Wells Fargo & Co. said on yesterday it found bad documentation on 55,000 foreclosures, in its first admission of possible problems in the way it repossesses homes.

The San Francisco-based bank — the second largest home mortgage servicer in the country — has continued to foreclose on delinquent borrowers in recent weeks, even as its rivals instituted moratoriums amid a public furor over whether banks cut corners in the foreclosure process with so-called "robo-signers" of legal documents.

Wells Fargo found problems with foreclosure affidavits in 23 states where the final internal review or the notarization of the documents did not meet company standards. The bank plans to re-file the affidavits by mid-November.

In cases where the foreclosure is imminent, the bank will ask for an extension from the local courts.
"We found human errors, and we are fixing those errors," said Teri Schrettenbrunner, Wells Fargo spokeswoman, who declined to discuss the nature of the errors the bank found.

Despite problems, the bank had no plans to institute its own moratorium because it believes the filing mistakes did not lead to borrowers being unjustly evicted from their homes.

On average, borrowers are 16 months behind on payments at the time of their foreclosure, according to Wells Fargo data released on yesterday.

Bank of America Corp., the largest mortgage servicer in the country, instituted a 50-state foreclosure moratorium earlier this month that has since been partially lifted. JPMorgan Chase & Co. and GMAC Mortgage, a division of Ally Financial Inc., both imposed 23-state halts.

Wells Fargo also said the affidavits will have no impact on its mortgage repurchase obligations.

The bank has reserved $1.3 billion to repurchase bad mortgages from investors.

The foreclosure crisis in recent weeks has sparked fears of a shoddy paper trail for mortgages held by third-party investors totaling billions of dollars, which banks could be forced to repurchase.

Yesterday, the chief of the Treasury’s homeowner preservation office told a Congressional panel she did not see a systemic threat posed by banks rebuying mortgages, and regulators were monitoring the situation closely. (Reuters)