Back in October, banks and lending institutions, such as Bank of America, JP Morgan Chase, and Citibank were suspending foreclosures to straighten out their paperwork, and revamp their policies and procedures by which foreclosures were processed. Many of these lenders including others were accused of “robo-signing,” which is the signing of complex legal documents without evaluating their contents.

The buying of distressed properties had been very robust for investors in the past. Buyers of these properties have been able to flip a place after fixing it up and turning a tidy profit. However, in the last few months, buyers have become more concerned that the previous owner will sue the banks claiming false representation or fraud and of being victims of robo-signing. Thus, it is reported that in all 50 states, foreclosure sales have declined tremendously.

InNew Jersey, six mortgage lenders, including Bank of America, JP Morgan Chase, and Citibank, ordered to provide to the court documents proving that their internal foreclosure application processes are up to current standards by Jan. 19, 2011, or the applications will be suspended. The mortgage divisions of Wells Fargo, OneWest Bank, Ally Financial, along with the three aforementioned lenders, account for more than 40 percent of all foreclosures filed in that state, according to the Star-Ledger.

Additionally, 24 lenders that have filed more than 200 residential mortgage foreclosures this year will be required to prove within 45 days that there were no irregularities in those processes. The companies must review and verify these foreclosure applications and prove their reliability and accuracy, according to the administrative order.

New York state is also paying closer attention to robo-signing prevention. In a press release from the New York State Unified Court System on Oct. 20, Chief Judge Jonathan Lippman emphasized the importance of accountability in foreclosure processes. “It is important the judiciary ensures that judges are not rubber-stamping questionable documents that may not be reliable,” he said.

Under the new requirement, plaintiff’s counsel in foreclosure matters must submit documents of affirmation at one of several stages. In new cases, the affirmation must accompany the request for judicial intervention. In pending cases, the affirmation must be submitted with either the proposed order of reference or the proposed judgment of foreclosure.

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