By Katy Stech
A J.P. Morgan Chase & Co. unit struck a $50 million deal
with regulators who accused the bank of filing "robo-signed"
mortgage documents to bankruptcy courts across the country.
Under the deal with the U.S. Justice Department, J.P. Morgan
Chase Bank N.A. promised to make payments to more than 25,000
homeowners, including some who weren't properly notified that their
mortgage payments increased after they filed for bankruptcy
protection.
The deal came after bank officials were accused of filing tens
of thousands of documents to bankruptcy courts that weren't
actually reviewed by the people who vouched for their accuracy.
Specifically, bank officials admitted to filing more than 50,000
payment-change notices that were improperly signed, under penalty
of perjury, by persons who hadn't reviewed the accuracy of the
notices, according to Justice Department officials.
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 Justice Department added.
"It is shocking that the conduct admitted to by Chase in this
settlement...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."
J.P. Morgan spokesman Jason Lobo said the company's
payment-change notices were appropriately reviewed "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," said Mr. Lobo, who also disputed the
department's characterization of the process as robo-signing.
The payments to homeowners will come in the form of cash
payments, mortgage-loan credits and loan forgiveness.
The settlement agreement was negotiated by the Justice
Department's U.S. Trustee Program, which monitors bankruptcy cases
for wrongdoing.
"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," U.S. Trustee Program Director
Cliff White said.
Tuesday's settlement is the latest promise of relief to mortgage
borrowers from J.P. Morgan. The bank is required to provide $4
billion in consumer aid under its $13 billon mortgage-securities
settlement with the Justice Department. The bank said late last
year it has provided more than half that amount by cutting mortgage
debt for struggling homeowners and lending to low-income home
buyers.
The Justice Department is requiring J.P. Morgan, as well as Bank
of America Corp. and Citigroup Inc., to spend money assisting
struggling borrowers as a condition of their multibillion-dollar
settlements. The three banks have all settled accusations that they
had misled investors about the quality of the mortgage securities
they sold before the 2008 financial crisis.
Alan Zibel contributed to this article.
Write to Katy Stech at katherine.stech@wsj.com
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