Admitting it was a “bad boy” handling mortgages in bankruptcy, Chase recently entered a settlement with the federal government to compensate more than 25,000 US homeowners. The settlement is subject to court approval.
The United States Trustee Program, a unit of the Department of Justice whose attorneys at the bankruptcy court oversee the integrity of the system, announced on March 3 it had reached an agreement with Chase forcing it to pay homeowners $50 million in cash, mortgage loan credits and loan forgiveness for “robo-signing” and other improper practices before the bankruptcy court. Chase also agreed to change internal operations and submit to the oversight of an independent compliance reviewer.
Chase admitted it submitted more than 50,000 mortgage “payment change notices” that were signed by persons who had no knowledge of the accuracy of the notices they signed:
- More than 25,000 of the notices were signed by employees or former employees who had nothing to do with reviewing the accuracy of the notices.
- The rest of the notices were signed by employees of third party vendors who also were not involved in verifying the accuracy.
Chase also admitted it failed to file the notices in a timely fashion, as well as failing to provide timely escrow statements to homeowners in bankruptcy.
“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,” said Acting Associate Attorney General Stuart F. Delery. “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,” stated U.S. Trustee Program Director Cliff White.
Under the proposed settlement, Chase agrees to provide payments, credits and contributions totaling more than $50 million:
- 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.
- Chase will pay $10.8 million to more than 12,000 homeowners in bankruptcy through credits or refunds for payment increases or decreases that were not timely filed in bankruptcy court and noticed to the homeowners.
- Chase will pay $4.8 million to more than 18,000 homeowners who did not receive accurate and timely escrow statements. This includes credits for taxes and insurance owed by the homeowners and paid by Chase during periods covered by escrow statements that were not timely filed and transmitted to homeowners.
- Chase will pay $4.9 million, through payment of approximately $600 per loan, to more than 8,000 homeowners whose escrow payments Chase may have applied in a manner inconsistent with escrow statements it provided to the homeowners.
- Chase will contribute $7.5 million to the American Bankruptcy Institute’s endowment for financial education and support for the Credit Abuse Resistance Education Program.
If approved by the court, homeowners will get notification from Chase to any relief for which they are eligible.
If you have questions or concerns about your situation, contact our law office.