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The Texas attorney general has ordered a suspension of foreclosures in that state as part of an investigation into widespread reports that lenders routinely failed to properly document their claims in repossessing residential properties.
Letters were send Monday to 30 mortgage companies, including several of the nation’s largest, demanding that they cease all foreclosure activities in Texas until they identify all foreclosures that may have been improperly documented and provide assurances that all such documentation errors will be corrected. The action is the latest development in the “robo-signing” scandal that is overtaking the mortgage industry, in which bank employees are reported to have routinely signed off on thousands of foreclosure affidavits without verifying the accuracy of those claims.
Foreclosures suspended in 23 states last week
Last week, three major lenders – Ally Financial (parent company of GMAC Mortgage), JP Morgan Chase and Bank of America – announced that they were suspending foreclosures in 23 states to investigate potential problems with foreclosure documentation. Texas was not among those states, hence the attorney general’s action today. Faced with a flood of foreclosures, bank employees have reportedly been automatically signing off on thousands of foreclosure documents without reading them or, in some cases, obtaining proper notarization. In one Florida case, an Ally Financial supervisor testified in a deposition last spring that she and seven other employees signed off on as many as 18,000 foreclosures a month. The 23 states in which the three lenders suspended foreclosures last week are what are known as “judicial foreclosure” states, where foreclosures must be carried out through the courts. Texas uses both judicial and nonjudicial foreclosures and therefore was not included in the voluntary suspension by the three.
All affected foreclosures must be documented
The order from the attorney general’s office directs that all foreclosures, sales of foreclosed properties and foreclosure evictions be suspended until the individual lender provides certain information. That includes identifying all employees that engaged in “robo-signing” foreclosure affidavits and other documents in the state of Texas, as well as all foreclosures in which those documents were used. The lenders must also assure the attorney general’s office that the problems with those foreclosures will be corrected and explain how they plan to do so. They must also provide assurances that the problem will not be repeated in the future. They have until Oct. 15 to provide an initial response.
Foreclosures could drag out even longer
With the nation’s lenders already struggling to process a record number of foreclosures, the robo-signing scandal threatens to grind the foreclosure process to a standstill. Even if the documentation problems can be readily corrected, the process of correcting what could be hundreds of thousands of foreclosures, including many already completed, could further clog up the process for months to come. Among others, the attorney general’s letter was sent to the Bank of America, JP Morgan Chase, Citibank and Wells Fargo, known as the “Big Four” U.S. banks, as well as to Ally Financial, which was the first lender to suspend foreclosures in 23 states last week.
Similar Posts:
- Bank of America Suspends Foreclosures in All States
- Foreclosure Documentation Crisis Could Cloud Title for Homebuyers
- GMAC Denies Halting Foreclosures in 23 States
- Caution Urged on New Mortgage Rules
- More Properties Lost to Foreclosure
