Wells Adds to Crisis Over Home Seizures
The US mortgage foreclosure crisis deepened as it emerged that Wells Fargo may have used practices that prompted rivals to halt home repossessions, and JPMorgan Chase said banks might be fined over the issue.
Bank of America , JPMorgan and GMAC have halted foreclosures after learning that “robo signers” had rubber-stamped thousands of mortgage documents without checking their accuracy.
Attorneys-general in 50 states have launched a joint investigation into the matter.
Jamie Dimon, JPMorgan chief executive, on Wednesday became the first top banking executive to say some attorneys-general may levy penalties on banks for their foreclosure practices .
Legal documents obtained by the Financial Times suggest that Wells Fargo , the second-largest US mortgage servicer, also used a “robo signer”. Unlike its rivals, Wells Fargo has not halted foreclosures.
The San Francisco-based bank said on Tuesday it was reviewing some pending cases, but it has maintained that it has checks and balances designed to prevent serious procedural lapses.
In a sworn deposition on March 9 seen by the FT, Xee Moua, identified in court documents as a vice-president of loan documentation for Wells, said she signed as many as 500 foreclosure-related papers a day on behalf of the bank.
Ms Moua, who was deposed as part of a foreclosure lawsuit in Palm Beach County, Florida, said that the only information she verified was whether her name and title appeared correctly, according to the document.
Asked whether she checked the accuracy of the principal and interest that Wells claimed the borrower owed — a crucial step in banks’ legal actions to repossess homes — Ms Moua said: “I do not.”
Ms Moua nevertheless signed affidavits that said she had “personal knowledge of the facts regarding the sums of money which are due and owing to Wells Fargo”. The affidavits were used by the bank in foreclosure proceedings.
Ms Moua added that before reaching her desk, it was her understanding that the foreclosure documents had been reviewed by outside lawyers. Wells declined to comment on the deposition but said its records show its “foreclosure affidavits are accurate”.
The bank added: “When we find team members who do not follow procedure, we fix what is done incorrectly. Until this case is resolved, we should keep in mind that a deposition does not suggest a wrongful foreclosure.”
Mr Dimon defended JPMorgan’s conduct but said banks’ costs might rise as a result of the controversy, although not significantly. “We don’t think there are cases where people have been evicted?...?where they shouldn’t have been,” he told investors during a call to discuss third-quarter earnings adding that JPMorgan is reviewing 115,000 foreclosure cases across the US.
“Obviously it will increase our costs a little bit and maybe we’ll have to pay penalties eventually to some of the [attorneys-general]”. Mr Dimon pledged that if JPMorgan made mistakes, “we will fix them”.
The moratorium on foreclosures has the potential to delay the recovery in the US housing market and hurt growth in the economy as millions of homes remain in ownership limbo.
Additional reporting by Justin Baer and Francesco Guerrera.