BluegrassForeclosure.com

J.P. Morgan Chase, one of the nation’s leading banks, announced Wednesday that it will freeze foreclosures in about half the country because of flawed paperwork, a move that Wall Street analysts said will pressure the rest of the industry to follow suit.

The bank’s decision will affect 56,000 borrowers in 23 states where allegations of forged documents and signatures and other similar problems are being used to try to overturn court-ordered evictions. Yet the impact may be much broader, given J.P. Morgan’s stature in the industry. If other banks adopt the same approach, the foreclosure process in many parts of the country will grind to a halt.

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Foreclosure homes made up nearly one-fourth of all residential sales in the second quarter, according to a report Thursday from RealtyTrac Inc.

The foreclosure tracking outfit said 248,534 U.S. homes sold in some stage of foreclosure during the quarter, an increase of 5 percent from the previous quarter, but down 20 percent from a year ago.

Foreclosures on average sold at a 26-percent discount compared with properties not in foreclosure. That’s down from 27 percent in the first quarter.

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