SACRAMENTO (CN) - JPMorgan Chase instructed homeowners to stop making mortgage payments, as that was the only way to be considered for a loan modification, then repossessed their house when they followed the bank's advice, a couple claims in Federal Court. "I've seen this happen to so many people," their attorney said. "When they come in here to tell me their story, I can actually tell it to them."
Faiz and Khadua Jahani sued Morgan Chase and its predecessor, Washington Mutual Bank, on their own behalf and on behalf of the public.
"When they called the 800 number, they were specifically told that as long as they were current on their mortgage they wouldn't even be considered for a loan modification," the couple's attorney, Piotr Reysner, said in an interview.
In their federal complaint, the Jahanis say they contacted the bank in December 2008 "to indicate that they were having trouble paying their mortgage and would like to discuss a possible loan modification."
The Jahanis say the bank representative told them "that they would not work with plaintiffs at all because they were currently not in breach of their loan terms. Plaintiffs were specifically advised at that time to stop making payments for a period of three months, at which time defendants would consider a loan modification. Plaintiffs were specifically informed that as long as they were current on their mortgage payments, that defendants would not consider a loan modification. ...
"Reasonably relying on the direction of defendants, plaintiffs stopped making their loan payments. Plaintiffs are informed and believe and thereon allege that defendants immediately reported to the various credit reporting agencies (Equifax, Experian and TransUnion) that plaintiffs were late on their mortgage payments. ...
"On or about June 23, 2009, defendants sent a letter to plaintiff entitled 'Notice of
Intent to Foreclose,' indicating that plaintiffs were past due in their mortgage in the amount of $100.65 and that plaintiffs need to bring the account current within 30 days to avoid foreclosure proceedings. No Notice of Default accompanied the letter, nor was any Notice of Default ever served on plaintiffs."
Months of correspondence between the Jahanis and Chase followed, with the Jahanis repeatedly sending Chase documents it had requested, and Chase repeatedly sending them letters claiming it had not received proper documentation and that their loan modification was "in jeopardy."
The Jahanis say they called the bank to check on the status of their loan modification, and were told to disregard Chase's letters, that the bank "had in fact received all necessary documentation."
Then in October 2009, the defendants sold their house at a trustee sale. The Jahanis say strangers came to their house and told them that "the property had sold at auction, that plaintiffs no longer owned the property and that they (meaning the unnamed persons) were interested in buying the house from the bank." (Parentheses in complaint.)
The Jahanis say they immediately called Chase, which told them that their house "had not been foreclosed and that the people who were approaching the property were doing so illegally."
The Jahanis say this insanity continued for months. They called the bank again in February 2010, and asked why their house was still listed as having been foreclosed in October 2009.
Chase told them it was all a "mistake" and that the bank simply had not updated its records, according to the complaint.
"During that same conversation, plaintiffs asked why defendants continued to accept mortgage payments from plaintiffs if the house had been foreclosed. Plaintiffs demanded to know where their payments were going and demanded a payment history from defendants. Plaintiffs further demanded to know why defendants' REO department had indicated that plaintiffs no longer owned the house and that it was now in fact owned by the bank."
They say the bank rep, "Janet," "again reiterated that this was a mistake and that she would take care of it. Janet further claimed that she, at that moment, was sending e-mails and correspondence 'everywhere' within the company to rectify the situation and to please allow her 10 days to clear up the mess. The mess, in fact, was never cleaned up. Janet further promised in that same conversation that someone would review the file and get back to them within 10 days. No one did."
The Jahanis add, "This was never resolved, as the Jahanis received tax documents indicating that their house had been acquired by the bank, even though they continued to send in mortgage payments."
Their attorney Reysner said the Jahanis' story is all too common.
"I've heard this story from many, many, many clients," Reysner said. "I've seen this happen to so many people. When they come in here to tell me their story, I can actually tell it to them."
Reysner said it "makes no sense" for Chase to encourage its customers to put themselves in such an untenable position.
"I don't know their motivation," the attorney said, referring to the bank. "I just know what happens. They get the person behind in their payments, which puts the bank into the position to foreclose, because as soon as you go late, the bank has the right to foreclose."
The Jahanis demand general and special damages of $150,000 for breach of contract, fraud, predatory lending and violation of the Fair Credit Reporting Act.
They also seek an order requiring Chase to return any money fraudulently collected from homeowners.
"The goal is to hit them hard," Reysner said. "But it's also to try to get them to change their business practices."