Chase freezes 56,000 foreclosures due to incorrect documents

We’ve reported a few instances where Chase has filed foreclosures without the proper documentations that it actually owns the loans or has proper authority as servicer of the loan to foreclose.  In one case that we’ve found, Chase couldn’t prove it owned the loan and the balance was dismissed by a judge.

It looks Chase’s documentation problems are a lot more widespread that the few cases we’ve seen, as they’ve just announced they are freezing 56,000 foreclosures because Chase employees signed off on documents without having properly reviewed them.  Mind you, this is only the foreclosures, there are hundreds of thousands of additional loans that are delinquent that Chase may not be able to prove they own or have the right to foreclose as the loan servicer.

If you have a mortgage with Chase and are having problems, you may benefit by asking Chase to prove it has the proper documentation.  In some cases they will not be able to prove this and you may have the leverage necessary to negotiate much better terms on your loan.

Update 10/1/10:  Ohio is now asking Federal prosecutors to investigate possible defects in legal papers for thousands of foreclosures in Ohio.

Do you need to be in the news to get a loan mod with Chase?

This story is so typical Chase.  Family falls on hard times, in this case because they have a gravely ill child.  Chase has initiated foreclosure proceedings in parallel with the homeowners seeking a loan modification and days before the foreclosure sale is scheduled, Chase tells them that they have been approved for a HAMP loan modification.  But, the papers never arrive and the house is sold back to Fannie Mae.

The reason this case didn’t stop there is that the Washington Post wrote a story on this particular family and their plight, and Chase decided that they would take a second look at the families situation.

For one thing, under Fannie Mae protocols (Chase just serviced the loan) the family should have been offered other modifications options.

So the publicity put pressure on both Chase and Fannie Mae and they discovered the case had not been handled properly.  The foreclosure has been reversed and the family is being offered other modification options.

Is this really the only way to get treated fairly by Chase contact the press?

Are some Chase loan modification approvals a scam?

I’ve heard a number of stories where people are contacted by Chase to say their loan modification has been approved and then later told that it is no longer approved or has never been approved.  I just got this story from a reader:

Chase has called me twice telling me my loan modification was approved and only days later I receive a letter saying I was denied.  This time they say the reason (always before it was the bogus missing doc thing) I wasn’t over 60 days later (I’m current) and that I don’t have a hardship.  I no longer received $1500/month child support and I’m paying almost 45% in a minimum payment due to reset in December moving it up to 50% … and it’s adjustable.  I called them and they say they don’t know why someone would call me and say I was approved.  I think they are called under false pretenses to obtain information.  This should be illegal.  I also notice they no longer say “this call is being recorded” … surprise.  What can I do?  Chase Sucks!!! 1 year 3 months of nonsense.

I could think of a number of reasons they would be doing this but chief among them is to get people to pay more money than they might if they understood they would be denied in the end.

Another WaMu/Chase foreclosure dismissal, this time with finding of fraud

A couple recently was able to get their foreclosure by WaMu then Chase dismissed and the court went a step further and found WaMu and Chase guilty of fraud.

At the heart of the issue was the fact that the bank was claiming it owned the loan rather than being the service of the loan which was owned by Fannie Mae.  The loan was originated by another bank unrelated to WaMu or Chase so neither bank (WaMu, then Chase as the purchaser of WaMu’s assets) had the right to claim that they owned the loan.

The court found WaMu and Chase guilty of fraud because they knew as servicer and not owner of the loan, they were not entitled to foreclose; only Fannie Mae was entitled to foreclose.

11.  The court find by clear and convincing evidence that WAMU, Chase, and Shapiro and Fishman committed fraud on this court.

Chase claims a lot more foreclosures coming

As you walk down the trecherous road to trying to get a loan modification with Chase Bank, and you begin to wonder what their motivations truly are, keep this in mind:

Charlie Scharf, JP Morgan Chase’s head of retail financial services, told investors recently to expect REO (Real Estate Owned) sales to make up a substantial part of overall real estate sales over the next two years, from 21 to 28 percent.  He certainly must know something about Chase’s mortgage business which presumably figures into his statement and might be taken as admitting that Chase doesn’t see itself stemming the wave of foreclosures anytime soon.

This is why you should challenge a Chase foreclosure

Another useful tidbit from a great Chase-related blog post.

Quite often, when a big bank like Chase (and it seems especially Chase) forecloses on someone, chances are they have not dotted all ‘i’s and crossed all the ‘t’s.  In fact, there is a good chance they might not actually be able to prove that they have the right to foreclose upon you, and you could quite possibly get your foreclosure dismissed, and perhaps even get your loan forgiven.  Take for instance this deposition of Beth Ann Cottrell, Operations Manager of Chase Home Finance LLC:

Q.  So if you did not review any books or records or electronic records before signing this affidavit of payments default, how is it that you had personal knowledge of all of the matters stated in this sworn document?

A.  Well, it is pretty simple, I have personal knowledge that my staff has personal knowledge of what is in the affidavit on personal knowledge.  That is how our process works.

Q.  So, when signing an affidavit, you stated you have personal knowledge of the matters contained therein of Chase’s business records yet you never looked at the data bases or anything else that would contain those records; is that correct?

A.  That is correct.  I rely on my staff to do that part.

Q.  And can you tell me in a given week how many of these affidavits you might sing?

A.  Amongst all the management on my team we sign about 18,000 a month.

Q.  And how many folks are on what you call the management?

A.  Let’s see, eight.

Dear Chase, you *did* receive our last payment!

Have you just persevered through 12 months of trying to get a loan modification or short sale or ANYTHING at all to happen with Chase and still have nothing to show for it?  I found this cute little story from this blog, which make a pretty good argument for strategically defaulting on your mortgage, if the circumstances are right.

Well, I know a homeowner who lives in Scottsdale, Arizona… lovely couple… wouldn’t want to embarrass them by using their real names, so I’ll just refer to them as the Campbell’s.

So, just the other evening Mr. Campbell calls me to say hello, and to tell me that he and his wife decided to strategically default on their mortgage.  Have you heard about this… this strategic default thing that’s become so hip this past year?

It’s when a homeowner who could probably pay the mortgage payment, decides that watching any further incompetence on the part of the government and the banks, along with more home equity, is just more than he or she can bear.  They called you guys at Chase about a hundred times to talk to you about modifying their loan, but you know how you guys are, so nothing went anywhere.

Then one day someone sent Mr. Campbell a link to an article on my blog, and I happened to be going on about the topic of strategic default.  So… funny story… they had been thinking about strategically defaulting anyway and wouldn’t you know it… after reading my column, they decided to go ahead and commence defaulting strategically.

So, after about 30 years as a homeowner, and making plenty of money to handle the mortgage payment, he and his wife stop making their mortgage payment… they toast the decision with champagne.

You see, they owe $865,000 on their home, which was just appraised at $310,000, and interestingly enough, also from reading my column, they came to understand the fact that they hadn’t done anything to cause this situation, nothing at all.  It was the banks that caused this mess, and now they were expecting homeowners like he and his wife, to pick up the tab.  So, they finally said… no, no thank you.

Luckily, she’s not on the loan, so she already went out and bought their new place, right across the street from the old one, as it turns out, and they figure they’ve got at least a year to move, since they plan to do everything possible to delay you guys from foreclosing.  They’re my heroes…

Okay, so here’s the message I promised I’d pass on to as many JPMorgan Chase people as possible… so, Mr. Campbell calls me one evening, and tells me he’s sorry to bother… knows I’m busy… I tell him it’s no problem and ask how he’s been holding up…

He says just fine, and he sounds truly happy… strategic defaulters are always happy, in fact they’re the only happy people that ever call me… everyone else is about to pop cyanide pills, or pop a cap in Jamie Dimon’s ass… one or the other… okay, sorry… I’m getting to my message…

He tells me, “Martin, we just wanted to tell you that we stopped making our payments, and couldn’t be happier.  Like a giant burden has been lifted.”

I said, “Glad to hear it, you sound great!”

And he said, “I just wanted to call you because Chase called me this evening, and I wanted to know if you could pass a message along to them on your blog.”

I said, “Sure thing, what would you like me to tell them?”

He said, “Well, like I was saying, we stopped making our payments as of April…”

“Right…” I said.

“So, Chase called me this evening after dinner.”

“Yes…” I replied.

He went on… “The woman said: Mr. Campbell, we haven’t received your last payment.  So, I said… OH YES YOU HAVE!”

New CA law provides tax relief for forgiven debt

As short sales, loan forgiveness, and foreclosures proliferate, many former homeowners are finding themselves with a huge tax bill. Any amount of your loan the is forgiven is subject to taxes as if it were income.

In California, there is now some relief.  Gov. Schwarzenegger signed SB 401 into law last Monday which modifies California law to match the tax treatment of forgiven debt with that of the federal government, recently changed through the federal Mortgage Forgiveness Debt Relief Act, which forgives this “phantom” income up to certain amounts.  The new California law retroactively applies to such income back to the beginning of 2009.

The limits are complicated and not easily described.  For more detail, read the text of SB 401 (California) or the text of the  Mortgage Forgiveness Debt Relief Act (IRS).