The Foreclosure Fiasco
Having suffered through one of the worst times in industry history, with WaMu, Countrywide, and others brought to their knees or utterly failing, some of the big banks found themselves dealing with another fiasco. It turns out that after losing billions of dollars on bad home mortgages—in one form or another—banks found they often don't have basic documentation showing ownership of the properties on which they're trying to foreclose. One would think these financial institutions would know something about internal control, but what's transpiring causes one to seriously question that presumption.
Adding insult to injury, reports indicate that statements by bank officials in legal proceedings, saying loan files were reviewed and required documents in good order, often simply were not true. With banks' foreclosure processes on hold, homeowners who defaulted on mortgages remain in their houses and buyers aren't able to complete transactions, causing the entire housing market to remain on shaky ground.
According to reports, the problem first came to widespread light when GMAC announced it was withdrawing affidavits in pending court cases and suspending certain foreclosures to give it time to investigate its procedures. Soon afterwards JPMorgan Chase suspended foreclosures in the 23 states requiring court approval in order to determine whether the documentation meets legal standards. Bank of America then said it would “amend all affidavits in foreclosure ...