Paperwork storm hits nation's biggest bank
Saturday, October 2, 2010
Bank of America, the nation's largest bank, on Friday became the latest lender to put foreclosures on hold in 23 states because of concerns that court documents it submitted were improperly prepared.
Bank of America and other mortgage companies have been under pressure to review their paperwork after employees and contractors said in sworn depositions that, because of the enormous volume, they hadn't had the time to read the documents, much less check them for accuracy.
"To be certain affidavits have followed the correct procedures, Bank of America will delay the process in order to amend all affidavits in foreclosure cases that have not yet gone to judgment," spokesman Dan Frahm said in a statement.
A Bank of America executive, Renee Hertzler, said in a February deposition in Massachusetts that she signed as many as 8,000 foreclosure documents a month without reviewing them. The deposition is similar to others taken from document processors at J.P. Morgan Chase and Ally Financial, which have also frozen foreclosures over the past week. The statements were taken by lawyers for homeowners contesting the seizure of their homes.
J.P. Morgan and Ally have said they believe in the factual accuracy of the documents they submitted. Bank of America said it was still conducting a review.
On Wall Street, the stocks of companies that insure titles for homes were down Friday on fears of the worst-case scenario: that flawed paperwork could be used in court cases by those who have been evicted to reclaim resold properties. At least one such company, Old Republic Title, has stopped insuring homes that were foreclosed on by Ally Financial or its GMAC mortgage unit.
Bank of America's announcement comes as federal and state law enforcement officials have stepped up their scrutiny of foreclosure practices.
Connecticut Attorney General Richard Blumenthal (D) announced a 60-day moratorium on foreclosures by all banks in the state, making it the first jurisdiction to take such wide-ranging action.
Blumenthal called the actions of J.P. Morgan and Ally a "possible fraud on the court undermining the integrity of the legal process and consumers' ability to fight foreclosures." He added, "This freeze should stop a foreclosure steamroller based on defective documents and enable effective remedies."
J.P. Morgan and Ally declined to comment on Blumenthal's remarks.
Meanwhile, California broadened its moratorium on foreclosures by Ally Financial to include those by J.P. Morgan Chase. Calling the companies' review of key foreclosure documents a "ruse," California Attorney General Jerry Brown (D) ordered J.P. Morgan to prove it is following the law before it resumes foreclosures in the state.
The 23 states where Bank of America, J.P. Morgan and Ally suspended some foreclosures require a court order before a home can be seized. This approach is considered favorable for homeowners because mortgage companies must submit more extensive documentation before they can foreclose. Connecticut is on that list, but California is not.