On Wednesday, September 29th, J.P. Morgan Chase announced that it will halt foreclosures in 23 states due to loan documentation flaws.  On Wednesday, J.P. Morgan spokesman, John Kelly, stated the firm “does not expect to find any factual problems or that customers have been harmed, but if we do find any cases we will take appropriate action.”

Speculation is that this step by high-profile J.P. Morgan may pressure other lenders to make the same move of freezing foreclosures.  Presumably, such a break in foreclosure filings will allow institutions to get a handle on potentially flawed loan and foreclosure documentation.

The consequences of this decision by J.P. Morgan are difficult to foresee, but should other large lenders follow their lead residential forecl osure activity would certainly decrease, with potentially significant impacts on the residential housingmarket.  Some see a potentially positive result and suggest that a delay in foreclosure sales would permit the residential market to find a floor.  Others fear that it is only after resolving the buildup of foreclosures that the nation’s housing market will recover, and any delay in foreclosures will delay this recovery.