In recent weeks, lawmakers and the attorney generals in many states in the US are focusing on the foreclosure of thousands of homes where processing may have taking place without the proper review of supporting documentation As a result, J.P. Morgan Chase & Co. (US: JPM), Bank of America Corp. (US: BAC), Ally Financial Inc. (previously known as GMAC), PNC Financial Services Group, Inc. (US: PNC) and Litton Loan Servicing LP - a unit of Goldman Sachs Group Inc. (US: GS) have temporarily halted foreclosures as they review their processes and legal exposures.
MY TAKE: Among the contributing factors leading to the housing bubble were poor lending practices by mortgage originators. Today, as the market seeks stability in US residential housing, it appears that similar sloppy processes are being applied to foreclosures. The foreclosure slowdown may be a temporary issue (estimates suggesting there may millions of pending and completed foreclosures requiring review). If substantive processing issues are revealed, confidence among potential home purchasers could be undermined, which may stall an already fragile housing market. If legal probes and actions expand, we will likely learn more about Reston, VA based Mortgage Electronic Registration Systems Inc. (MERS). MERS acted as an intermediary in processing mortgage. Its shareholders include several of the larger market participants and its motto is "process loans, not paperwork".