Foreclosure Machine Seizes Up: JPMorgan and GMAC Halt Foreclosures

Update: BofA waited until the end of the day today to announce it was also halting foreclosures in 23 states. From San Francisco Chronicle:

Due to the fraud that has been coming to light in the foreclosure industry — see related posts here and here — JPMorgan and GMAC are the first to feel the pressure and halt their foreclosures. JPMorgan has suspended 56,000 foreclosures in 23 states; GMAC isn’t giving a number.

The New York Times reports:

Evictions are expected to slow sharply, housing analysts said, as state and national law enforcement officials shine a light on questionable foreclosure methods revealed by two of the country’s biggest home lenders in the last two weeks. …

Attorneys general in half a dozen states are demanding action or opening investigations. The Treasury Department said Thursday it was asking regulators to look into “these troubling developments.” …

Defense lawyers say the disclosures are symptomatic of the carelessness, if not outright fraud, that lenders have been exhibiting for years in their rush to file cases. Many necessary documents have disappeared, with defense lawyers saying the lenders often do not even have standing to foreclose.

Attorneys are scrambling to file motions to have the foreclosure actions dismissed. The New York Times quotes one of them:

“Judges used to look at us strangely when we tried to tell them all these major financial institutions are lying,” said Ms. Golant, a former associate general counsel for the lender Ocwen Financial.

Unfortunately, as you might expect, many homeowners faced with foreclosure don’t have the means to hire attorneys. Many have lost their homes already due to this fraud. I’m guessing the latest news is going to result in a whole lot of really pissed off people. As the Times puts it:

The issue has broad consequences for the millions of buyers of foreclosed homes, some of whom might not have clear title to their bargain property. And it may offer unforeseen opportunities for those who were evicted.

So struggling homeowners — who this industry has tried to run out of their homes as fast as possible while no one was looking — can stay in them. And because of the industry-wide fraud, the whole notion of who owns what is now deeply called into question. Very interesting times indeed.