The U.S. Justice Department on Tuesday announced a $50 million settlement with J.P. Morgan Chase (NYSE:JPM) to help compensate about 25,000 homeowners whose bankruptcy filings were allegedly mishandled by the giant banking firm.
The settlement includes cash payments, mortgage loan credits and loan forgiveness to the homeowners whose paperwork in various bankruptcy courts around the country was “robosigned” by J.P. Morgan workers who had not checked the paperwork for accuracy, according to a statement released by the Justice Department.
Continue Reading Below
In addition to the financial settlement, the bank has agreed to improve internal operations and submit to oversight by an independent compliance reviewer.
The proposed settlement was filed in the U.S. Bankruptcy Court for the Eastern District of Michigan and is subject to court approval.
As part of the settlement, J.P. Morgan admitted filing 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.
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, according to the Justice Department’s statement. 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.
Chase also acknowledges that it failed to file timely, accurate notices of mortgage payment changes and failed to provide timely, accurate escrow statements.
“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 in the statement. “Such unlawful and abusive banking practices can deprive American homeowners of a fair chance in the bankruptcy system, and we will not tolerate them.”
The Justice Department said J.P. Morgan cooperated with the investigation into improper “robosigning” by conducting an internal investigation and taking steps to mitigate harm to homeowners.
A J.P. Morgan spokesman issued the following statement: “Our Payment Change Notices were appropriately reviewed and substantively correct in the overwhelming majority of cases, even though the process for filing them electronically was flawed. We have changed our system to ensure electronic signatures on bankruptcy filings will match the individual who reviewed the filing for accuracy.”
The breakdown of payments to affected homeowners is as follows: J.P. Morgan 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; the bank 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; and will pay $4.8 million to more than 18,000 homeowners who did not receive accurate and timely escrow statements.
In addition, J.P. Morgan 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.
The bank will also contribute $7.5 million to the American Bankruptcy Institute’s endowment for financial education and support for the Credit Abuse Resistance Education Program.
The Justice Department said J.P. Morgan has also agreed to make necessary changes to its technology, policies, procedures, internal controls and other oversight systems to ensure that the problems identified in the settlement do not recur.
Continue Reading Below