That $2 billion trading debacle isn't all JPMorgan Chase has to deal with this week.
Allan Danforth of Kansas City claims that he bought a house in a short sale in September 2010 from homeowners whose mortgage was held by JPMorgan, KMBC reports. Then two months later and without warning, JPMorgan foreclosed on the home, changing the locks and taking away his furniture, appliances and family items. Danforth is now suing JPMorgan for trespassing and theft.
Danforth's suit is likely no more than an afterthought to a bank struggling with a large-scale problem -- a $2 billion trading loss that's injured the company's reputation and prompted some shareholders to propose CEO Jamie Dimon give up his role as chairman.
Short sales, in which properties are sold for less than the amount owed, have become promoted as an increasingly promising alternative to foreclosure, but Danforth's experience suggests the process can still leave something to be desired. All together, there were more short sales than foreclosures in January, according to data from Lender Processing Services cited by Bloomberg, and many housing experts viewed that as a promising sign that foreclosure alternatives were being pursued.
In addition, critics allege that banks' mortgage paperwork has been disorganized -- so disorganized, in fact, for banks to be able to acknowledge receiving new paperwork. Foreclosures have subsequently been criticized as at times impersonal and sudden, with little opportunity for borrowers to negotiate with banks.
In another example of foreclosure confusion, a realtor sold Terry Jordan of Mississippi the wrong foreclosed home after she already had started renovations, according to WREG. The realtor blamed the bank, which he said had given him the wrong information.
Other Kansas City homeowners also are suing a major bank because of foreclosure. Vicki and Richard Sutliffe, a couple in Kansas City, are suing Wells Fargo because the bank allegedly offered mortgage modifications with no intention of making them permanent, according to Courthouse News Service. A judge recently dismissed part of their lawsuit.
JPMorgan Chase temporarily suspended 50,000 foreclosures in September 2010 after concerns arose about the validity of its foreclosure documents. At the time, a JPMorgan spokesman confirmed to the AP that JPMorgan employees had signed off on some foreclosures without verifying the documents.
Bank of America also temporarily halted foreclosures in all 50 states in October 2010 because of concerns about the validity of its foreclosure documents.
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