JPMorgan Chase announced today that they too may have been part of the robotic foreclosure process that Ally Financial acknowledged is a major issue for them. In a memo distributed last night, JP alerted its attorneys that employees in its foreclosure operations may have signed affidavits without the required personal knowledge.
As the third largest servicer in the country, with over $1.3 trillion in its servicing portfolio, even a 0.1% impact would be huge. And that percentage is not out of the realm of financial impact to the company. Litigation exposure, on both the default borrower side as well as investor backlash, together with any regulator penalties, could cost the company millions. JP has taken the same “stiff upper lip” posture as Ally, claiming that the factual information given in the affidavits was accurate and was not affected by whether or not the signer knew the details. So, it will come down to the courts to decide what type of penalty to impose.
And like Ally, JP is now requesting that courts not enter judgments on pending foreclosures until they figure out what was done and how to fix it. Well, there goes securitization investor cash-flow some more as foreclosures get put on extended hold. This will also cost JP money, as it too now has to wait for its reimbursement of funds in the securitization cash-flow waterfall.
It seems that in their race to foreclosure, proper processes were laxed (kind of like the underwriting standards that got the industry into the mess to begin with). I guess it is just boils down to a question of when does “volume–izing” the mortgage industry (be it in origination or servicing) cause policies and procedures to get tossed out of the window.
Well with GMAC Mortgage and JP Morgan now on the hot seat, that just leaves Bank of America, Wells Fargo (that now includes anything from Wachovia), Litton (a/k/a Goldman Sachs), Saxon (a/k/a Morgan Stanley), and all the little fellas (Carrington, American Home, HomEq, etc.) to get put on the rack. And in a politically charged year, the politicians should have a field day with this (unless, of course, they had a “Friend of __________ Loan”). We have already seen California Attorney General Jerry Brown, now running for “Governor Moon Beam – Part Deux,” chime in yesterday.
Having had foreclosures, short sale, or bankruptcy, the key decision you could make today is usually to choose a highly skilled and knowledgeable mortgage professional in order to develop a approach to re-establish you as a credible and ready buyer.
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