Chase settles mortgage abuse case with military homeowners

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May 19, 2011

Chase settles mortgage abuse case with military homeowners 

Under an agreement approved earlier this month, a class of about 6,000 military servicemembers will share a $48 million settlement of claims that their rights under the Servicemembers Civil Relief Act were violated. They alleged that Chase Home Finance LLC charged excessive mortgage interest and illegally foreclosed on active-duty military personnel.

By Allison Torres Burtka

Chase Home Finance LLC (part of JP Morgan Chase & Co.) has agreed to pay $48.4 million for overcharging servicemembers on their mortgages and illegally foreclosing on them. (Rowles v. Chase Home Finance, LLC, No. 9:10-cv-01756 (D.S.C. filed July 6, 2010).) A federal judge in South Carolina approved the settlement on May 6.

“It sends a message to financial institutions that this is an important issue,” said Richard Harpootlian of Columbia, South Carolina, who represents the plaintiffs.

The U.S. Department of Justice’s Civil Rights Division has been investigating several mortgage and lending companies for wrongful foreclosures against military personnel.

The settlement certifies a class of about 6,000 military members who have Chase mortgages and whose rights under the Servicemembers Civil Relief Act (SCRA) were violated. For some class members, the settlement means they will get their homes back, Harpootlian said.

The SCRA gives servicemembers the right to have their interest rates reduced to 6 percent when on active duty, and it prevents lenders from foreclosing on active-duty servicemembers unless they have a court order.

The purpose of SCRA is “to provide for, strengthen, and expedite the national defense through protection extended by this act . . . to servicemembers of the United States to enable such persons to devote their entire energy to the defense needs of the nation.”

The lead plaintiffs are Jonathon Rowles and George Holloway. Sergeant First Class Holloway was in the Army Reserve when Chase foreclosed on his home and sold it.

Rowles was a captain in the Marine Corps who had purchased a home before enlisting. After being called to active duty, he requested that Chase reduce his interest rates. Chase told him it would but that he would have to submit quarterly verifications that he remained on active duty. Then Chase raised his rate without telling him.

Rowles provided the quarterly verifications and continued to pay at the 6 percent rate. His payments fell behind based on Chase’s calculations, and the company began debt collection procedures, which included calling Rowles repeatedly late at night and warning him that he would lose his home.

In March, Saxon Mortgage Services, a unit of Morgan Stanley, settled a similar case brought by a servicemember who alleged that it illegally seized and sold his home. (Hurley v. Deutsche Bank Trust Co. Americas, No. 1:08-cv-361 (W.D. Mich. settled Mar. 10, 2011).)

Banks have become “huge multinational conglomerates,” and their focus is on profits, Harpootlian said. “No one’s paying attention to the details.”

He and Rowles testified before the House Committee on Veterans’ Affairs at a February hearing on SCRA violations. Holly Petraeus, head of the newly formed Office of Servicemember Affairs at the Consumer Financial Protection Bureau, also testified about the importance of SCRA protections.

As the government works to address the problem, Harpootlian said, “trial lawyers can have an important role to play. We’re sort of the last line of defense.”

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