|JPMorgan Chase Chairman and CEO Jamie Dimon|
NEW YORK ( TheStreet) -- As states attorney generals in 49 states launch a nearly nationwide probe into the latest foreclosure mess, JPMorgan Chase ( JPM) is addressing its foreclosure issues by taking a down in the trenches approach. JPMorgan is currently reviewing roughly 115,000 loan files in the foreclosure process and will re-file affidavits where appropriatem -- or even delay foreclosure sales in certain states -- while new processes are being put in place. The banks said it wants to "ensure we fulfill all procedural requirements on a go-forward basis," according to JP Morgan's third-quarter earnings call presentation slides. Members of JPMorgan's management said on the call earlier in the day that it has identified issues related to affidavits signed under the foreclosure process. Specifically that some affidavits were not properly notarized, while other signers of the forms did not personally review the underlying loan files, but employees instead relied upon the work of others. Chairman and CEO Jamie Dimon said while it would take several weeks to go through the files, as well as various conversations with state attorney generals and regulators, hopefully the banks will be able to resume foreclosures in early 2011.
"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," Dimon said. "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 processes, so we're hoping it will be sooner rather than later and those conversations are starting to take place." Dimon said so long as the foreclosure issues are cleared up quickly, it is not likely to dramatically add to the bank's expenses. "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," Dimon said. "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." The disclosure comes as the banking industry experiences the latest crisis associated with the housing downfall - that of a practice known as "robo-signing" of legal documents associated with foreclosing on borrowers who defaulted on their mortgage loans. State attorneys generals and bank regulators on Wednesday launched a probe across in 49 states to deal with the foreclosure mess, according to Bloomberg. (Alabama was the only state that did not agree to the consortium probe, the article states.)
As state officials investigate, lenders including JPMorgan, Bank of America ( BAC), Ally Financial and PNC ( PNC) have been among those firms that have temporarily halted foreclosures to review their files. Early Wednesday, JPMorgan reported third-quarter earnings of $4.4 billion, or $1.01 per share, up from a profit of $3.6 billion, 82 cents a share, in the same period last year. Still the company says its priority is to avoid foreclosure. Since January 2009, JPMorgan has prevented 429,000 foreclosures through loan modifications, short sales and other loss mitigation efforts, it says. "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," CFO Doug Braunstein said on the call. "We would hope that we would be in a position to move briskly here to avoid further damage and further pressure on the housing market and ultimately further pressure on the economy," Braunstein said. "The company takes these matters very seriously and we are devoting substantial resources to the issue." A bellwether for the health of the entire banking industry, JPMorgan Chase's quarterly numbers should give investors insight into the remainder of the earnings season that kicks off in full force next week. JPMorgan's three big bank rivals report quarterly earnings next week. Citigroup ( C) reports on Monday, October 18th; BofA releases earnings on Tuesday, October 19th, and Wells Fargo ( WFC) reports on Wednesday, October 20th. JPMorgan's shares were most recently trading down 0.4% to $40.24 on very strong volume of about 35 million shares. --Written by Laurie Kulikowski in New York. To contact the writer of this article, click here: Laurie Kulikowski. To submit a news tip, send an email to: email@example.com.