“We reviewed 36 affidavits for foreclosures in judicial States to determine whether the amounts of the borrowers’ indebtedness were supported. Chase was unable to provide documentation for the amounts of borrowers’ indebtedness listed on the affidavits for all except four. When we reviewed the four affidavits in detail with Chase management, three were inaccurate.”
JPMorgan Chase Bank N.A. Foreclosure and Claims Process Review
March 12, 2012
FOR: Charles S. Coulter, Deputy Assistant Secretary for Single Family Housing, HU
FROM: Kelly Anderson, Regional Inspector General for Audit, 5AGA
SUBJECT: JPMorgan Chase Bank, N.A.
Foreclosure and Claims Process Review
INTRODUCTION AND BACKROUND
As part of the Office of Inspector General’s (OIG) nationwide effort to review the foreclosure practices of the five largest Federal Housing Administration (FHA) servicers (Bank of America, Wells Fargo Bank, CitiMortgage, Ally Financial, Incorporated, and JPMorgan Chase Bank), we reviewed JPMorgan Chase Bank’s (Chase) foreclosure and claims processes. In addition to this memorandum, OIG issued separate memorandums for each of the other four reviews.1 We performed these reviews due to reported allegations made in the fall of 2010 that national mortgage servicing lenders were engaged in widespread questionable foreclosure practices involving the use of foreclosure “mills” and a practice known as “robosigning”2 of sworn documents in thousands of foreclosures throughout the United States. We initially focused our efforts on examining the foreclosure practices of servicers in the judicial States and jurisdictions in which they do business.3
Chase is a supervised FHA direct endorsement lender that can originate, sponsor, and service FHA-insured loans. Chase’s foreclosure operations are conducted by its servicing branch, Chase Home Finance, LLC (Chase Home), which is located in Westerville, OH. As of October 1, 2010, Chase Home serviced more than 580,000 FHA-insured loans. In addition, Chase acquired EMC Mortgage Corporation and Washington Mutual Bank in March and September 2008, respectively, and obtained their loan servicing portfolios.
During Federal fiscal years 2009 and 2010, Chase submitted 16,223 FHA insurance claims totaling more than $2 billion.4 It also submitted 385 FHA insurance claims totaling $46 million using EMC’s or Washington Mutual FHA servicing identification numbers during the review period;5 thus, approximately 2.3 percent of its claims were for loans previously serviced by EMC or Washington Mutual. In September 2010, Chase stated that it had temporarily halted judicial foreclosures while it reviewed its foreclosure process. Because we identified potential False Claims Act6 violations, we provided the U.S. Department of Justice (DOJ) with our analyses and preliminary conclusions as to whether Chase engaged in the reported foreclosure practices. DOJ used our review and analysis in negotiating a settlement agreement with Chase. On February 9, 2012, DOJ and 49 State attorneys general announced their proposed settlement of $25 billion with Chase and the four other mortgage servicers for their reported violations of foreclosure requirements. As part of the proposed settlement agreement, each of the five servicers will pay a portion of its settlement to the United States and also must undertake certain consumer relief activities. The proposed settlement agreement described tentative credits that each mortgage servicer would receive for modifying loans, including principal reductions and refinancing, and established a monitoring committee7 and a monitor to ensure compliance with agreed-upon servicing standards and consumer relief provisions. Once the final settlement agreement has been approved by the courts, OIG will issue a separate summary report detailing each of the five servicers’ allocated share of payment due as a result of the settlement agreement.
Our objective was to determine whether Chase complied with applicable foreclosure procedures when processing foreclosures on FHA-insured loans.
Full report below…