JPMorgan Chase & Co., after admitting it mishandled mortgages of U.S. service members, won approval of a $56 million settlement of claims that it overcharged on their home loans.
U.S. District Judge Margaret B. Seymour in Columbia, South Carolina found that the accord, which provides $27 million in cash to military personnel overcharged on mortgages as well as other benefits, was a fair resolution of suits over the problem loans.
Service members who suffered from the overcharges think the settlement “is phenomenal,” said Jonathon Rowles, a Marine fighter pilot who sued JPMorgan over the handling of his loan.
“They recognized they made mistakes and they took the steps to fix them and compensate people for their damages,” Rowles said in an interview after the hearing. “I’m pleased with the way it turned out.”
JPMorgan officials acknowledged earlier this year that one of the bank’s units made errors in handling mortgages covered by the Servicemembers Civil Relief Act. That law was enacted in 1942 to shield deployed military personnel from financial stress.
Bank officials “regret the mistakes our firm made on mortgages for members of the military,” Frank Bisignano, a JPMorgan executive who leads the home lending unit, said in an e-mailed statement yesterday.
‘ Accountable and Responsible’
“We hold ourselves accountable and responsible for these mistakes, and fixing them is just the beginning of a new way forward with the military and veteran community,” he added.
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 Rowles, who holds the rank of captain, sued the bank in federal court in South Carolina last year over the mortgage unit’s handling of his $255,000 loan.
Under the terms of the settlement, Rowles and an estimated 6,000 other service personnel whose mortgage accounts were mishandled will split the $27 million 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.
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.
Finally, the company agreed to pay $8 million in legal fees for Rowles and other affected military personal who sued over the mishandled mortgages, according to court filings.
Seymour approved both the settlement and the legal-fee request after a two-hour hearing yesterday.
“The resolution of this case sends a message that we won’t let our fighting men and women be distracted from their missions by unfair financial burdens on the home front,” Richard Harpooltian, a Columbia, South Carolina-based lawyer for Rowles, said in an interview.
Justice Department Probe
The U.S. Justice Department said it has opened an investigation of lenders’ handling of servicemembers’ mortgages.
Units of Morgan Stanley, the sixth-largest U.S. bank by assets, and Deutsche Bank AG 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, U.S. District Court, District of South Carolina (Beaufort).