Compliancex

JP Morgan Chase faces the potential of a class action lawsuit over allegations that it manipulated mortgage paperwork in thousands of bankruptcy cases resulting in additional costs being imposed on borrowers, the Huffington Post reports.

The suit is led by plaintiff Ernest Michael Bakenie. The California district court where it is taking place has yet to recognize it as an official class action lawsuit.

Mortgage fraud helped bring on the housing crisis a few years ago. While the charges in this suit go back to 2009, they are alleged to have occurred after the financial crisis of 2008, indicating that the national furor over such practices as robo-signing may not have deterred subsequent mortgage misconduct.

It has not been a good time for JP Morgan Chase. In the last three months, profits have gone down by almost a quarter. The bank has also stopped its attempts to collect on consumer debts in various cities around the U.S.

A few months ago, JP Morgan Chase said it would pay $153 million to settle a fraud case with the Securities and Exchange Commission. This case also involved a mortgage transaction, of which JP Morgan chase was accused of negligence in giving investors important details. JP Morgan Chase settled without admitting or denying guilt.

JP Morgan Chase has agreed to pay out big bucks to bring a legal matter to a quick finish on multiple occasions.

There are plenty of other big banks dealing with similar accusations, including Bank of America, go, Citigroup and Morgan Stanley, Wells Fargo and Allied Home Mortgage.
While these are all allegations, banks appear undeterred by the prospect of paying a fine in a civil case, especially if, as has generally been the case with the SEC, they do not have to admit guilt.  Regulators need to worry less about how to resolve such cases quickly and more about how to deter them in the first place.

Jon Lewin is a contributing writer for CompliancEX and Wall Street Job Report.