Chase Counsel in Hot Water

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MORTGAGE EXPERT
7 · 08 · 13

JP Morgan Chase Bank, N.A., and its counsel will face a hearing about whether they engaged in frivolous conduct when attorneys “falsely” claimed for nearly two years that Chase was the owner of a mortgage and note, according to a decision from a New York state judge.

When JPMorgan Chase & Co. acquired Washington Mutual Bank, it acquired the mortgage on Frederick Butler’s Brooklyn, N.Y., home.

The loan, itself, was sold to Fannie Mae in 2007, while the mortgage servicing rights belonged to JP Morgan Chase Bank, N.A.

After the borrower defaulted on the mortgage, an instant foreclosure action was commenced on Jan. 20, 2010. Chase recorded a satisfaction.

But $490,000 remained to be distributed.

However, a July 5 ruling by Supreme Court of New York Judge Arthur M. Schack Jr. said that Chase never owned the subject mortgage and note even though it asserted for almost two years that it did.

The decision also stated that Butler never paid the balance due.

“After numerous misrepresentations to the court by various counsel for Chase, it is clear that the actual Butler mortgage and note, given in 2007 by the defunct Washington Mutual Bank, FA [WaMu], was acquired in 2007 by the Federal National Mortgage Association [Fannie Mae] from WaMu,” the decision states. “Despite Chase’s claims, before December 2011, to the special referee and the court that it owned the subject mortgage and note, plaintiff Chase only purchased the servicing rights to the subject mortgage and note from the Federal Deposit Insurance Corp. [FDIC] in September 2008, when WAMU was seized by the FDIC.”

The decision went on to say that Chase never owned the mortgage and note and had no right to foreclose on Butler’s property.

In addition, the two years of falsely claiming to own the mortgage and note was called “troubling.”

The court decided to release $55,617 of the funds to Butler and declared the note fully satisfied.

Another hearing will be held to determine whether Chase or Fannie Mae is entitled to the remaining balance of $434,383 on deposit with the Kings County Clerk.

Chase and its counsel will be given an opportunity to be heard at the upcoming hearing about whether or not they engaged in frivolous conduct, in violation of 22 NYCRR § 130-1.1.

Potential costs and sanctions will be considered at the hearing.

Among counsel in the case was the firm of Steven J. Baum P.C., which closed in 2011 after photographs from a company party of employees who were mocking foreclosed borrowers were published in media reports.

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Mortgage Daily Staff

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