U.S. Housing Market

Great news for everyone in the default servicing business! JPMorgan Chase will begin re-filing affidavits later this month for some 127,000 foreclosures that have been on hold because of “robo-signing” issues.

Yesterday in Boston, Charlie Scharf, head of the bank’s retail financial services unit, told a group of analysts and investors that the company will begin resubmitting affidavits in these cases within “the next couple of weeks.”

Scharf says his company risks losing a couple million dollars each month the foreclosure proceedings are delayed. The re-filings should begin by mid-November and will take at least three to four months to complete.

Bank of America says it has begun resubmission of 102,000 cases affected by procedural errors. GMAC Mortgage has re-filed 9,523 affidavits with the courts, and is in the process of reviewing another 15,500.

Scharf says JPMorgan’s reviews have identified two fundamental problems in its foreclosure process: 1) Affidavits were approved and recorded without the signer having personal knowledge of all information in the filing. 2) Documents were notarized without being properly witnessed.

In his presentation, Scharf attempted to dispel what he said were common misconceptions about the affidavit issues. He stressed that borrowers who are current have not been foreclosed on and that all of the company’s foreclosure decisions are “based on materially accurate information” that calls for repossession of the property.

According to Scharf, JPMorgan has multiple checks and controls in place throughout the foreclosure process to confirm sufficient contact and modification efforts have been made and foreclosure decisions are appropriate.

He also assured analysts and investors that all liens and records of ownership have been properly transferred.  According to Scharf, another myth is that foreclosures are being pursued too aggressively – he states they are not. On average,

homeowners have not made a mortgage payment in over 14 months at the time of foreclosure. Some have argued that servicers aren’t able to cope with the high volumes of defaults – Scharf disagrees and claims his company can handle the workload. Scharf noted that JPMorgan currently has over 17,000 default employees with almost 13,000 involved in loss mitigation efforts. In efforts to avoid another foreclosure “freeze”, he added that staff members that are independent of the operational process are responsible for checking the loan status at least twice, once before a loan is referred to foreclosure and once before foreclosure sale.