California Attorney General Edmund G. Brown Jr. called on all other lenders to halt foreclosing on California homes until the banks can demonstrate that they are complying with state law.
"All lenders should halt foreclosures until they clear up this mess and ensure that the process is fair and complies with California law," Brown said. "Bank of America has taken an important step, and the other major lenders should follow its lead."
JP Morgan Chase, the nation's third largest loan servicer, Ally Financial and One West have admitted that employees approved and signed foreclosure documents without first fully reviewing the borrowers' loan files. As a result, those borrowers lost their homes based on affidavits the bank never confirmed were accurate.
"Bank of America has extended our review of foreclosure documents to all fifty states," the company said in a statement Friday. "We will stop foreclosure sales until our assessment has been satisfactorily completed. Our ongoing assessment shows the basis for foreclosure decisions is accurate. We continue to serve the interests of our customers, investors and communities. Providing solutions for distressed homeowners remains our primary focus."
Ally Financial's GMAC Mortgage, PNC and JPMorgan Chase have suspended foreclosure activity in at least some states in which they do business.
The reason, of course, is the new scrutiny lenders are under. It began last month when a mortgage official for GMAC Mortgage revealed in a deposition that he did not read all foreclosure documents before signing an affidavit swearing that he had.
At least 23 states require that an employee of the foreclosing agent attest in court that all the information in the foreclosure filing is accurate. They are required to sign the affidavit in the presence of a notary. Some lenders, it is alleged, employed robo-signers to process thousands of foreclosure affidavits each month.
Delaware Attorney General Beau Biden, who earlier this week called on Bank of America, JP Morgan Chase, and Ally Financial to stop foreclosure actions in Delaware, commended BofA's action.
"We applaud Bank of America for doing the right thing by suspending foreclosure proceedings in all states while they review serious questions about their documentation review and verification procedures. Borrowers have an obligation to meet their mortgage payments and lenders have an obligation to follow the rules when they take foreclosure actions against homeowners. Everybody has to play by the same rules," Biden said.
See you in court
Attorneys representing dispossessed homeowners have pounced on the revelation, saying they will challenge many of these foreclosures in court. In addition, a number of states and the federal government have begun investigations.
In Ohio, Attorney General Richard Cordray filed a lawsuit this week against GMAC Mortgage, charging the bank committed fraud in its foreclosures. Cordray bases the charge on the sworn testimony of the bank employee who admitted he didn't always read and sign foreclosure documents.
As a result of similar reports regarding depositions taken by a JPMorgan Chase and Bank of America employees, Cordray also requested that JPMorgan Chase and Bank of America suspend moving toward a judgment, sale, eviction or property transfer involving any foreclosure case with affidavits signed by those employees.
Cordray also sent letters to Wells Fargo and Citibank, requesting that the banks meet with his office to discuss foreclosure affidavit procedures.
