Errors affect thousands of military mortgages - Army News | News from Afghanistan & Iraq - Army Times

Errors affect thousands of military mortgages

JPMorgan Chase is issuing checks totaling $2 million to 4,000 service members after discovering overcharges and errors in their mortgages.

“We made mistakes, we deeply regret them, and are working to fix it in the hopes that this does not happen again,” said JPMorgan Chase spokeswoman Kristin Lemkau.

Fourteen service members were improperly forced into foreclosure. Chase has resolved 13 of cases and is working on the remaining one, Lemkau said.

The errors were made in the loans of service members who requested their rights under the Servicemembers’ Civil Relief Act, and came to light after a lawsuit was filed in federal court by a Marine fighter pilot.

The SCRA provides a number of protections to service members, including the right to require a bank to reduce interest rates to 6 percent on loans entered into before active-duty service or mobilization.

Marine Capt. Jonathon Rowles, now assigned to South Korea, alleges Chase committed a number of violations, including failing to give the proper effective date of the interest rate reduction, repeatedly requiring him to re-apply for SCRA protections, and trying to collect on inaccurate account balances.

Lemkau said Chase officials were aware of some of problems with service members before the lawsuit, “but the full-on review intensified” afterward.

Rowles’ story first aired on NBC News’ Today Show. Since then, said Richard Harpootlian, one of Rowles’ attorneys, “from the calls I’ve gotten, it’s clear that many service members are not aware of their rights under the SCRA.” He urges service members to check with their legal offices on base for information.

Chase’s mistakes occurred over the last five years and were not limited to one particular area of the country, Lemkau said.

She could not say what percentage of Chase military customers who had sought a reduced interest rate under SCRA were affected.

“As one of the fixes, we now have a dedicated, trained team within our home lending business focused on military customers,” she said.

Chase has advertised itself as a military-friendly bank since at least 2005, when it began touting its Home Finance Military Mortgage program, which offers a discount on closing costs in home purchases or refinancing for military members and retirees.

Also, mobilized National Guard and reserve members who had a Chase mortgage in good standing could defer entire mortgage payments for up to 18 months during call-ups. That goes beyond the requirements of the SCRA.

Lemkau could not say if any of the 4,000 service members receiving checks, or Rowles, was involved in that program.

Marine’s lawsuit

The SCRA also applies to loans taken out by active-duty troops before joining the military.

That applies to Rowles, who took out an adjustable-rate, interest-only mortgage for $255,000 in February 2004, two years before he entered active duty in January 2006. The mortgage was sold to Chase in May 2004.

Rowles alleged that Chase Home Finance, a subsidiary of JPMorgan Chase, failed to reduce his interest rate to 6 percent on the effective date of his active-duty status and required him to re-apply for SCRA protections no less than four times a year after that. He also alleges that starting in April 2009, Chase tried to collect “an inaccurate account balance” resulting from “its own systemic errors in servicing the loan,” according to the lawsuit, filed July 6 in U.S. District Court in Beaufort, S.C. Rowles’ attorneys are seeking to have it certified as a class-action suit.

The suit alleges that “Chase repeatedly violated the SCRA by engaging in aggressive collection methods that included threats to report Rowles to the credit bureaus and to foreclose” on his Colorado house.

Rowles contends he continued to make payments that Chase repeatedly refused to credit, even though he spent “considerable time” communicating with Chase by phone, email and letter. He even took leave to travel from South Carolina to Colorado to meet with Chase representatives, according to the lawsuit.

Senators call for action

Meanwhile, two senators are pushing for federal investigations of improper banking practices regarding mortgage protections under the SCRA.

“Soldiers fighting on the frontlines to protect our country shouldn’t have to needlessly fight with banks to protect their homes,” said Sen. Jack Reed, D-R.I., in announcing that he has asked the Justice Department to examine the issue.

“JPMorgan Chase was violating the law, and I am concerned other banks may also be wrongly overcharging our troops or taking unfair advantage of their situation,” he said. “I urge all banks to review, acknowledge, and rectify any and all violations.”

Sen. John Kerry, D-Mass., has written a letter to Federal Reserve Chairman Ben Bernanke asking for an investigation. Kerry authored legislation enacted in December that extends SCRA provisions — which otherwise would have expired — that bar nonjudicial foreclosure on a home for nine months after a service member is released from active duty; and bar mortgage interest rates from being raised above 6 percent for one year after release from active duty.