JPMorgan Chase is expanding its review of foreclosures to 41 states as pressure builds on banks to answer allegations of document fraud.
The bank is now reviewing about 115,000 foreclosure cases, up from 56,000, Douglas Braunstein, chief financial officer for JPMorgan Chase & Co., said Wednesday. JPMorgan had stopped proceedings in the 23 states that require judicial review of foreclosures and now is looking into similar deals in states where there "could possibly be an issue," spokesman Joseph Evangelisti said.
The bank acted in response to evidence that mortgage lenders have used flawed court papers to evict homeowners.
Bank officials also said JPMorgan had previously stopped using the banking industry's controversial electronic mortgage tracking system for foreclosures in 2007 and 2008. The bank still uses the system, known as MERS, for other loan purposes.
Lawyers in class-action lawsuits have argued that MERS _ which allowed financial institutions to do away with paperwork in favor of electronic tracking _ lacks the required paper trail to prove mortgage ownership.
The news of an expanded probe came just as officials in 50 states and the District of Columbia announced a joint investigation into allegations that mortgage companies used illegal methods in dealing with foreclosure documents that were used to evict people from their homes. The probe will examine whether mortgage company employees made false statements and whether they prepared foreclosure paperwork in a fraudulent manner.
The foreclosure mess has escalated in the last month. Ally Financial's GMAC Mortgage has stopped foreclosure proceedings in the 23 states where courts weigh in on home seizures. Bank of America has now frozen foreclosures in 50 states. Litton Loan Servicing, Goldman Sachs' mortgage service unit, has halted some questionable foreclosures.
Lawmakers have called for an all-out national foreclosure moratorium. What's at stake is the nation's entire foreclosure machinery. If it is indeed brought to a standstill, it could further damage an already struggling housing market as well as deal a blow to a frail economic recovery.