
JPMorgan's move Wednesday makes it the second major company to take such action this month, underscoring a growing legal problem. The issue could stall an already overloaded foreclosure process.
Still, analysts don't expect the delays to reduce the number of foreclosures over the long run.
"It will probably slow things down for a couple months while these documents are reviewed," said Rick Sharga, a senior vice president at foreclosure listing service RealtyTrac Inc. "It won't stop things."
But if the problems turn up at more of the largest mortgage companies, a foreclosure crisis that's already likely to drag on for several more years could persist even longer.
GMAC Mortgage LLC last week halted certain evictions and sales of foreclosed homes in 23 states to review those cases. The company said it found procedural errors in some foreclosure affidavits.
After GMAC's announcement, attorneys general in California and Connecticut told the company to stop foreclosures in their states until it proves it's complying with state law. The Ohio attorney general this week asked judges to review GMAC foreclosure cases. And in Florida, the state attorney general is investigating four law firms, two with ties to GMAC, for allegedly providing fraudulent documents in foreclosure cases.
The issue is also gaining attention on Capitol Hill. Last week, Rep. Barney Frank, D-Mass. and two other lawmakers wrote to Fannie Mae, urging the government-controlled mortgage giant to stop working with so-called "foreclosure mill" law firms under investigation for document fraud.
"Why is Fannie Mae using lawyers that are accused of regularly engaging in fraud to kick people out of their homes?" the lawmakers wrote.
A Fannie Mae spokesman said the company is reviewing the issue.
JPMorgan acknowledged Wednesday that its employees signed some affidavits about loan documents without personally verifying the files. These affidavits verifies the accuracy of the loan information, including who owns the mortgage.
JPMorgan spokesman Kelly said the bank believes the information in the affidavits is accurate, and that the affidavits were prepared by "appropriate personnel."
The bank asked judges not to enter judgments against homeowners facing foreclosure until it completes its review of the problem. JPMorgan expects the process to take a few weeks.
The way mortgages are packaged and sold to many investors as securities can make it hard to determine who has the right to foreclose on a homeowner.
In some states, lenders can foreclose quickly on delinquent mortgage borrowers. But 20 states use a lengthy court process for foreclosures. They require documents to verify information on the mortgage, including who owns it. Florida, New York, New Jersey and Illinois are the biggest states with this process.
Christopher Immel, a Florida lawyer who represents homeowners, said people who already have lost homes could sue their lender, alleging errors in documents.
In August, a judge in Duval County, Fla., ruled that JPMorgan could not foreclose on two homeowners. The reasoning was that Fannie Mae carried the mortgage on its books and JPMorgan Chase only collected payments on the loan. JPMorgan Chase had identified itself as the owner of the loan.
More lawsuits could come soon.
In May, JPMorgan employee Beth Ann Cottrell said in a deposition that she and her staff of eight signed about 18,000 legal documents a month without reviewing every file. In a similar testimony, GMAC employee Jeffrey Stephan said he signed 10,000 documents a month without personally verifying the mortgage information.
"It's very realistic to believe that this is a standard practice in how they go about foreclosures in certain states," said Immel, whose law firm took Cottrell's and Stephan's depositions.
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caused us to have to file a chapter 13. We had missed our dec payment (this was back in 2001) so we called and made a payment arrangement, we actually called at the end of dec to make the payment, so they set up the payment, and had another payment set up for the middle of Jan for a few hundred extra over our reg payments. Well, after they took out the first payment, they called and told us their records showd we hadn't made a payment for nov and dec. They set up a payment for 1575 to come out the beggining of Feb. They said after that we would be all caught up. We knew the only payment we had missed was dec, but we agreed to the payment. Two days after paying the 1575 (our normal payment was 810)we received another call, this time they said records showed we didn't have a payment on record for oct, nov, dec. Again they set up a payment for 1575 for the beggining of March. So again we went through the same thing. They said their records showed we still were behind and set up another 1575 payment. They also set one up for May as well, and had a payment set up for June for 1000. So when May came, about three days before the May payment was scheduled to come out, we received a notice of default from the mortgage company saying they were going to file foreclosure. We didn't even know they had filed for forecloseure until an attorney contacted us. We ended up having to put 9,000 into a chapter 13 for them after we had just gotten done paying them over 5000. When they kept calling we finally told them that we had just made all the payments they had asked, and the only payment we had missed was dec, which they were supposed to take out at the end of dec, but hadn't (they had the last two digits of our bank account number backwards, so it was their error to begin with), and they told us we would have to write out a letter to the person that handles the defaulted mortgages, and fax over every payment receipt. I had evey single receipt except three ( we had been living in the house since 98), and evry bank statement showing the payments made in jan for the 1,000 and the payments made for 1575 (3 of them). We faxed over 30 pages of proof, yet their department did nothing to stop or fix our situation. Our bankruptcy attorney said 90% of the cases they had in chapter 13 were because of chase. Their collections department never notified the payment department they had collected any payments from us. I was furious, but our attorney told us the only thing we could do was get a lawyer and sue them in court. So in the end we paid the 9,000 to them and as soon as we could we refied to another company. Never had another loan with chase. I am not suprised about the latest news.