by Bill McBride on 10/13/2010 12:04:00 PM
Wednesday, October 13, 2010
From the JPM conference call this morning (ht Brian)
JPM: We've identified issues relating to the mortgage foreclosure affidavits and those include signers not having personally reviewed the underlying loan files but instead having relied upon the work of others. Those others, Chase employees, did conduct reviews of the underlying loan files. And there are circumstances where affidavits have not been properly notarized. So I want to just step back and have you understand what the nature of some of the information in this affidavit relates to. They obviously differ by jurisdiction but in general the types of content that we're attesting to includes the name of the borrower, property address, the date, whether or not the borrower was actually defaulted and if they've cured the default and the total amount of indebtedness. As a result of these actions, we're reviewing 115,000, plus or minus, loan files that are currently in the foreclosure process. And we'll do the following based on that review, either refile the affidavits where appropriate. As you know, we delayed our foreclosure sales and so to the extent we can, we'll reinitiate those when appropriate. And we're also in the process of putting additional processes in place to make sure on a go-forward basis we fulfill all the procedural requirements. ……And just to remind everyone, this is a very lengthy process and so from the initial default to the actual foreclosure sale, for our serviced mortgages, that's on average 14 months. Mortgages in the state of Florida for us, that process is 678 days, in New York it is 792 days, more than two years. And in most, if not all instances, over that period of time no principal or interest payments have been made on the mortgage. So I think we would like to conclude by saying is that we really believe the proper approach and response here is to go loan by loan, file by file, customer by customer, and if mistakes have been made then we need to address them individually which we absolutely will do.
Analyst: I was wondering if you could give us any sense for timing of resolution in terms of reopening these 115,000 cases?
JPM: It's going to take several weeks to go through the files and make sure and correct any errors that are in there. The underlying stuff is all accurate. So that's the key substance. Obviously we know there's a lot of state AGs and we have conversations with them. We're hoping [to get back to] the normal process -- for us, the sooner the better for everybody involved. We don't think there are cases with people have been evicted out of homes where they shouldn't have been. These foreclosures go through multiple process, so we're hoping it will be sooner rather than later and those conversations are starting to take place.
Analyst: And is it fair to assume that at least a fair portion of that litigation reserve that you added to is specifically for this topic within mortgage?
JPM: No, nothing in it for this topic. I think the way you should look at this topic is that we're bearing today $7 billion of charge-offs, foreclosure, repurchase costs, this is ex-reserves. That $7 billion will go up or down based upon the economy and stuff like this. I'm not sure stuff like this is going to dramatically change that number. It may extend it a little bit longer and stuff like that but -- and remember, we have in total, between the repurchased reserves and $11 billion, we have $14 billion of reserves for repurchases or loan losses. Look, the mortgage thing is -- we're halfway through all this. We think we should continue and get done and make sure we do the right thing for the consumers, the investors and the country.
Analyst: And the foreclosure stuff, outside of how it directly may impact you or somebody else, how do you look at the drag it may have on the housing market, kind of the macro impact, what do you think about that?
JPM: Again, I hope -- this is a hope. This is not a knowledge. Is that when people take a deep, sigh breath, go back to the right, look to the substance underlying the files and go back to modifying, foreclosing and doing the right thing, all told, it could be a blip. Talking about three or four weeks it will be a blip in the housing market. If it went on for a long period of time it will have a lot of consequences, most of which would be adverse on everybody.
Analyst: The foreclosure suspension, it's a matter of weeks instead of months, did I hear you say that?
JPM: No. I didn't say weeks to clean up the files. We actually have to have little in depth conversations with regulators and AGs and stuff like that. So I don't know exactly when. I'm hopeful that it all starts to move at one point. I don't know if it's going to be three weeks or five. But I think it will be a real shame if we don't get this resolved and moving again.
Analyst: In all likelihood you should be allowed to foreclose as we go into next year.
JPM: I hope so. It's not up to me.