At least 23 states are putting a stop to home foreclosure proceedings and reviewing evictions, increasing reports that banks have not followed correct procedures for foreclosing on homeowners who were behind on their payments.
Banks involved in lawsuits related to the claims include JPMorgan Chase, Bank of America and GMAC Mortgage. The flaw, including false signatures and documents, is affecting thousands of homeowners.
Banks appear to have not verified documents required as part of the foreclosure process. Employees have admitted to signing off on paperwork before signing them and moving forward with the foreclosures. In some cases, forgery is even suspected, since signatures do not appear to match.
States that have halted foreclosure proceedings include Iowa, Florida, Massachusetts and Illinois. A Florida judge has tossed out 61 foreclosure cases.
RealtyTrac, a website that tracks foreclosures, reported that more than 95,000 homes were seized be lenders around the country in August. In addition, lenders notified homeowners of 338,000 more foreclosure filings. A Princeton University study found that black Americans have suffered more because of foreclosures.
The study found that blacks with similar credit scores to white borrows were given worse mortgage deals, and that in blacks were more likely to sign up for subprime loans that stuck them with high interest rates and extra fees.
Ed Towns, a New York congressman representing Brooklyn, said his state is not among those who are stopping foreclosures.
“We are going to look at this issue from a commitment stand point,” Towns said. “I’m not sure there is going to be a hearing, but there is a lot of interest. All these mistakes have been made by losing paperwork.”