Justice Officials Eye Foreclosure Paperwork Practices by Lenders

Attorney General Eric Holder and President ObamaThe Justice Department is reviewing practices by major lenders that may have led to the improper foreclosure of homes as a result of shoddy documentation – or the “robo-signing” of affidavits without verifying data.
U.S. Attorney General Eric Holder today confirmed his department’s probe following the announced internal reviews in recent days by Bank of America, Ally Financial (formerly known as GMAC) and JPMorgan Chase.
“We are aware of the charges that have surfaced in the newspapers in the last couple of days and we’re looking at them,” Holder said during an unrelated news conference today.
Several state attorneys general have already commenced investigations into foreclosure practices. Many of asked other lenders to freeze foreclosure actions pending reviews. Lenders could face stiff financial penalties – as much as $25,000 – for every improperly processed affidavit.
Bank of America is the only lender, thus far, to order an across-the-board freeze on foreclosures pending reviews of possibly erroneous affidavits.
Potentially, tens of thousands of cases could be involved in the reviews by the three major lenders. Chase has said it is suspending 56,000 foreclosures.
Most of the cases pertain to paperwork in the twenty-three states that process foreclosures through their court systems, requiring documentation to verify mortgage data and ownership. But calls for investigations by officials have included some of the 27 non-judicial foreclosure states.
The 23 states with court system proceedings are: Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.
House of Representatives Speaker Nancy Pelosi and fellow Democrats yesterday wrote to Holder and Federal Reserve Chairman Ben Bernanke asking for an investigation of “possible violations of law or regulations by financial institutions in their handling of delinquent mortgages, mortgage modifications, and foreclosures.”
The uproar over foreclosure documentation erupted in recent weeks after “robo-signers” – mid-level managers at some lenders – have admitted to signing thousands of affidavits without personally verifying the data. Pressure from lenders to avoid trials and push through back-logs of foreclosure cases may have contributed to the “robo-signing” mindset.
“The apparent pattern reported by our constituents leads us to conclude that their problems are not just personal anecdotes anymore,” reads the letter to Holder from the Democrats. “Recent reports that Ally Financial (formerly GMAC) and JP Morgan may have approved thousands of unwarranted foreclosures only amplify our concerns that systemic problems exist in the ways many financial institutions have dealt with homeowners who are seeking to avoid foreclosures.”
Also see: Foreclosure Freeze: Bank of America to Review Paperwork for Errors

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