JPMorgan Chase & Co. JPM continues to be in news for settling legal issues related to its past business misconducts. This time, the bank has agreed to settle allegations, brought by the U.S. Department of Justice, related to mishandling of bankruptcy filings of more than 25,000 homeowners.
JPMorgan will pay roughly $50 million that would include cash payments, mortgage loan credits and loan forgiveness, to over 25,000 homeowners who are or were bankrupt. The company will also make changes in internal operations and submit to oversight by external compliance reviewer.
Breakdown of the $50 million payment to 25,000 affected homeowners is as follows:
- $22.4 million in credit and second lien forgiveness to about 400 homeowners who got wrong payment increase notices
- $10.8 million to more than 12,000 homeowners in bankruptcy through credit or refund for payment rise or fall, which were not timely filed in bankruptcy court
- $4.8 million to roughly 18,000 homeowners who did not receive correct and timely escrow account statements
- $4.9 million, through payment of $600 per loan, will be paid to 8,000 house owners whose escrow payments were inconsistent with the statements provided to them
- $7.5 million as contribution to the American Bankruptcy Institute’s endowment for financial education and support for the Credit Abuse Resistance Education Program
Further, as part of the settlement, JPMorgan admitted that more than 50,000 payment change notices were improperly signed by persons who had not reviewed the accuracy of the same. Specifically, more than 25,000 notices were signed in the name of former employees or those staff members who had nothing to do with checking the accuracy of the filings.
The remaining notices were signed by individuals employed by the third-party vendor, who were not responsible for checking correctness. All these are collectively known as ‘robo-signing’. Further, JPMorgan acknowledged that it failed to file timely, accurate payment change notices as well as provide correct escrow statements.
Notably, the settlement requires the approval of the U.S. Bankruptcy Court for the Eastern District of Michigan.
Earlier also, JPMorgan had been embroiled in allegations of robo-signing that led to foreclosures. In 2012, the company, along with Bank of America Corporation BAC, Citigroup Inc. C, Wells Fargo &Company WFC and Ally Financial Inc., had to settle similar accusations by paying $25 billion in aggregate.
We believe that JPMorgan will continue to resolve various legal matters related to its past business operations. These settlements will, consequently, hamper the company’s financials, going forward.
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