JPMorgan Chase said Wednesday that it was suspending more than 50,000 foreclosures as it reviewed the legitimacy of legal documents in the cases.
The bank is the second major company to take such action this month, underscoring a growing legal problem about identifying the holder of the original mortgage note. The issue could stall an already overloaded foreclosure process. Analysts do not expect the delays to reduce the number of foreclosures in 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 problem turns up at more of the largest mortgage companies, a foreclosure crisis that is likely to drag on for several more years could persist even longer.
JPMorgan acknowledged that its employees signed some affidavits about loan documents without personally verifying the files. These affidavits identify who holds the original mortgage note in foreclosure cases.
The company believes the information in the affidavits is accurate, and that the affidavits were prepared by “appropriate personnel,” spokesman Tom Kelly said Wednesday.
The bank asked judges to not enter judgments against homeowners facing foreclosure until the review is done. It expects the process to take a few weeks.
In a similar move, GMAC Mortgage 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.
Fitch Ratings said that Wednesday it was asking mortgage companies about their internal processes for executing foreclosure affidavits. If it finds the processes lacking, Fitch will consider downgrading the company’s rating.
The agency also said if the issue is widespread, the resulting delays and extra costs to foreclose could increase losses related to residential mortgage-backed securities.
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