A flurry of developments has sketched an alarming scenario: that major U.S. banks rammed through foreclosure after foreclosure without giving many borrowers a fair shot at keeping their homes.
Questions have arisen about the scope of the problem, the effect on the nation's foreclosure epidemic and the likelihood that some people could regain their foreclosed homes.
Here's what you need to know about the unfolding foreclosure mess:
What's the problem I'm hearing about foreclosures?
Three of the nation's largest banks — JPMorgan Chase & Co., Ally Financial's GMAC Mortgage unit and PNC Financial — have stopped foreclosures in some states. The biggest bank, Bank of America Corp., has done so in all 50 states. JPMorgan has done so in 41. They're checking to see whether their employees made errors in loan documents needed to complete foreclosures. The banks say they think they'll resume foreclosures in those states within weeks. Others think it could drag on longer, especially as more state and federal officials intervene.
What kinds of errors?
Evidence has surfaced of mistakes in the documents that mortgage companies present to a judge to foreclose on a home. Lenders failed, for instance, to show they have a legal right to foreclose on borrowers' homes. And some mortgage company employees have acknowledged they signed foreclosure documents without reading them. Many documents also appear to have been signed without a notary public witnessing that signature. That's a violation of law.
How did this happen?
Mortgage companies have been overwhelmed by paperwork involving millions of foreclosures and defaults. Consumer advocates say the companies took shortcuts to manage the onslaught rather than hiring more staff. One way was to have a bank or a bank representative "robo-sign" thousands of documents he or she hadn't actually read.
How widespread is the problem?
Only JPMorgan Chase has spelled out how many foreclosures it's suspending: about 115,000. But consumer advocates say the problems with foreclosure documents are widespread. Two of the biggest lenders, Wells Fargo & Co. and Citigroup Inc., say they have no plans to suspend foreclosures. They say they're confident they complied with state laws.
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