J.P. Morgan Chase to freeze foreclosures over flawed paperwork
By Ariana Eunjung Cha | Washington Post
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.
The bank’s decision will affect 56,000 borrowers in 23 states where allegations of forged documents and signatures and other similar problems are being used to try to overturn court-ordered evictions. Yet the impact may be much broader, given J.P. Morgan’s stature in the industry. If other banks adopt the same approach, the foreclosure process in many parts of the country will grind to a halt.
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. Underscoring that concern, Fitch said it is considering whether to lower the grades it gives to the mortgage servicing divisions of the nation’s largest lenders.
“Over the next few weeks, we expect to see more and more companies come out with similar announcements,” said Diane Pendley, a managing director at Fitch.
The paperwork problems at J.P. Morgan mirror those uncovered last week at another large mortgage lender, Ally Financial. But J.P. Morgan’s decision is expected to have a much greater effect on the industry because it is held in high regard by its peers. By contrast, Ally, formerly known as GMAC, is still under the cloud of a $17 billion federal bailout package that it has been unable to pay back.