BofA, Other Banks Agree to Special Master for Foreclosures in New Jersey

Bank of Amer­ica Corp. (BAC) and five other mort­gage ser­vicers agreed to the appoint­ment of a spe­cial mas­ter to exam­ine fore­clo­sure pro­ce­dures in New Jer­sey, a court– appointed lawyer said today.

A blan­ket sus­pen­sion of fore­clo­sures in New Jer­sey isn’t nec­es­sary in light of the set­tle­ment, which sub­jects the banks to a per­for­mance review for a year, the lawyer, Edward Dauber, said in a let­ter to Supe­rior Court Judge Mary Jacob­son, posted on the court’s web­site. Dauber’s law firm, Newark, New Jer­sey– based Green­berg Dauber Epstein & Tucker, was appointed to present argu­ments sup­port­ing a fore­clo­sure suspension.

Given these pro­tec­tions any order of sus­pen­sion “would serve no pur­pose,” Dauber said in the let­ter. “To the con­trary, an effi­cient and nor­mal­ized fore­clo­sure process is essen­tial to the health of the New Jer­sey hous­ing market.”

The banks’ prac­tices came under scrutiny after employ­ees signed court doc­u­ments in fore­clo­sure cases with­out ver­i­fy­ing their accu­racy, accord­ing to court papers. The banks are Ally Finan­cial Inc., Bank of Amer­ica, JPMor­gan Chase & Co. (JPM), Wells Fargo & Co. (WFC), Cit­i­group Inc. © and OneWest Bank, accord­ing to a Dec. 20 court order.

The banks argued in court papers filed in Jan­u­ary that defects in their pro­ce­dures for seiz­ing homes could be reme­died with­out halt­ing foreclosures.

Pend­ing Actions

The spe­cial mas­ter will gov­ern the resump­tion of pend­ing fore­clo­sure actions, accord­ing to the agree­ment. Banks will be required to sub­mit affi­davits and cer­ti­fi­ca­tions detail­ing record-keeping, processes to review doc­u­ments, train­ing pro­grams and quality-assurance procedures.

The spe­cial mas­ter will then decide whether to rec­om­mend that Jacob­son per­mit indi­vid­ual banks to resume pros­e­cu­tion of pend­ing foreclosures.

Dauber rec­om­mended that retired New Jer­sey Supe­rior Court Judge Richard J. Williams be appointed spe­cial master.

JPMor­gan spokesman Joseph Evan­ge­listi declined to com­ment. Wells Fargo spokes­woman Vic­kee Adams and Diane Henry, a spokes­woman for OneWest Bank, and Ally spokes­woman Gina Proia had no imme­di­ate com­ment. Cit­i­group spokesman Sean Keve­lighan didn’t imme­di­ately return an e-mail and phone call left after reg­u­lar busi­ness hours seek­ing comment.

The New Jer­sey actions add to the legal chal­lenges banks are fac­ing across the coun­try. The 50 state attor­neys gen­eral are inves­ti­gat­ing fore­clo­sure prac­tices by banks and mort­gage ser­vicers, while home­own­ers in sev­eral states have filed poten­tial class-action law­suits against the companies.

The case is In the Mat­ter of Res­i­den­tial Mort­gage Fore­clo­sure Plead­ing and Doc­u­ment Irreg­u­lar­i­ties, Supe­rior Court of New Jer­sey, Chancery Division-General Equity Part, F-59553–10, Mer­cer County (Trenton).

To con­tact the reporter on this story: Sophia Pear­son in Philadel­phia at spearson3@bloomberg.net

To con­tact the edi­tor respon­si­ble for this story: David Rov­ella at drovella@bloomberg.net