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Another lawsuit against JPMorgan Chase ....
Started:January 20th, 2012 (02:50 PM) by kbit Views / Replies:733 / 0
Last Reply:January 20th, 2012 (02:50 PM) Attachments:0

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Another lawsuit against JPMorgan Chase ....

Old January 20th, 2012, 02:50 PM   #1 (permalink)
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Another lawsuit against JPMorgan Chase ....

Another lawsuit against JPMorgan Chase is brewing in California, and this one has the potential to blow up big.
It claims JPMorgan Chase systemically engaged in forgery to gain an upper-hand in thousands of bankruptcy cases since 2009. [via Huffington Post]

The lawsuit, which is still waiting to obtain official class-action designation by the California court system, alleges that JPMorgan Chase fabricated mortgage-related documents in thousands of bankruptcy cases to make a profit and remove itself from the responsibility of money-losing mortgages.

The complaint claims that documents were "photo-shopped" to show Chase had the rights to money due under mortgage loans, allowing the bank to obtain "relief from stay" motions in bankruptcy court.

Yves Smith at Naked Capitalism breaks down how that "relief from stay" motion is beneficial to Chase:
Remember that filing for bankruptcy puts a “stay” or hold, on all creditor claims. They all go wait while the court determines which creditors get what from the under water borrower. A “motion for relief of stay” by a mortgage lender is tantamount to saying, “Judge, let me grab the house.”

The "manufactured evidence is systemically utilized to deceive bankruptcy players and increase the profits of Chase," the complaint reads. The court filing alleges that Chase obtained relief of stay permission on 95% of the 7,000 cases where such motions were filed.

In addition, the complaint claims that Chase offered financial incentives to their attorneys who were able to obtain the relief of stay motions the quickest.

The fabricated documents also allowed JPMorgan Chase to show they transferred the mortgage notes — essentially a written promise by the borrower to pay back debt — to mortgage securitization trusts when they might not have, the court filing alleges. The following segment from the filing breaks down how Chase essentially removed itself from the chain of liability through such actions [via Courthouse News] :

That said practice allows Chase to dump defaulted loans that were never properly securitized by WAMU and other originators acquired by Chase into private mortgage backed security trusts by creating the illusion of a valid transfer.

Said practice shifts the liability of defaulted loans not properly securitized by WAMU, from Chase to private mortgage backed security trusts. The practice allows Chase to effectively mitigate the millions of dollars in liability of the WAMU acquisition, where WAMU failed to transfer MLNs of its portfolio before its demise. Said practice shifts losses from WAMU to MBST bond investors.

The lawsuit certainly carries a lot of oomph in its allegations — though it is still in its infancy, the court filing is dated Jan. 13 — and could mean further legal ramifications for JPMorgan depending on how the bank will act. By now, most are familiar with JPMorgan's habit of paying down its mortgage-related lawsuits — most recently the bank settled with the SEC for $153.6 million on misleading investors in mortgage securities in June 2011.

This is also not the first time JPMorgan has made legal headlines related document issues. Just last week, American Banker reported that the bank had dropped several credit card debt collections across the U.S. because of possible "documentation irregularities." From American Banker:

Robo-signing, or the high-volume production of signed legal documents, has been a key element of the governmental and media foreclosure reviews. Chase's current pullback raises at least the possibility that at least some banks may have documentation problems in other business lines.

The suit also sounds remarkably similar to the charges that the Massachusetts Attorney General brought against Bank of America, JPMorgan, Wells Fargo, Citigroup and Ally Financial in early December on deceptive foreclosure conduct.
The ball's now in JPMorgan's court, and this suit is definitely one to keep an eye on.

Read more: This Could Be The Mortgage Lawsuit That Blows Up In JPMorgan's Face

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