Chase Sued: Allegedly Told Homeowner To Stop Payments, Then Foreclosed

JPMorgan Chase told a California couple to quit making mortgage payments in order to qualify for a loan modification but then foreclosed on their Sacramento home, according to a lawsuit filed in federal court.

Faiz and Khadija Jahani called Chase in December 2008 because they were having trouble making their mortgage payments. According to the suit, they were told that they wouldn’t qualify for a modification without being delinquent and that they should stop making payments for three months.

At the beginning of June, the Jahanis claim that they were told they qualified for a modification that reduced their monthly payments. Three weeks later, they received a letter telling them the bank intended to foreclose. This confusing back-and-forth continued for months, with Chase repeatedly asking them to resend paperwork, according to the complaint filed in U.S. District Court, Eastern District of California/Sacramento Division, which was first reported by Courthouse News.

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Editor’s Note: In the course of helping homeowners in similar situations over the past 8 years we have found these circumstances to be common and true. Banks do tell their borrowers that in order to qualify for loan modification or some type of short sale, deed in lieu of foreclosure, etc, they must first be delinquent on their payments for at least 3 months. Isn’t it quite irresponsible of the banks to encourage a homeowner’s deliquency by telling them to stop making payments?

So now the bank tells you is that even if you are completely up-to-date on all of your payments you should instead miss 3 payments, effectively ruining your credit score for years. This act alone makes it virtually impossible to finance another home for several years. They also will give you the run around by “losing” your paperwork multiple times (by the way, this is a common practice among banks) and then ultimately start foreclosure proceedings. Even if you wanted to catch up the payments to save your home from foreclosure most people can’t at that point because of the added interest, penalties, and fees on top of the 3 missed payments.

What happens to many people is they end up losing their home, and with a lower credit score and no down payment they now have no ability to finance a new one. Even a rental is hard to find with bad credit.

Our suggestion is don’t do it. It is much better to sell your home via land contract or lease purchase then it is to foreclose and make it virtually impossible to buy a new one for years.

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