Reports indicate that several lawsuits have been filed against big banks due to the mishandling of important lending documents. The mishap has resulted in the stopping of foreclosure proceedings and reviewing past evictions in 23 states.
Banks that are being targeted in the lawsuits include Bank of America, JPMorgan Chase, Ally Financial Inc., and GMAC Mortgage because of document verification issues, specifically, false signatures and documents. Tens of thousands of homeowners are being affected by the flaw.
Among the most common problem involves documents that were not verified before foreclosures could legally proceed. Several documents were signed by employees who said they didn't verify important information. There are also questions about the notarization of documents.
Issues of forgery are also coming into play, as many documents contain different signatures in different versions.
Massachusetts, Illinois, Iowa and Florida are among the states that have stopped foreclosure proceedings. In Florida, a judge dismissed 61 foreclosure cases.
Data from RealtyTrac Inc. indicates that more than 95,300 homes were taken by lenders in the country in August, along with lenders issuing more than 338,000 foreclosure filings to homeowners. In a Princeton University study by Douglas Massey and Jacob Rugh, Blacks have suffered the most from foreclosures.
In Black neighborhoods across the America, there was an increase in foreclosures by 15,028. Blacks were more likely to be given subprime loans with high interest rates and hidden fees. The study also revealed that worse deals were given to Blacks with similar credit scores as Whites.
Blacks were found to be as likely as Whites to receive predatory treatment among lenders that did not go bankrupt.
According to Rep. Ed Towns, D-NY, New York is not one of the states that has stopped foreclosure proceedings because of the mishap. Several state attorney generals have asked lenders to freeze foreclosure proceedings in their states. Towns said New York will take the steps to do the same, if necessary.
"We are going to look at this issue from a commitment stand point," the congressman told The Amsterdam News. "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."
Towns said that people have called his office in reference to the problem going on in other states, saying that the banks' mistakes have put the economy into a deeper financial hole that is harder to dig out of.
"There's no doubt it has made it worse," he said. "I give credit to banks for correcting this. I can't help thinking about those who have been foreclosed on. What recourse do they have? I'm hoping that others will follow through as we monitor and look at this."