JPMorgan Chase Bank will pay $50 million – pending court approval – to settle allegations that it mishandled documents filed in bankruptcy court on behalf of homeowners facing bankruptcy.
As part of its settlement with the U.S. Trustee Program, Chase will pay more than $50 million in cash payments, mortgage loan credits and principal write-downs to more than 25,000 homeowners who are or were in bankruptcy, according to a U.S. Department of Justice (DOJ) press release.Â
Specifically, Chase will provide $22.4 million in credits and second lien forgiveness to about 400 homeowners who received inaccurate payment increase notices during their bankruptcy cases; $10.8 million to more than 12,000 homeowners in bankruptcy through credits or refunds for payment increases or decreases that were not filed in bankruptcy court and noticed in a timely fashion; $4.8 million to more than 18,000 homeowners who did not receive accurate and timely escrow statements, including credits for taxes and insurance; and $4.9 million, through payment of approximately $600 per loan, to more than 8,000 homeowners whose escrow payments may have been applied in a manner inconsistent with escrow statements.
In addition, the bank has been ordered to contribute $7.5 million to the American Bankruptcy Institute's endowment for financial education and support for the Credit Abuse Resistance Education Program.
The bank must also make the necessary changes to its technology, policies, procedures and internal controls to ensure the problems are fixed.
As part of the settlement, filed in the U.S. Bankruptcy Court for the Eastern District of Michigan, JPMorgan Chase ‘acknowledges that it filed in bankruptcy courts around the country more than 50,000 payment change notices that were improperly signed, under penalty of perjury, by persons who had not reviewed the accuracy of the notices,’ the DOJ release states.
‘More than 25,000 notices were signed in the names of former employees or of employees who had nothing to do with reviewing the accuracy of the filings. The rest of the notices were signed by individuals employed by a third party vendor on matters unrelated to checking the accuracy of the filings,’ the DOJ says.
‘It is shocking that the conduct admitted to by Chase in this settlement, including the filing of tens of thousands of documents in court that never had been reviewed by the people who attested to their accuracy, continued as long as it did,’ says Stuart F. Delery, acting associate attorney general, in the release. ‘Such unlawful and abusive banking practices can deprive American homeowners of a fair chance in the bankruptcy system, and we will not tolerate them.’
‘This settlement should signal once again to banks and mortgage servicers that they cannot continue to flout legal requirements, compromise the integrity of the bankruptcy system and abuse their customers in financial distress,’ says Cliff White, director of the U.S. Trustee Program. ‘It should be acknowledged that Chase responded to the U.S. Trustee's court actions by conducting an internal investigation and taking steps to mitigate harm to homeowners. But years after uncovering improper mortgage servicing practices and entering into court-ordered settlements to fix flawed systems, it is deeply disturbing that a major bank would still make improper court filings and fail to provide adequate and timely notices to homeowners about payments due.’
White adds, ‘Other servicers should take note that the U.S. Trustee Program will continue to police their practices and will work to ensure that those who do not comply with bankruptcy law protections for homeowners will pay a price, just as Chase has done in this matter.’