JPMorgan Chase & Co. (JPM), one of the lenders criticized over improper foreclosures on military families’ homes, agreed to pay $56 million to settle claims it overcharged service members on their mortgages.
JPMorgan will pay $27 million in cash to about 6,000 active-duty military personnel who were overcharged on their mortgages, cut interest rates on soldiers’ home loans and return homes that were wrongfully foreclosed upon, according to settlement terms filed in federal court in Beaufort, South Carolina.
JPMorgan officials said three months ago that one of the bank’s units had made errors in the handling of mortgages covered by the Servicemembers Civil Relief Act. That law was enacted in 1942 to shield deployed military personnel from financial stress.
“We are sorry and regret the mistakes our firm made on mortgages for members of the military,” Frank Bisignano, a JPMorgan official appointed to oversee the company’s home- lending unit in February, said in an e-mailed statement. “We hold ourselves accountable and responsible for these mistakes.”
In February, JPMorgan officials said they returned 10 homes to families protected by the law that were found to have been taken improperly in foreclosure actions. The servicemembers law requires enhanced reviews of soldiers’ mortgages and payment histories before such actions are undertaken.
JPMorgan officials said at the time that its mortgage unit didn’t provide the required review to a total of 18 military families whose homes were foreclosed upon.
“This company has a great history of honoring military and veterans, and the mistakes we made on military foreclosures are a painful aberration on that track record,” Chief Executive Officer Jamie Dimon said in a February statement.
The bank said in January it would pay about $2 million to about 4,500 service members after discovering they’d been overcharged on their JPMorgan mortgages.
The servicemembers law allows soldiers to demand mortgage interest rates be set at 6 percent while on active-duty status. The law applies to current loans and those taken out by troops prior to being deployed.
JPMorgan executives discovered the errors after Marine Captain Jonathon Rowles, a fighter pilot, sued the bank in federal court in South Carolina last year over the mortgage unit’s handling of his $255,000 loan.
Rowles contends Chase Home Finance LLC officials originally failed to heed his interest-rate reduction request, according to court filings. After agreeing to comply with the law, the lender required him to reapply for the protections four times in a year.
The bank also failed to credit Rowles’ payments based on the mandated 6 percent interest rate and began a round of “aggressive collection methods for what it characterized as a past-due balance” on the account, according to court filings.
The bank threatened to report Rowles to credit bureaus and start foreclosure proceedings against his home, the captain said in his lawsuit.
Under the terms of the settlement, Rowles and an estimated 6,000 other service personnel whose mortgage accounts were mishandled will split $27 million in cash, according to court filings. That will provide an average payout of $4,500 per soldier. Recoveries in the cases will vary based on service member’s individual damage claims.
Rowles, now stationed in South Korea, will become “an informal advisor” to a veterans advisory council JPMorgan has created, according to court filings.
The accord also calls for JPMorgan to cut interest rates on all mortgages held by deployed troops to 4 percent for one year, the filing shows.
The lender has agreed to return houses that have been improperly foreclosed upon and not yet sold and to pay fair market value for those already auctioned off, according to the filing. It also will forgive any remaining mortgage debt of military borrowers who were protected by the law and mistakenly foreclosed upon.
JPMorgan officials said in today’s statement they’ve already made $6 million in payments to military borrowers who were overcharged. Under the settlement, the bank also will provide an estimated $6.4 million in additional benefits to soldiers who may have been subjected to “wrongful foreclosure practices.”
Finally, the company will pay $8 million in legal fees for Rowles and other affected military personal who sued over the mishandled mortgages, according to court filings.
Judge Must Approve
U.S. District Judge Margaret B. Seymour still must approve the class-action settlement before it becomes final. “We are very satisfied with this negotiated settled as are our clients,” Richard Harpootlian, a Columbia, South Carolina-based lawyer representing soldiers who sued the bank over the mortgage miscues, said in an interview.
The U.S. Justice Department has launched an investigation of lenders’ handling of service members’ mortgages in the wake of disclosures about mistakes.
Units of Morgan Stanley (MS), the sixth-largest U.S. bank by assets, and Deutsche Bank AG (DBK) are being probed over alleged violations of the servicemembers law, Justice Department officials said last month.
A Michigan judge found in 2009 that Saxon Mortgage, the Morgan Stanley unit, and Deutsche Bank Trust Company Americas violated the servicemembers law by foreclosing on a U.S. Army sergeant’s home in Michigan. The case later settled and terms of the accord weren’t made public.
The South Carolina case is Rowles v. Chase Home Finance LLC, 10-1756-MBS, U.S. District Court, District of South Carolina (Beaufort Division).
To contact the editor responsible for this story: Michael Hytha at email@example.com.