October 3, 2010
NEW YORK (AFP) – Already fragile US financial firms are facing a raft of law suits and potential fines after three major mortgage lenders admitted to mishandling thousands of home foreclosures.
Major mortgage lenders Bank of American, JPMorgan Chase and GMAC have in recent days announced they were suspending tens of thousands of foreclosure processes across the country due to apparent improper handling of documents.
Attorney generals in six states are already investigating claims by borrowers that lenders have committed errors in the foreclosure documentations.
Foreclosures have evolved into a massive industry since the start of the economic crunch as Americans faced massive debts, with the number of mortgage defaults soaring from an annual average of one percent before 2008 to 10 percent today.
In 2010, more than three million foreclosures were expected to take place in the United States, figures show.
Documentation problems “are in all probability” likely to exist in 80 percent of them, according to Richard Kessler, an attorney that heads a company dealing with foreclosures.
The influx of hundreds of thousands of foreclosures led lending institutions to employ people who processed the paperwork as quickly as possible in order to put the property on the market in what has become known as “robo-signing”.
“This is a case of someone being understaffed cutting corners and trying to get the work down. I didn’t see this story as a malicious attempt against borrowers,” said Michael Moskowitz, CEO of Equity Now, a Manhattan-based mortgage lender.
Most of the foreclosures are expected to remain in place once the lending institutions re-examine the myriad of cases, even though the process may take years, said Kessler.
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