Two major lenders, Chase and Wells Fargo, have angered federal judges sitting in two different cases: Chase, because of an apparent fraud on the court, and Wells Fargo, through incompetence and sloppy bookkeeping.
Chase lies to the court
My good friend Jay Fleischman describes the Chase case:
In the case of In re Pawson, Case No. 05-18439 (Bankr. S.D.N.Y.) Chase filed a motion for relief from stay although the debtor had substantial equity in a co-operative apartment valued at $1,000,000. Chase alleged that the debtor was two months in arrears in his mortgage payments, though the debtor showed that Chase had been rejecting the online payments he had made since filing his petition.
Because this is not the first time Chase has been caught with its hand in the cookie jar, it now has to agree to follow special procedural safeguards in that bankruptcy court designed to prevent future fraud, and, if I’m reading the story correctly, must pay to the debtor $50,000 in compensation.
Wells Fargo can’t keep track of its payments
The Wells Fargo case is simply one of extreme incompetence:
The Burriers denied that they had missed payments, but in April, to keep their home, they agreed to make double payments to cover the ones Wells Fargo claimed they had missed. If the borrowers could prove that the mortgage checks were submitted, Wells Fargo said, their account would be credited and they would no longer have to make up the payments. The proof required by Wells Fargo and approved by the court was “valid, accurate and true copies” of the front and back of the checks the borrowers sent in.
Only one problem: Wells Fargo had been recording the payments electronically, so that the borrowers never got any canceled checks, and Wells Fargo knew that.
“The payments have, evidently, been lost in a black hole of the creditor’s organization or through accounting mismanagement,” the judge wrote. “This is a major lender/mortgage loan servicer where the left hand does not know what the right hand is doing — the collection department does not know what the check processing and accounting departments are doing.”
Like Chase, Wells Fargo has been in hot water before with this same judge, and he’s considering whether their conduct in this case deserves some kind of punishment.