TX Halts Foreclosures or Tries

STATE MOVES TO HALT FORECLOSURES AND SALES OF FORECLOSED

PROPERTY



By NANCY SARNOFF, PURVA PATEL and JENNIFER HILLER

HOUSTON CHRONICLE / SAN ANTONIO EXPRESS-NEWS

Oct. 4, 2010, 9:52PM



Texas Attorney General Greg Abbott called for a halt on foreclosures Monday amid nationwide scrutiny over the way they are processed. Notices to suspend foreclosures were sent to 27 loan servicers doing business in Texas, including Bank of America and JPMorgan Chase, the Attorney General's Office said. It did not have the full list of companies available late Monday. The state office also called for a halt on the sales of properties previously foreclosed upon - possibly affecting auctions scheduled Tuesday - and on evictions of people living in such properties. The office said it began investigating foreclosures last month after reports that an employee of Ally Financial, a large mortgage lender, acknowledged signing thousands of foreclosure documents without reviewing them as required. Ally has since suspended foreclosures on certain properties in 23 states, as have JPMorgan Chase and Bank of America, to investigate whether their employees rushed foreclosures, a practice called "rob signing." In the state's letter to JPMorgan Chase, Paul D. Carmona, chief of the attorney general's consumer protection and public health division, said rob signing practices can include signing documents without reading them, signing thousands of documents a month, signing documents without proper notarization, and signing affidavits falsely claiming personal knowledge of facts. Court order not sought. A JPMorgan Chase spokesman declined to comment on the attorney general's move, and Bank of America officials could not be reached late Monday. Chase and Bank of America, along with Wells Fargo, service more than 50 percent of the outstanding loans nationwide, said David Zugheri, co-founder of Houston-based Envoy Mortgage. Abbott sought the foreclosure suspension Monday "in an effort to determine the full harm Texas homeowners may have suffered or could suffer as a result of these business practices," according to a statement released late Monday by Jerry Strickland, a spokesman for the office. The Attorney General's Office has not sought a court order, and wouldn't say what kind of action, if any, it might take if companies don't comply. "This is a demand from the Attorney General's Office that they thoroughly review their business practices to ensure they comply with Texas law and are not unlawfully harming Texas homeowners," Strickland said. The move could have a widespread impact on Texas borrowers and lenders. "If the AG can really do this, it's huge," said Zugheri. George Roddy, president of the Addison-based Foreclosure Listing Service, which tracks foreclosures in 19 North and Central Texas counties, questioned the attorney general's authority to seek the suspensions. "I'm not sure how the AG could do that unless there's some type of fraud," he said . And stopping the sale of properties already lost to foreclosure could prove particularly complicated. "This could be opening up a real can of worms if they're actually talking about properties already sold," Roddy said. "Title has been passed back to the lender or a third party has purchased it at the foreclosure auction. Someone else could be living in the house." 'An October surprise' Gregg Stanley of RexReport.com, a San Antonio-based foreclosure listing service, said that the 23 other states where foreclosures have been suspended require lenders to go to court to foreclose. Texas has non-judicial foreclosures, which don't require court orders. But in its letter, the Attorney General's Office said the state nonetheless requires various documents with foreclosures and wants to be certain that paperwork is handled properly and in compliance with state law. "It could be a bit of an October surprise," Stanley said, noting that foreclosure auctions are scheduled across the state today. Harris County's auction is scheduled to start at 10 a.m. in the Family Law Center downtown. In its letters to JPMorgan Chase and Bank of America, the Attorney General's Office outlines steps the banks must take, including identifying employees or agents who participated in "rob signing." The letters ask the lenders to respond by Oct. 15