Chase Settles Class Action Wrongful Foreclosure Suit for $56 Million


Henry Chuang

by Henry Chuang on May 9, 2011

in Lending/Lender Issues

On April 21, 2011, JPMorgan Chase agreed to settle a class action lawsuit filed by active-duty military personnel for claims of wrongful foreclosure.  In Rowles v. Chase, three members of the armed forces sued Chase alleging violations of the Servicemembers Civil Relief Act (“SCRA”).  The SCRA provides protections to active-duty servicemembers by requiring lenders to reduce interest rates to six percent (6%), to not foreclose or report negative credit, and limits lenders’ ability to terminate loans.  The settlement, if approved, will provide cash payments to servicemembers, return wrongfully foreclosed homes or pay for the value of the home, create of an advisory council, and reduce interest rates.  Unlike previous cases, this settlement is a matter of public record.  While the settlement has no admissions of wrongdoing, Chase has stated that there were wrongful foreclosures and failure to follow applicable law.

Jonathan Rowles, a captain in the Marine Corp, alleged that Chase continually refused to reduce his interest rate to six percent.  Instead, over the course of several years, Chase repeatedly asked for the same documentation to prove that Rowles was in active service, refused to reduce the interest rate, and began aggressive collection methods that including calling Rowles at 4:00 A.M. and calling Rowles’ mother.

Sarah Letts-Smith, the second plaintiff, owned a house in California.  While Letts-Smith was serving in Iraq, Chase began foreclosure proceedings against her.  Three days after Letts-Smith was released from active duty, Chase completed the foreclosure of her home.

Martin Hupfl, the third plaintiff, financed a purchase of a car through Chase Auto Finance.  Hupfl began serving as a marine and notified Chase of his rights under SCRA.  Chase confirmed receipt of Hupfl’s SCRA request and confirmed that Chase had made the appropriate changes.  However, while Hupfl was serving as a marine, Chase terminated the loan contract and resold the account to a collection agency.  Chase also reported that Hupfl’s account had been “charged off as bad debt.”

While the settlement is a step in the right direction, it is unlikely to have an impact on other homeowners.  The plaintiffs only allege violations of the SCRA instead of broader state or federal laws.  Additionally, because the matter was settled, there is no precedent established for future cases.  However, the public statements and the terms of the settlement provide valuable information for other homeowners fighting to save their homes.  Chase has publically acknowledged that, at least in the case of active-duty personnel, it has failed to follow the applicable statutes and wrongfully foreclosed on servicemembers.  In addition, it is interesting to note that Chase agreed to void the foreclosure sales wherever possible and waive any mortgage debts.  Chase, along with most other lenders, had previously been reluctant to approve any principal debt reduction.

Practice Notes – While it is unlikely that this settlement will help other homeowners, this case may provide a template for other class action suits against lenders.  Although the class action lawsuit alleging violations of the Perata Mortgage Relief Act was struck down in California, other cases that allege violations of specific protections for smaller groups may be viable.  It will be interesting to watch to see if other active-duty personnel or other homeowners with special protections will seek class action lawsuits against lenders.  Previously, Deutsche Bank and Morgan Stanley had settled similar cases filed by active-duty servicemen, however, those settlements were never made public.  Additionally, the current settlement discussions between the group of 50 state attorneys general and loan servicers may provide additional relief to homeowners.

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{ 6 comments… read them below or add one }

avatar Michael Roney June 22, 2011 at 2:31 am

My house was sold illegally during an executed Forbearance Agreement with Chase LLC. I made my payment via Western Union, for July, early, and was notified by telephone on July 7, 2010, that my house had sold to the highest bidder. I was served with a Unlawful Detainer back in August 2010. It was dismissed this past February. To date, there has been no attempt to remedy this situation. We have contacted numerous politicians, TARP, FBI, Fannie Mae Fraud and Attorneys General here in CA. Can you help? Thank you, Michael Roney 909-866-9817

avatar Henry Chuang July 14, 2011 at 12:55 am

Michael,
Unfortunately, my practice is here in Palo Alto. From your area code, it seems that you reside in Southern California. Given the distance, representation would be difficult logistically and would not be cost effective. I would recommend finding an attorney who works in Southern California to assist you with your suit against Chase.

avatar Teresa August 9, 2011 at 8:15 pm

My husband is in the navy. He was activated Chase told me because he was not on the loan they could not use soldier act. Then fighting for a while they said ok. Problem is when he left we had to wait a month to get paid. I was short $200 and the Navy family Relief Center gave me a check made out to Chase for the $200 to go along with my certifed bank check. I sent the payment to chase. They kept the $200 check from the Navy Center and sent back my bank check. Then they kept telling me I was behind. every month. They then refused to take my certifed bank checks.
They called me anywere from 5 to 6 times a day. The loan was in my husbands name. He refinanced and when we went to sign the papers they said I had a better score then his and we should put it in my name. I told them I don’t work and I am disabled. I don’t get SS or anything like that. So how can you put the loan in my name. They said that don’t matter. We fell behind on the loan and they told us send in almost $20,000 we did and they said we be cought up and then just make regular payments. After that they told us they were not reporting the payments we made to the credit reporting agency. They said the money we sent in was going to the investrers that that was money they would have made if we sent in our payments on time. They then told us they were adding like $20,000 on to the end of the loan. So the loan went from $178,000 to $200,000 and again when he came back from Iraq it went up to $222,000. The lady at Chase asked me how we got this loan that we don’t make enough money. Told her you gave it to us. The loan payment had gone from $1.200 to $1,968 a month. I have no clue what they did with the money I sent them. I have the money orders I sent them and the bank has all the certifed bank checks plus the the rest was debit out of the checking. The house is worth about.$125,000 and the loan is for $222,000. What do we do.

avatar Carolyn Sion November 16, 2011 at 5:09 am

Chase Bank wrongfully forclosed on my home! What can I DO?

avatar M C April 23, 2012 at 5:56 am

I was wrongfully foreclosured on my home. Help. who can I talk to to sue>?

avatar Annie M. Earle April 25, 2013 at 11:36 pm

I was getting a loan modification with CHASE and they sold my home, I have less than 20 days to get out. It was sold to FEDERAL MORTGAGE ASSOCIATION, they are still sending lending right to day stating they are investigating the situation for loan modification. They said I was served I was not. I had a Third party sending all my documents due to CHASE claimed I had missing pages and thing were not right I waiting for 2 years to get a trial payment, After 17 years of paying I know how to pay my bills. Is there anything I can do? I’m getting evicted.

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