The Washington Post brings us news of the mortgage industry’s latest shenanigans:
J.P. Morgan Chase, one of the nation’s leading banks, announced Wednesday that it will freeze foreclosures in about half the country because of flawed paperwork, a move that Wall Street analysts said will pressure the rest of the industry to follow suit.
I’m not sure which part of that statement is more astounding. That J.P. Morgan Chase (JPMC) — a bank which is “held in high regard by its peers” — has seriously flawed foreclosure paperwork in half its operations, or that Wall Street analysts are confident the rest of the industry has exactly the same problem.
What kind of flaws are we talking about? The WP‘s second para summary presents it as: “allegations of forged documents and signatures and other similar problems”.
But, obviously, for JPMC to take the extraordinary step that it did, it can’t be just a matter of unproven allegations from borrowers faced with foreclosure and eviction. It has to be clear to JPMC that there’s truth to these allegations. That must be why officials at Fitch Ratings don’t speak of allegations made by borrowers, but defects actually found in foreclosure documents:
Officials at Fitch Ratings, a credit-rating firm that measures the health of companies, said the “defects” found in foreclosure documents at J.P. Morgan are industry-wide.
However, the official spin on the paperwork problems stays far away from words like forgery. Instead, it’s just a matter of failing to properly review foreclosure documents.
The paperwork problems at J.P. Morgan mirror those uncovered last week at another large mortgage lender, Ally Financial.
Both firms are investigating whether foreclosure files were improperly assembled, and whether their employees failed to review the documents even as they signed off on them.
J.P. Morgan had declined to address the matter until Wednesday. But in a sworn deposition, one of the bank’s employees, Beth Ann Cottrell, admitted that she and her team signed off on about 18,000 foreclosures a month without checking whether they were justified.
I don’t know, it seems to me that there is a material — a very material — difference between “forged documents and signatures”, and unreviewed documents.
And JPMC is really straining the limits of credulity with some of their barefaced spokesmanship:
J.P. Morgan spokesman Tom Kelly said Wednesday that the firm “does not expect to find any factual problems or that customers have been harmed, but if we do find any cases we will take appropriate action.”
Tom Kelly’s talents, I think, are totally wasted at JPMC. He should be working for the Republican Party. JPMC has abruptly halted foreclosures in half the country because they do not expect to find any factual problems or that customers have been harmed?
Presumably, the “attorneys general in seven other states (who) have opened civil or criminal investigations related to flawed foreclosures” also confidently expect that they are just wasting their time?
And it’s not just JPMC. Ally is equally sanguine that there’s been no harm, no foul:
Ally officials on Wednesday declined to comment on any ongoing or potential investigations, but they have said that they are confident that “the processing errors did not result in any inappropriate foreclosures.”
Like the WP, I saved the really best part for last. It seems these endemic foreclosure paperwork problems in the mortgage industry have the potential to bugger up the housing market all over again:
Mark Zandi, chief economist for Moodys.com, said that, in the worst-case scenario, the document-processing problems could lengthen the foreclosure process from three years to as long as a decade, especially if homeowners use the flawed paperwork to appeal their evictions.
The long holdup could have “macroeconomic consequences” as a destabilizing force on housing prices. Banks could become more unwilling to extend credit to households or to small-business owners who use homes as collateral. And investors who had been keeping home prices propped up by buying foreclosures may stop and never come back.