1st Amended Complaint in The Matter of The United States Ex Rel Schneider V JPMC 14-01047. D.E. 80-1st Amended Complaint
1st Amended Complaint in The Matter of The United States Ex Rel Schneider V JPMC 14-01047. D.E. 80-1st Amended Complaint
)
UNITED STATES OF AMERICA, et al.,
)
) Case. No. 1:14-cv-01047-RMC
Plaintiffs,
)
) Judge Rosemary M. Collyer
Ex rel. [UNDER SEAL],
)
) FIRST AMENDED COMPLAINT
Plaintiff-Relator,
)
v. )
)
[UDER SEAL], )
)
Defendants. )
)
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TABLE OF CONTENTS
I. INTRODUCTION ...............................................................................................................2
A. Relator ...............................................................................................................12
B. Defendants .........................................................................................................13
5. Incentive Payments......................................................................................40
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ii
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1. This is an action to recover damages and civil penalties on behalf of the United
the National Mortgage Settlement Agreement (“NMSA”) entered into between the United States
and Defendants, J.P. Morgan Chase Bank, National Association, J.P. Morgan Chase & Company
and Chase Home Finance LLC (collectively “Chase” or “Defendant” or “Company”). Under the
NMSA, Chase was required to meet certain loan servicing standards and consumer relief
provisions. When Chase failed to meet those conditions, it was required to make certain
payments to the United States and also was subject to penalties. In order to avoid these
payments and penalties, Chase filed false reports and certifications with the Court appointed
Monitor of the NMSA. These false certifications are actionable “reverse” false claims under 31
[that] knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay
2. This action also seeks to recover damages and civil penalties on behalf of the
United States and on behalf of the Relator based on violations of the “Amended and Restated
(“Commitment” or “SPA”) entered into between the United States and Chase. Under the
Commitment, Chase was required to meet servicing standards specified in the Home Affordable
Modification Program (“HAMP”) and provide loan modifications to its borrowers. Chase was
paid various amounts for each loan modification by the Government. Chase also received
additional incentive payments based on its performance. Payments were conditioned upon
Chase certifying that it was in compliance with the HAMP servicing standards. Chase falsely
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certified that it was in compliance with those standards and created false records to support each
certification. These false certifications and records are actionable under 31 U.S.C. §
3729(a)(1)(A) & (B), which prohibit knowingly submitting “a false or fraudulent claim for
payment or approval” or the use of “a false record or statement material to a false or fraudulent
claim.”
I. INTRODUCTION
A. Defendant’s Fraud
3. Defendant Chase’s fraud arises out of its response to efforts by the United States
Government (“Government” or “Federal Government”) and the States (the “States”) 1 to remedy
the misconduct of Chase and other financial institutions whose actions significantly contributed
premature and unauthorized foreclosures, violation of service members’ and other homeowners’
rights and protections, the use of false and deceptive affidavits and other documents, and the
waste and abuse of taxpayer funds. Each of the allegations regarding Defendant contained
herein applies to instances in which one or more, and in some cases all, of the defendants
5. In March 2012, after a lengthy investigation (in part due to other qui tam
plaintiffs) under the Federal False Claims Act, the Government, along with the States, filed a
1
States of Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware,
Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland,
Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New
Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Rhode Island,
South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia,
Wisconsin, and Wyoming; the Commonwealths of Kentucky, Massachusetts, Pennsylvania and
Virginia, and the District of Columbia.
2
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complaint against Chase and the other banks responsible for the fraudulent and unfair mortgage
practices that cost consumers, the Federal Government, and the States tens of billions of dollars.
Specifically, the Government alleged that Chase, as well as other financial institutions, engaged
including, but not limited to, irresponsible and inadequate oversight of the banks’ quality control
standards.
6. These improper practices had previously been the focus of several administrative
enforcement actions by various government agencies, including but not limited to, the Office of
the Controller of the Currency, the Federal Reserve Bank and others. Those enforcement actions
resulted in various other Consent Orders that are still in full force and effect.
7. In April 2012, the United States District Court for the District of Columbia
approved a settlement between the Federal Government, the States, the Defendant and four other
banks, which resulted in the NMSA. The operative document of this agreement was the Consent
Judgment (“Consent Judgment” or “Agreement”). The Consent Judgment contains, among other
things, Consumer Relief provisions. The Consumer Relief provisions required Chase to provide
over $4 billion in consumer relief to their borrowers. This relief was to be in the form of, among
other things, loan forgiveness and refinancing. Under the Consent Judgment, Chase received
“credits” towards its Consumer Relief obligations by forgiving or modifying loans it maintained
as a result of complying with the procedures and requirements contained in Exhibits D and D-1
8. The Consent Judgment also contains Servicing Standards in Exhibit A that were
intended to be used as a basis for granting Consumer Relief. The Servicing Standards were
tested through various established “Metrics” and were designed to improve upon the lack of
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independent Monitor.
9. The operational framework for the Servicing Standards and Consumer Relief
requirements of the NMSA was based on a series of Treasury Directives that were themselves
designed as part of the Making Home Affordable (MHA) program. The MHA program was a
critical part of the Government's broad strategy to help homeowners avoid foreclosure, stabilize
the country's housing market, and improve the nation's economy by setting uniform and industry
wide default servicing protocols, policies and procedures for the distribution of federal and
10. Before the Consent Judgment was entered into, Chase sold a significant amount
of its mortgage obligations to individual investors. Between 2006 and 2010, the Relator bought
the rights to thousands of mortgages owned and serviced by Chase. Unbeknownst to the Relator,
these mortgages were saturated with violations of past and present regulations, statutes and other
governmental requirements for first and second federally related home mortgage loans.
11. After both the Consent Judgment was signed and the MHA program was in effect,
numerous borrowers, whose 2nd lien mortgages had been sold by Chase to the Relator, received
debt-forgiveness letters from Chase that were purportedly sent pursuant to the Consent
Judgment.
12. Relator, through his contacts at Chase, was made aware that 33,456 letters were
sent by Chase on September 13, 2012 to second-lien borrowers. On December 13, 2012 another
approximately 10,000 letters were sent, and on January 31, 2013 another approximately 8,000
letters were sent, for a total of over 50,000 debt-forgiveness letters. These letters represented to
the recipient borrowers that, pursuant to the terms of the NMSA, the borrowers were discharged
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from their obligations to make further payments on their mortgages, which Chase stated, it had
forgiven as a “result of a recent mortgage servicing settlement reached with the states and federal
government.” None of these borrowers made an application for a loan modification as required
by the Consent Judgment. These letters were not individually reviewed by Chase to ensure that
Chase actually owned the mortgages or to ensure the accuracy and integrity of the borrower’s
information but instead were “robo-signed”; each of the letters sent out was signed by “Patrick
13. Relator’s experience with Chase’s baseless debt-forgiveness letters was not
unique. Several other investors were also affected by Chase choosing to mass mail the “robo-
signed” debt-forgiveness letters to thousands of consumers from its hidden system of records in
order to earn credits under the terms of the Consent Judgment and to avoid detection of its illegal
14. In addition to the debt forgiveness letters sent, and after both the Consent
Judgment was signed and the MHA program was in effect, numerous borrowers, whose 1st
mortgages had been sold by Chase to the Relator, had their 1st mortgages liens quietly released.
15. Relator, through his third party servicer, which was handling normal and
customary default mortgage servicing activities, was made aware that several lien releases were
filed in the public records on mortgage loans that were owned by Relator in the fall of 2013.
Through Relator’s subsequent investigation of the property records for 1st mortgage loans that
Chase had previously sold to Relator, scores of additional lien releases were also discovered.
discovered that Chase maintains a large set of loans outside of its primary System of Records
(“SOR”). The hidden system of records is known as the Recovery One population (“RCV1” or
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“RCV1 SOR”). The RCV1, essentially a “back room” operation, was disclosed neither to the
Monitor of the NMSA nor to Freddie Mac as compliance agent for the Federal Government
under the MHA, and it is still only known to those select few that are directly involved with it
within Chase. The accuracy and integrity of the information pertaining to the borrowers’
accounts whose loans are in the RCV1 population was and is fatally and irreparably flawed.
Furthermore, the loans in the RCV1 were not serviced according to the requirements of Federal
law, the Consent Judgment, the MHA programs or any of the other consent orders or settlements
pre-selected borrowers of valueless loans did not meet the Servicing Standards set out in the
Consent Judgment to establish eligibility for credits toward its Consumer Relief obligations.
This practice enabled Chase to reduce its cost of complying with the Consent Judgment and
MHA program, while at the same time enhancing its own profits through unearned Consumer
Relief credits and MHA incentives. Chase sought to take credit for valueless charged-off and
third-party owned loans instead of applying the Consumer Relief under the NMSA and MHA
loan modification programs to properly vetted borrowers who could have applied for and
benefitted from the relief and modification programs, those borrowers that were originally
intended by the Government to receive the benefit of the Government’s bargains with Chase.
18. The Servicing Standards and the Consumer Relief Requirements of the Consent
Judgment are set forth in Exhibits A and D of that document. The Consent Judgment is
governed by the underlying Servicer Participation Agreements of the MHA program, which
required mandatory compliance with the Treasury Directives under the MHA Handbook
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the form of periodic certifications to the government. Chase ignored the requirements of
Exhibits A and D of the Consent Judgment, especially with respect to the RCV1 population of
loans. Therefore, Chase has been unable to service with any accuracy the charged-off loans it
owns and to segregate those loans that it no longer owns. As such, any certifications of
compliance with the Consent Judgment or the Services Participation Agreement (“SPA”) are
false claims.
19. Relator conducted his own investigations and found that the Defendant sent loan
forgiveness letters to consumers for mortgages that Chase no longer owns or that were not
eligible for forgiveness credit. Further, Chase continues to fail to meet its obligations to service
loans and to prevent blight as required by both the Consent Judgment and SPA. Chase’s
intentional failure to monitor, report and/or service these backroom loans, and its issuance of
invalid loan forgiveness letters and lien releases, evidence an attempt to thwart the goal of the
Consent Judgment and the MHA program. The purpose of this scheme was to quickly satisfy the
Defendant’s Consumer Relief obligations as cheaply as possible, without actually providing the
relief that Chase promised in exchange for the settlement that Chase reached with the Federal
Government and the States. In addition, Chase applied for and received MHA incentive
payments without complying with the MHA mandatory requirements. In short, Chase decreased
its liabilities, increased its revenues, avoided its obligations, and provided little to no relief to
consumers.
20. The mere existence of RCV1 makes all claims by Chase that it complied with the
Servicing Standards and the Consumer Relief Requirements of the Consent Judgment false.
Likewise, the existence of RCV1 makes all claims by Chase that it complied with the SPA of the
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21. Exhibit E of the Consent Judgment provides for penalties of up to $5 million for
failure to meet a prescribed Metric of the Servicing Standards. Exhibit E, ¶ J.3(b) at E15.
If Servicer fails to meet the commitment set forth in these Consumer Relief
Requirements within three years of the Servicer’s Start Date, Servicer shall pay an
amount equal to 125% of the unmet commitment amount, except that if Servicer
fails to meet the two year commitment noted above, and then fails to meet the
three year commitment, the Servicer shall pay an amount equal to 140% of the
unmet three-year Commitment amount.
23. The required payment set out in Exhibit D, ¶10.d is made either to the United
States or the States that are parties to the Consent Judgment. Fifty percent of any payment is
24. As explained in more detail below, Chase was required to certify that it was in
compliance with the Servicing Standards and the Consumer Relief Requirements. Many, if not
all, of the loans that Chase identified for credits against the $4 billion Consumer Relief
provisions were not eligible for the credit, because Chase did not comply with the Servicing
Standards or the Consumer Relief Requirements. Specifically, all loan modification programs
must be made available to all borrowers, who may then apply to determine eligibility. Hundreds
of thousands of borrowers’ accounts, hidden in the RCV1 system of records, were not considered
for all eligible loss mitigation options (even though they could likely have qualified). Due to this
omission none of the loan modification programs qualified for Consumer Relief Credit. Thus,
Chase did not and does not qualify for any of the Consumer Relief Credit for which it applied.
25. For these reasons, each of Chase’s certifications to the Federal Government of
compliance represents a “reverse” false claim to avoid paying money to the Government.
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26. Under the FCA a person is liable for penalties and damages who:
31 U.S.C. § 3729(a)(1)(G).
§3729(a)(1)(G), because they represent a false record or statement that concealed, avoided or
28. The Federal Government and the States agreed to the NMSA with Chase, with the
understanding that Chase would meet its obligations under the Consent Judgment.
29. As set out in the Consumer Relief Requirements, the measure of the Federal and
State Governments’ damages is up to 140 percent of the credits that Chase falsely claimed met
the requirements of the Consent Judgment and up to $5 million for each Metric the Chase failed
to meet.
30. These damages are recoverable under the Federal Civil False Claims Act, 31
U.S.C. § 3729 et seq. (the “FCA”), and similar provisions of the State False Claims Acts of the
States of California, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Minnesota,
Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina,
Rhode Island, Tennessee, the Commonwealths of Massachusetts and Virginia, and the District of
Columbia.
31. The Federal Government and the States are now harmed because they are not
receiving the benefit of the bargain for which they negotiated with Chase due to the false claims
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32. The Amended and Restated Commitment to Purchase Financial Instrument and
Servicer Participation Agreement between the United States Government and Chase provided for
Services”).
33. The value of Chase’s SPA was limited to $4,532,750,000 (“Program Participation
Cap”).
34. The value of EMC Mortgage Corporation’s (“EMC”) SPA (Chase is successor in
35. As explained in more detail below, Chase must certify that it is in compliance
with the SPA and the MHA program and must strictly adhere to the guidelines and procedures
issued by the Treasury with respect to the programs outlined in the Service Schedules (“Program
Guidelines”). The Program Guidelines pursuant to the Treasury Directives are cataloged in the
MHA Handbook (“Handbook”). None of the loans that Chase and EMC identified and
submitted for payment against their respective Participation Caps were eligible for the incentive
payment, because neither Chase nor EMC complied with the SPA and Handbook guidelines.
Specifically, all loan modification programs must be made available to all borrowers, who must
accounts hidden in the RCV1 system of records were not offered and thereby unable to be
considered for all eligible loss mitigation options (even though they likely could have qualified).
Due to the omission of the RCV1 population for any loss mitigation options, none of the
modifications that Chase provided qualified for HAMP incentives. Thus, Chase does not qualify
for any of the HAMP incentives for which it applied and received funds.
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support those certifications represent both the knowing presentation of false or fraudulent claims
for a payment and the knowing use of false records material to false or fraudulent claims.
37. Under the FCA, a person is liable for penalties and damages who:
31 U.S.C. § 3729(a)(1)(A)
and
31 U.S.C. § 3729(a)(1)(G).
§3729(a)(1)(A) and (B), because they represent a false or fraudulent claim for payment or
39. Under HAMP, the Federal Government entered into the Commitment with Chase,
with the understanding that Chase would meet its obligations under the SPA and related Treasury
directives. The Federal Government is now harmed because it is not receiving the benefit of the
bargain for which it negotiated with Chase due to the false claims for payment that have been
40. The Court has jurisdiction over the subject matter of this action pursuant to 28
U.S.C. § 1331 and 31 U.S.C. § 3730(a) and supplemental jurisdiction over the counts related to
Defendant transacts the business that is the subject matter of this lawsuit in the District of
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Columbia and numerous acts proscribed by 31 U.S.C. § 3729 occurred in the District of
Columbia.
III. PARTIES
A. Relator
42. Relator, Laurence Schneider, submits this complaint on behalf of the Federal
Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Minnesota, Montana, Nevada, New
Hampshire, New Jersey, New Mexico, New York, North Carolina, Rhode Island, Tennessee,
Commonwealths of Massachusetts and Virginia, and the District of Columbia, pursuant to their
respective State False Claims Acts. Relator is an experienced real estate and mortgage investor
who works and resides in Boca Raton, Florida. Because of his ownership of thousands of
mortgage loans and hundreds of rental housing units, Relator has acquired extensive knowledge
of banking practices, laws and regulations. Relator has direct and personal knowledge of the
fraudulent scheme described herein. Relator, as President of S&A Capital Partners, Inc., 1st
Fidelity Loan Servicing, LLC, and Mortgage Resolution Servicing, LLC, has purchased
mortgage notes from Chase since 2005. Relator has over 20 years of experience in mortgage
loan origination and servicing. In that time, he has built relationships and purchased mortgage
loans from over 40 different loss mitigation representatives in three different loan servicing
centers operated by Chase in Wisconsin, Arizona and Texas. In the process, he has learned
intimate details of Chase’s loss mitigation activities and gained an understanding of Chase’s
43. S&A Capital Partners, Inc. (“S&A”) is a Florida corporation located at 6810 N.
State Road 7, Coconut Creek, Florida. Relator is the President and shareholder of S&A. From
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2005 to 2010, S&A purchased First Lien and Second Lien mortgages owned by Defendant
Chase.
44. 1st Fidelity Loan Servicing, LLC (“1st Fidelity”) is a Florida Limited Liability
Company located at 6810 N. State Road 7, Coconut Creek, Florida. Relator is the President and
managing member of 1st Fidelity. From 2007 to 2010, 1st Fidelity purchased First Lien and
Limited Liability Company located 6810 N. State Rd. 7, Coconut Creek, Florida. Relator is the
pool of what were purported and represented to be 3,529 First Lien mortgages from Defendant
46. By letter dated March 28, 2013, the Relator voluntarily provided information on
which this action is based prior to the filing of his original Complaint on May 6, 2013. The
Relator served his statement of material information regarding this action on the Government
B. Defendants
47. Defendants JP Morgan Chase Bank, National Association and Chase Home
Finance LLC are subsidiaries of Defendant JP Morgan Chase & Co.. Chase’s headquarters is
located at 270 Park Avenue, New York, New York. Defendant JP Morgan Chase & Co. is a
Delaware corporation. On September 25, 2008, Washington Mutual Bank., F.S.B., a federal
savings bank headquartered in Henderson, Nevada, failed, and J.P. Morgan Chase Bank, N.A.,
purchased substantially all of the assets and assumed all deposit and substantially all other
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Agreement with the Federal Deposit Insurance Corporation (“FDIC”) and the FDIC as Receiver
for Washington Mutual Bank, F.S.B. On March 16, 2008, Chase acquired EMC Mortgage
Corporation as part of its acquisition of Bear Stearns Companies, Inc. The business of
Defendant J.P. Morgan and its subsidiaries and affiliates includes the origination and servicing of
mortgage loans.
IV. BACKGROUND
48. In 2008, Congress enacted the Emergency Economic Stabilization Act (EESA) in
response to the Great Recession. The EESA included the Troubled Asset Relief Program (TARP)
which charged the Secretary of the Treasury with developing a program to provide relief to
struggling homeowners while offering incentives to the loan servicers of homeowner mortgages.
49. In February 2009, the Government introduced the MHA, a plan to stabilize the
housing market and help struggling homeowners get relief and avoid foreclosure.
50. The U.S. Department of the Treasury ("Treasury") established the HAMP
pursuant to section 101 and 109 of the Emergency Economic Stabilization Act of 2008, as
section 109 of the Act has been amended by section 7002 of the American Recovery and
51. In March 2009, Treasury issued uniform guidance for loan modifications across
the mortgage industry and subsequently updated and expanded that guidance in a series of policy
announcements and Treasury Directives. On June 26, 2014, the Government extended the
52. On March 12, 2012, the Federal Government, 49 individual States, and the
District of Columbia jointly filed a complaint against numerous banks and loan servicing
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companies, including Chase, for misconduct related to their origination and servicing of single
53. The National Mortgage Complaint was the capstone on a series of enforcement
actions brought against Chase and other servicers for certain deficiencies and unsafe or unsound
practices in residential mortgage servicing. These actions were brought by a wide variety of
regulatory agencies including the Office of the Comptroller of the Currency, the Federal Reserve
Bank, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and others.
These prior actions resulted in various settlements and consent agreements, many of which
54. The National Mortgage Complaint, among other things, alleged that the
misconduct of the defendants “resulted in the issuance of improper mortgages, premature and
unauthorized foreclosures, violation of service members’ and other homeowners’ rights and
protections, the use of false and deceptive affidavits and other documents, and the waste and
abuse of taxpayer funds.” The National Mortgage Complaint also contained several allegations
concerning unfair and deceptive trade practices engaged in by Chase and other financial
institutions.
55. These unfair and deceptive trade practices engaged in by Chase and other
financial institutions led to several enforcement actions both prior to and during the pendency of
56. These enforcement actions address the same core issues and unsafe or unsound
servicing and mortgage practices. In each instance, the government enforcement agency
bringing the action required Chase to remediate its policies and procedures and to come into
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compliance “with each and every applicable provision of” the particular enforcement action. In
each instance, Chase failed to address the problems on an institutional level because in each
instance the RCV1 system of records was hidden and deliberately kept from regulatory
oversight.
57. Relator experienced many aspects of Chase’s repeated and deliberate unfair and
deceptive loan servicing practices prior to, during and after Chase entered into the SPA’s with
58. On February 9, 2012, the Attorney General of the United States announced that
the Federal Government and 49 states had reached a settlement agreement with the nation’s five
largest mortgage services to address mortgage servicing, foreclosure, and bankruptcy abuses. On
April 4, 2012, the United States District Court for the District of Columbia entered a Consent
Judgment approving the NMSA, officially making it the single largest consumer financial
protection settlement in United States history, totaling approximately $25 billion dollars in
59. The resulting settlement attempted to address the primary goals of the attorneys
bring badly needed reform to the mortgage servicing industry; to ensure that foreclosures are
lawfully conducted; and to penalize the banks for robo-signing misconduct. The settlement
imposed monetary sanctions on the banks while seeking to provide immediate and continuing
relief to homeowners.
60. The settlement requires comprehensive reforms of mortgage loan servicing. The
mandated standards cover all aspects of mortgage servicing, from consumer response to
foreclosure documentation. To ensure that the banks meet the new standards, the settlement was
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61. The Consent Judgment is “expressly subject to, and shall be interpreted in
accordance with, (a) applicable federal, state and local laws, rule and regulations, including, but
not limited to any requirements of the federal banking regulations, (b) the terms of the applicable
mortgage loan documents, (c) Section 201 of the Helping Families Save Their Homes Act of
2009, and (d) the terms and provisions of the Servicer Participation Agreement [SPA] with the
62. The principal statute governing mortgage servicing is the Real Estate Settlement
and Procedures Act of 1974 (RESPA), as amended, 12 U.S.C. § 2601 et. seq.
63. Nothing in the Consent Judgment relieved the Servicers of their obligation to
comply with applicable state and Federal law and any pre-existing consent judgments and
64. Additionally, the NMSA was intended to be interpreted consistent with the
65. First among the requirements of the Consent Judgment was a payment of
the NMSA is termed the “Direct Payment Settlement Amount.” Id. Money paid in this method
was transferred to an administrator to provide cash payments to borrowers whose homes were
sold or taken by foreclosure between January 1, 2008 and December 31, 2011. This timeline is
consistent with prior enforcement actions and marks the height of the improprieties by the
Banks.
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66. After the Direct Payment, the Consent Judgment has two main intertwined
components, new comprehensive Servicing Standards and wide spread Consumer Relief. The
first sentence of Exhibit A of the Consent Judgment, entitled the Settlement Term Sheet, states
the major focus of the NMSA in a succinct manner that brings both components together. Both
the Servicing Standards and the Consumer Relief Credits “are intended to apply to loans secured
1. Servicing Standards
67. The first of these components requires Servicers to comply with new
comprehensive Servicing Standards designed to improve upon the lack of quality control and
continuity of communications with borrowers, issues that caused chaos in the housing market to
date. These Service Standards, as detailed under Exhibit A of the Consent Judgment, were first
68. The NMSA Servicing Standards require, among other things, a single point of
contact, adequate staffing levels and training, better communication with borrowers, and
appropriate standards for executing documents in foreclosure cases, ending improper fees, and
69. The Consent Judgment requires that “Defendant . . . comply with the Servicing
Standards, attached hereto as Exhibit A, in accordance with their terms and Section A of Exhibit
E, attached hereto.” Consent Judgment at p. 3 ¶ 2. These Servicing Standards under the Consent
Judgment were intended to redress the practices in mortgage servicing that led to the clams that
70. The Servicing Standards are governed by the HAMP and apply to all federally
related mortgage loans serviced by the Servicer. Among others, they contained the following
provisions:
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foreclosure proceedings:
• Are signed by hand of affiant (except for permitted electronic filings) and
dated; and
easily accessible and reliable Single Point of Contact (“SPOC”) for each
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d. Loss Mitigation – Servicers were required to comply with all Loss Mitigation
initiatives:
• Are not levying application or processing fees for first and second lien
modification applications; and
• Comply with the Service Members Civil Relief Act (“SCRA”) and any
applicable state law offering protections for service members; and
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and implemented policies to ensure that REOs (real estate owned by the
71. The Servicing Standards were to be implemented and tested through a process
involving various levels of checks and balances designed to ensure compliance with the
72. The first part of this process was the establishment of an internal quality control
group called the Internal Review Group (“IRG”). This group was required to be, and remain,
“independent from the line of business whose performance [was] being measured [] to perform
compliance reviews each calendar quarter [] in accordance with the terms and conditions of the
work plan and satisfaction of the Consumer Relief Requirements. . . .” Exhibit E, ¶ 7 at E-3.
The independence of the IRG ensures that the Servicer complies with the Consent Judgment and
that its actions remain transparent and are regularly reviewed by Servicer's senior management
73. The IRG’s independence is critical to the success of the entire implementation of
74. Internal Chase documents demonstrate that its IRG was not in fact independent of
Chase’s mortgage operations. These internal communications demonstrate that there was direct
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communication between the servicing department and the IRG concerning which loans were
appropriate for review by the Monitor and could be advanced for credits.
75. The next part of the process, as defined under the Consent Judgment, was the
appointment of a “Monitor”, here Joseph A. Smith, who, as part of his tasks, was responsible for
overseeing Servicer's implementation of and compliance with the Servicing Standards. The
representatives of the U.S. Department of Housing and Urban Development, the U.S.
76. The Consent Judgment then required the Monitor to engage professionals who
possessed expertise in the areas of mortgage servicing, loss mitigation, business operations,
compliance, internal controls, accounting and foreclosure and bankruptcy law. These
professionals were known as the Primary Professional Firm (“PPF”) and the Secondary
77. The PPF operated in a supervisory capacity to review the SPF's work in assessing
compliance among the Servicers to ensure consistency of work product across all Servicers.
78. Separate SPFs were assigned to each of the Servicers to assist in the review of
79. Together, the Monitor, PPF, SPF and IRG designed a clearly defined plan of
action (“Work Plan”) to implement the Servicing Standards and to facilitate and implement an
80. The Servicer implemented the Work Plan. The Work Plan described in detail the
performances that are to be measured and the procedures by which such measurements will be
undertaken.
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81. The Work Plans for all of NMSA Servicers were similar and applied the
Servicing Standards in a uniform manner across all Servicers. The NMSA established a general
framework for the formulation of each of the Servicers’ work plans, to include:
• The testing methods and agreed procedures to be used in performing test work
and computing Servicing Metrics for each quarter;
• The methodology and procedures utilized in reviewing and testing the work
performed by the IRGs for both the Servicing Standards and Consumer Relief
Requirements; and
• The description of the review process to be used by the IRGs and by the
Professional Firms and the mechanisms for ensuring compliance.
82. The Work Plan for Chase was reviewed and not objected to by the Monitoring
Committee.
83. The NMSA required that implementation of the Servicing Standards by the
Servicer would be phased in over time and would be in full effect by October 2, 2012.
84. To test the implementation of the Work Plan, the Monitor established 29 Metrics
to test the application and performance of the required Servicing Standards as they applied to the
entire population of the SOR. The Work Plan mapped to these Metrics to determine whether the
85. Servicer's system of record, or SOR, consists of the Servicer’s business records
related to and storage systems pertaining to Servicer's entire mortgage servicing operation and
related business operations. The SOR is the electronic data entered and maintained on the
Servicer’s servicing platforms and includes all of Servicer' s mortgage servicing platforms, home
equity line servicing platforms, and default processing platforms for mortgage loans, including
home equity lines. The SOR also includes records maintained by either Servicer or third parties
for Servicer.
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86. The Servicer provided the Professional Firms with information and explanations
on those parts of the SOR that were sufficient for Metrics testing.
87. The completeness and the integrity of the Servicer’s entire SOR was integral to
88. The IRG was required to use the Servicer’s SOR to compile the full population of
loans related to each metric and then to test a statistically valid sample of each applicable
population to determine whether the Servicer had passed the metric and was fully implementing
89. The Professional Firms relied on the IRG to select mortgage loan testing
90. As a check and balance to the process, the SPF was then to review the results
provided by the IRG and then retest a sub-sample of the IRG’s test sample in a process overseen
91. The results were set forth in Quarterly Reports and included reviews of Work
Plans and confirmation of the IRG's selection of testing populations and the IRG's testing of
Metrics.
92. In short, the Monitor, through the chain of the process, relied on the IRG’s testing
of the metrics pursuant to the terms of the Consent Judgment to determine the Defendant’s
3. Consumer Relief
93. The second objective of the Consent Judgment, Consumer Relief, required Chase
to provide over $4 billion in consumer relief in the form of loan forgiveness and refinancing.
Under the Consumer Relief provisions of the Consent Agreement, Chase received “credits”
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EXHIBIT A
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towards its Consumer Relief obligations by forgiving or modifying loans it owns or services
under a detailed and defined protocol, including a loan modification application. The process is
94. The Servicing Standards control the processes that lead to implementation of the
Consumer Relief.
95. A failure to meet the Servicing Standards would prevent proper determination and
issuance of Consumer Relief pursuant to the Work Plans as required by the Consent Judgment,
therefore would render any Consumer Relief Credits claimed by Chase invalid.
96. As set forth in Exhibit A, eligible borrowers considered for Consumer Relief were
tracked through a process, controlled by the Servicing Standards, which includes publicly
available information, a single point of contact, a defined application procedure, and a strict
timeline for evaluation, approval and implementation. All conditions must be met for the relief
for which they purported to qualify to merit credits under the NMSA.
97. Under the terms of the Judgment, Servicer is obligated to provide $4,212,400,000
follows:
paragraph 9 of Exhibit D.
Consumer Relief had unique eligibility criteria and modification requirements. In order for the
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EXHIBIT A
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Servicer to receive credit with respect to Consumer Relief activities performed, these eligibility
criteria and modification requirements had to be satisfied and validated by the Monitor in
accordance with Exhibits D, D-1 and E. Credits earned could vary based on timing, the form of
99. Servicer receives additional credit in the amount of 25% above the actual credits
earned on the foregoing activities completed and implemented on or before February 28, 2013.
100. In contrast, the Servicer incurred a debt payment of 125% of its unmet Consumer
Relief Requirements if it did not meet all of its Consumer Relief Requirements within three years
of March 1, 2012. That payment increased to 140% of its unmet Consumer Relief Requirements
in cases in which Servicer also has failed to complete 75% of its total Consumer Relief
101. Under the Consent Judgment, a Servicer received credit when it:
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102. As described above, the Servicer, SPF, PPF and Monitor agreed upon a Work
Plan that sets out the testing methods, procedures and methodologies for validation of Servicer’s
application process that is facilitated and dependent on coordination with the SPOC as defined
104. The Consumer Relief programs were required to be made available to all eligible
borrowers and thus vetted against the entire population of the SOR.
105. Eligible borrowers applied by submitting a completed loan application and all
the Servicer determined which loan modification programs borrowers were eligible.
107. Servicers then used the forgiveness or remediation to apply for Consumer Relief
based on the structure and status of each mortgage. The Servicer was entrusted to determine the
amount of credit given to itself. See Exhibit D at D1 to D7 and Exhibit D-1 at D1-1 to D1-5.
108. The IRG performed a Satisfaction Review after Servicer asserted that it had
satisfied its Consumer Relief Requirements. The IRG was required to report the results of that
109. The IRG’s testing of Servicer’s Consumer Relief Report required the IRG
randomly selecting valid samples from the testing populations based on data provided by
Defendant utilizing a simple Excel spreadsheet. The data reporting did not require providing
original documentation.
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110. The Professional Firms reviewed the work by the IRG and tested the same sample
111. The Consent Judgment required that Monitor determine whether Defendant had
satisfied the Consumer Relief Requirements and report Monitor’s findings to the Court in
112. As stated above, the government relied on the certifications of compliance with
113. To implement and help facilitate the uniform servicing guidelines and provide
114. The Treasury established a variety loan of modification programs under the Act to
further stabilize the housing market by facilitating first and second lien mortgage loan
encouraging foreclosure alternatives, such as short sales and deeds in lieu of foreclosure, and
making other foreclosure prevention services available to the marketplace (collectively, together
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EXHIBIT A
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115. The SPA provides various types of Servicer Incentive Payments depending on
• Pay-for-Success Incentives
116. To participate in HAMP a Servicer was required to register using the HAMP
117. Fannie Mae was designated by the Treasury as the financial agent of the United
States in connection with the implementation of the Programs. Its responsibilities were general
administration and record keeper for the Programs, standardization certain mortgage
modification and foreclosure prevention practices and procedures as they relate to the Programs,
consistent with the Act and in accordance with the directives of, and guidance provided by, the
Treasury.
Fannie Mae numerous schedules describing the various loan modification initiatives (“Services”)
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EXHIBIT A
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119. On March 24, 2010, Henry John Beans, SVP of Default Servicing for Chase
registered and executed a Servicer Participation Agreement and Service Schedules (SPA) with
1. Servicing Guidelines
120. Servicers participation in the MHA program included strictly adhering to the
guidelines and procedures issued by the Treasury with respect to the Programs outlined in the
directives, or other communications, including, but not limited to, business continuity
duties of the Participating Servicers in connection with the Programs outlined in the Service
Schedules (“Supplemental Directives" and, together with the Program Guidelines, the "Program
Documentation"). The SPA’s Servicing Standards in the MHA handbook were intended to be
used as the specific basis for granting Consumer Relief in the National Mortgage Settlement
Agreement.
121. Chase was required to perform the Services described in the Financial Instrument
warranted, and acknowledged its agreement to fulfill its duties and obligations, with respect to its
participation in the Programs and under the Agreement were set forth in the Financial
Instrument.
122. The Commitment between the Government and Chase was $4,532,750,000,
123. The Commitment between the Government EMC, with Chase as successor in
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124. Fannie Mae, in its capacity as the financial agent of the United States, remitted
payments described in the Program Documentation to Chase for its successful compliance with
125. In April 2012, the Department of the Treasury issued guidelines regarding which
Consumer Redress Activities may be considered “qualified loss mitigation plan[s]” for purposes
of Section 201 of the Helping Families Save Their Homes Act of 2009 (“HFSTHA”). As part of
HSFTHA, Congress amended the Truth in Lending Act such that each residential loan
reduction transaction identified in the Settlements, including those specific to individual servicer
126. In addition to entering into the qualified loss mitigation plans, mortgage servicers
• The mortgage must have been originated before May 20, 2009;
• The mortgagor occupies the property securing the mortgage as his or her principal
residence;
• The servicer reasonably determines, consistent with these guidelines, that the
application of the qualified loss mitigation plan will likely provide an anticipated
recovery on the outstanding principal mortgage debt that will exceed the
anticipated recovery through foreclosure.
127. Servicers were required to maintain complete and accurate records of, and
supporting documentation for, all Services provided in connection with the Programs including,
but not limited to, data relating to borrower payments (e.g. principal, interest, taxes,
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EXHIBIT A
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was relied upon by Fannie Mae when calculating the Purchase Price to be paid by the Treasury
128. Servicers certification as to its continuing compliance with, and the truth and
accuracy of, the representations and warranties set forth in the Financial Instrument were
provided annually in the form of a certification (the "Certifications"), beginning on June 1, 2010
and again on June 1of each year thereafter during the term of the SPA.
129. The requirements of the SPA applied to all mortgage loans Chase serviced,
whether it serviced such mortgage loans for its own account or for the account of another party,
130. Servicers were required to report periodic loan-level data for all transactions
related to HAMP using the HAMP Reporting Tool. Servicers upload data tapes of borrowers
131. The HAMP Compensation Matrix provides details on the incentive amount,
frequency, timing and conditions required for incentive payments in the form of the official
132. The HAMP requirements are now set out in “The Making Home Affordable
Program Handbook for Servicers of Non-GSE Mortgages” (“Handbook”). The Handbook was
intended to provide a consolidated resource for guidance related to the HAMP Program for
mortgage loans that are not owned or guaranteed by Fannie Mae or Freddie Mac (Non-GSE
Mortgages).
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133. The Federal Home Loan Mortgage Corporation ("Freddie Mac") was designated
by the Treasury as a financial agent of the United States in its capacity as compliance agent of
the Programs and oversight of Servicers performance of the Services and implementation of the
Programs.
134. As Compliance Agent for the elements of HAMP that are addressed in the
(MHA-C) for this purpose. MHA-C conducts independent compliance assessments and servicer
reviews to evaluate servicer compliance with the requirements of MHA. During the course of
135. These are similar responsibilities as those of the Monitor pursuant to the NMSA.
HAMP-related activities, and to provide that documentary evidence upon request to MHA-C.
loan files for all HAMP activities, for a period of seven years from the date of the document
137. The Handbook set forth the requirements for documentation required. It stated
that:
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EXHIBIT A
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* * *
• For charged off mortgage loans not considered for HAMP, evidence that
the servicer has released the borrower from liability for the debt and
provided a copy of the release to the borrower.
* * *
* * *
138. In short, servicers were required to establish and maintain internal controls that
provide reasonable assurance that they are in compliance with MHA Program requirements.
Further, servicers are required to certify that they have developed and implemented an internal
controls program to monitor compliance with applicable consumer protection and fair lending
139. Servicers review the effectiveness of the internal controls program on a quarterly
basis throughout the period covered by the related Certification. Servicers are also required to
develop and execute a quality assurance program to assess documented evidence of loan
evaluation, loan modification and accounting processes and to confirm adherence to MHA
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EXHIBIT A
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Program requirements. The quality assurance program includes of internal control processes, and
should be assessed to ensure that it: (i) includes loans from all potentially relevant categories (ii)
is independent from the business lines; (iii) applies appropriate sampling methodology; (iv)
140. Each servicer must develop, document and execute an effective quality assurance
(“QA”) program that includes independent reviews of each MHA program in which the servicer
is participating pursuant to an executed SPA to ensure that the servicer’s implementation and
execution of such program(s) conforms to the requirements of the SPA and this Handbook.
• Coordinates activities and validates results with other risk and control units
within the servicer’s organization including, but not limited to, internal
audit, compliance, and operational risk;
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EXHIBIT A
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• Reporting of MHA data timely and accurately for recording in the HAMP
Reporting Tool, including data related to incentive payments, and the process
used to map program data from the servicer’s loss mitigation system to the
HAMP Reporting Tool.
143. QA reviews must occur at least quarterly and the report must be distributed to the
144. Results of QA activities required support by adequate work papers and other
documentation that is well organized and sufficiently detailed to allow a knowledgeable third
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EXHIBIT A
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party who did not participate in the review to assess the documentation and understand how the
conclusions reached in the associated report are substantiated (a/k/a Professional Firms).
May 18, 2011, were required to establish and implement a process through which borrowers who
potentially are eligible for HAMP are assigned a relationship manager to serve as the borrower’s
single point of contact. The relationship manager’s functions were similar to the SPOC under
the NMSA.
146. Each servicer was required to have clear and comprehensive internal written
policies for identification and solicitation of borrowers who are potentially eligible based on
147. The same relationship manager was responsible for managing the borrower
relationship throughout the entire delinquency or imminent default resolution process, including
any home retention and non-foreclosure liquidation options, and, if the loan was subsequently
referred to foreclosure, had to be available to respond to borrower inquiries regarding the status
of the foreclosure.
148. Each such servicer must assign a relationship manager to a delinquent borrower or
upon the successful establishment of Right Party Contact with the borrower and (i) the
information disclosed during the initial telephone interview or other oral communication, or (ii)
upon receipt from the borrower of any completed or partially completed Initial Package (as
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EXHIBIT A
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150. The relationship manager had primary responsibility for coordinating the
servicer’s actions to resolve the borrower’s delinquency or imminent default until all available
home retention and non- foreclosure liquidation options had been exhausted and for
151. A servicer evaluated a borrowers loan modification options after its relationship
• Either (i) IRS Form 4506-T or 4506T-EZ or (ii) a signed copy of the
borrower’s tax return for the most recent tax year;
• Dodd-Frank Certification
152. Servicers could require use of the RMA by all borrowers requesting consideration
for HAMP or may use other proprietary financial information forms that are substantially similar
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EXHIBIT A
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153. Included in the RMA was a Hardship Affidavit. Every borrower seeking a
modification, regardless of delinquency status was required to sign a Hardship Affidavit that
attests that the borrower is unable to continue making full mortgage payments and describes the
type of hardship.
154. Servicers were required to use HAMP as the first loss mitigation option for each
borrower.
155. Each servicer was required to have written standards for determining imminent
default that are consistent with applicable contractual agreements and accounting standards and
must apply the standards equally to all borrowers. The mortgage file and/or servicing system
156. A servicer had to document in its servicing system and/or mortgage file the basis
for its determination that a payment default is imminent and retain all documentation used to
157. Servicers were required to include in their internal quality assurance plan
5. Organizational structure and staffing levels such that relationship managers can
properly carry out responsibilities; and
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158. Servicers were required to maintain evidence of the control testing activities
Certification) as to its continued compliance with, and the truth and accuracy of, the
representations and warranties set forth in the SPA on June 1, 2010. On June 1 of each year
thereafter during the term of the SPA, servicers are required to submit Subsequent Certification.
160. If a servicer became aware of any information that would cause them to be unable
to certify to the truth and accuracy of the representations and warranties included in the
applicable, the servicer was required to notify MHA-C promptly and amend its Certification to
161. These included any representations and warranties, or covenants that ceased to be
true and correct or any deficiencies in the design or operating effectiveness of the internal
5. Incentive Payments
162. Under the HAMP Chase received incentive compensation for each eligible loan
modification. This compensation varied based on the delinquency period of the loan and the
continued success of the loan modification effort. The specific conditions for these incentive
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EXHIBIT A
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163. As stated, Chase maintains a hidden secondary set of loans stored outside of its
primary SOR. The secondary set of loans is known as the RCV1 or RCV1-SOR. The RCV1 –
essentially a “back room” operation – was not disclosed or reported to Freddie Mac or the
Monitor, and is still only known to those select few working in it within Chase. This RCV1-
documentation has been corrupted, ignored or allowed to fall into disarray. It includes various
levels of defaulted and charged off loans in both first and second lien positions. It also includes
164. In short, the RCV1-SOR is a loose collection of once compliant loans that Chase
has relegated to the No Man’s Land of the bank where these mortgage loans and the associated
borrowers are ignored to the point where compliance with any regulatory body is impossible.
165. The RCV1 population of loans is comprised of loans that Chase has removed
from its primary SOR upon a determination that the loans were valueless based on General
166. Upon the determination that a loan is valueless, Chase removes the loan from its
balance sheet and adjusts its accounting entry, thus charging off the loan as a bad debt expense.
having little expectation of collection of the debt. However, the loan’s “charge off” status does
168. Chase’s policies and procedures regarding loan charge-offs included both first and
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EXHIBIT A
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169. These charge-offs included proprietary bank owned mortgage loans and loans
which are serviced on behalf of others, including Residential Mortgage Backed Securities
(RMBS) and loans serviced on behalf of Government Sponsored Entities (GSE) such as FNMA,
170. The motivating factors for moving charged off mortgages from the primary SOR
to the RCV1-SOR includes the high cost – in terms of both financial and human resources – of
properly servicing these federally regulated mortgages that require a single point of contact,
timely and accurate information, adequate and knowledgeable staffing, communications with law
firms, code enforcement, compliance with all Federal and State laws and other associated
activities.
171. Other motivating factors included servicing contracts between the Servicer and
third party investors that did not provide for reimbursement of third party expenses such as those
for property preservation, insurance, payment of taxes, costs of foreclosure and disposition fees.
172. Loans in RCV1 are not serviced as defined by RESPA, Treasury Directives, the
173. These loans remain subject to collection actions by collection agencies and the
174. The failure to service the loans in the RCV1 population and the failure to disclose
the existence of the RCV1 population is a violation of the applicable Servicing Guidelines of the
MHA and Servicing Standards of the NMSA that apply to all loans serviced by Chase.
175. The existence of RCV1, and the fact that its universe of loans was not included in
the compliance statistics reported to Freddie Mac or the Monitor, made it impossible for Chase to
be in compliance with the Treasury Directives of the HAMP or the Servicing Standards of the
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EXHIBIT A
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Consent Judgment. Thus, any assertion by Chase that Chase met those directives and standards
176. Throughout the time Chase was creating the Work Plan, Chase knew the
existence of the RCV1 as a hidden system of records and that the integrity and accuracy of the
data in the RCV1 population was irreparably corrupted and, thus, would fail every Metric for
177. The practice of porting loans out of the primary SOR and into the RCV1-SOR
began as early as 2000 when JP Morgan & Company merged with Chase Manhattan
Corporation.
178. Chase’s policy of porting charged off home loans into the RCV1-SOR damaged
its ability to properly document the loans due to the complete lack of any servicing, and thus a
complete corruption of the accuracy and integrity of the records for these mortgage loans.
179. While the Handbook allowed a Servicer to not consider certain “charged off
loans” for HAMP, this carve out itself had specific requirements that Chase did not meet. The
borrowers of the charged off loans that were not considered must have been released from all
“liability for the debt” and provided with a copy of the release. The Servicer was then required
180. As the internal documentation entitled “Chase Home Loan Servicing and Default:
Daily Agency Recovery Summary” (and as described below) demonstrated, these borrowers,
whose loans were in the RCV1 population, were not released of the “liability for the debt” but
instead were still the subject of collections efforts by various collection agencies who did not
service these federally regulated mortgages. These mortgage loans were therefore subject to all
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* * * *
182. The HAMP servicing guidelines and the NMSA Servicing Standards required that
183. Internal documents of Chase demonstrate that the RCV1 contains mortgage loans
whose borrowers have had no contact with Chase since as far back as 2000, more than a decade
before such loans were then vetted for potential inclusion within the Consumer Relief portions of
184. The entire population of loans sold to the Relator’s entity Mortgage Resolution
came directly from the RCV1-SOR, a small portion of the hundreds of thousands of loans
185. After the transfer to Mortgage Resolution of 3,529 loans from the RCV1-SOR,
Chase sent no transfer letters to the borrowers as required by RESPA. Chase did not provide any
complete or accurate servicing information. The reason for this failure is simply explained;
Chase did not possess the records necessary to determine whose loan had been transferred.
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Loans included in the HAMP population sold to Relator included loans which were foreclosed
186. As recently as March 2014, over 5 years after the completion of the sale, Chase
admitted in writing that it was unable to determine which loans it had included in the sale to
Mortgage Resolution.
187. Since the loans contained in the RCV1 population are not maintained or serviced
according to any Servicing Standards, they fail to meet any of the requirements set forth in the
MHA Commitment and its accompanying HAMP Handbook and the NMSA Consent
Agreement, the past standards under prior laws and regulations or the standards set forth in the
Dodd-Frank legislation.
188. Due to Chase’s total disregard of the HAMP Handbook, the Consent Judgment
Servicing Standards and servicing requirements under RESPA, none of the borrowers in the
RCV1-SOR were considered for eligibility for any proprietary or government loan modification
programs offered to borrowers in the primary system of records. In contrast, none of the
borrowers in the primary SOR’s were considered for eligibility for Chase’s 2nd Lien
Extinguishment Program.
189. Pursuant to the SPA and Consent Judgment, all loan modification programs must
be made available to all eligible borrowers. Since Chase did not make its proprietary or
government loan modification programs available to all eligible borrowers, none of the incentive
payments paid in accordance with HAMP or Consumer Relief credits claimed in accordance
with the NMSA are attributable to such programs cannot be paid or credited.
190. The Commitment for MHA Incentive Payments and the Consent Judgment
Consumer Relief credit are both conditioned on Chase complying with the Treasury Directives
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pursuant to SPA. Chase did not report the existence of RCV1 to the United States Government
or the Monitor; therefore, all of its claims for MHA Incentive payments and NMSA Consumer
191. Pursuant to the terms of the Consumer Relief requirements of the Consent
Judgment:
192. Instead of following the requirements of the Consent Judgment, Chase set out –
in an internal document (“DOJ July 2012”) – its own standards used to grant relief for second
liens:
• Loans were rank ordered using a variety of factors that included aging,
balance size and probability of payment.
• Loans were then segmented and binned into 5 distinct groups, each
offering its own benefits and opportunity cost collections.
• Each bin contains an estimated lifetime recoveries sum that was used to
determine the impacts to the line of business and 2012 recovery budget.
193. Using these criteria, Chase tasked its Mortgage Banking Recovery with
identifying second mortgage home loans for DOJ credit in the amount of Three Hundred,
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• Twenty-Five (25%) percent additional credit (12.5% total credit) for all dollars
forgiven by the end of year 2012; and
194. Proper application of the criteria for credits under the Consent Judgment would
have excluded from eligibility for credit any of these loans selected by Chase. Instead, Chase
simply “forgave” loans that did not qualify for credit under the Consent Judgment and then
sought credit under the Consent Judgment for those loans’ forgiveness.
195. Instead of applying the specific criteria set forth in the MHA Handbook and
Consent Judgment, Chase substituted its own self-serving algorithm, referencing criteria such as
the number of months since charge-off, last payment date and age of loan to determine the least
196. After running its queries through the RCV1 population, Chase identified 38,407
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• The last group was 11,329 second mortgage loans totaling $644,541,049.00 in
principal balance that were termed “inactive”.
from the loans considered for Consumer Relief those loans that could provide a larger monetary
benefit to Chase than the value of the Consumer Relief credit would have. Examples of loans
• Those loans that had been charged off in the last six months; and
• Those loans whose borrowers were making payments in the last year.
198. In short, Chase specifically excluded those homeowners for whom the Consumer
199. To implement this scheme, on or about September 13, 2012, Chase mailed 33,456
letters to borrowers with charged off second mortgage loans whose loans were stored within the
RCV1-SOR.
200. Each letter contained the same basic language and stated in part:
We are writing to let you know that we are cancelling the amount you owe Chase
on the loan referenced below, totaling [X] amount, as a result of the recent
mortgage servicing settlement reached with the states and federal government.
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This means you will owe nothing more on the loan and your debt will be
cancelled. You don’t need to sign or return anything for this to happen.
(Emphasis added.)
201. Each letter included the: 1) name of the borrower; 2) amount left on the loan; and
3) account number assigned to the mortgage. Each letter was “robo-signed” by Patrick Boyle,
Vice President.
202. The loans chosen for this mailing were selected based solely on internal queries of
the RCV1-SOR. In other words, they were loans from the backroom with the least possibility of
collection, no servicing history and not in compliance with the objectives of the Consent
Judgment.
203. Among these loans were loans sold to the Relator’s entities.
204. The letters were the result of efforts by Chase to minimize the cost of the NMSA
credits and to maximize its own profitability from the implementation of the Consumer Relief by
circumventing the application process and ignoring the MHA Servicing Guidelines and the
205. Using historical data from past performance, Chase calculated that by applying
the Consumer Relief in the manner described above, it converted this pool of approximately $3
billion in loans, whose lifetime collectability was only $4.2 million – a collection ratio calculated
by Chase to be 0.14 percent – into credits equal to $397 million dollars. In a single move –
based on this calculation – Chase increased its rate of return on these defaulted loans by nearly
100 times.
206. Ultimately, Chase claimed credits of $308,672,792 for second lien modifications.
207. Because all of the loans used to claim credits for second lien consumer relief
came from RCV1 which were not serviced according to the MHA Handbook or NMSA
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Servicing Standards and because they were not included in the primary SOR and were selected
according to the criteria set out in the Consumer relief requirements, all claims for credits for
208. As the internal Chase documents reveal, the bulk of these borrowers were no
209. Additionally, liens on a large percentage of these loans were no longer valid due
to foreclosure on the homes by first lien mortgage holders. In many cases, Chase itself owned or
was servicing the first lien that was foreclosed, wiping out the second lien that Chase was
210. Chase’s attempt to take credit for the forgiveness of these loans undermined major
objectives of the Consent Judgment. As plainly stated on the first page of Exhibit A, the major
211. Chase established policies and procedures for those mortgage loans in the RCV1-
SOR that included the rapid transfer of these borrowers’ accounts through several levels of third
party collections activity, from primary agencies through quinary agencies, based on their
collection success.
212. Through the use of these serial collection agencies, Chase increased the
profitability of these defaulted home loans and lowered costs on the funds collected because
213. Because the collection agencies did not service the federally regulated mortgage
loans, the RCV1 loan portfolio was not capable of being serviced as required by the MHA
50
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214. The use of collection agencies was reserved for the worst portion of the RCV1-
215. These collection agencies are unlicensed, unregulated and do not possess the
unwillingness to service loans properly placed Chase in violation of its legal obligations
216. Six months after the deadline for full implementation of the Servicing Standards
of the Consent Judgment, and years after Chase certified continued compliance with the
Commitment, an internal Chase document from April 2013 entitled “Chase Home Loan
Servicing and Default: Daily Agency Recovery Summary” stated Chase had 160,309 loans with
servicing.
218. These loans also included 30,105 service-only loans that were under contractual
219. This pool of 160,309 loans is but a portion of the total population included in the
RCV1. Based on information and belief the total number of such loans exceeds 500,000.
220. This serial use of collection agencies added to the data corruption already inherent
in the design of the RCV1. The data was incomplete, inconsistent and, in many places,
irreparably corrupted by the collection agencies’ involvement in the management of the data.
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221. In an internal document entitled “DOJ: Default: Recovery 2nd Lien Credit Initiative,
Financial Impact Overview, November 14, 2012” (“DOJ November 2012”), Chase began by
admitting to itself that the data from the RCV1 pool was “challenged.”
222. The DOJ November 2012 document is broken down between identifying issues
from the first Chase mailer and identifying loans to be included in the second mailer.
223. Chase went on to state that the mailing that it had sent out on September 13, 2012
had encountered issues, including “confusion over letters sent (bankruptcy and unsecured
customers)” and that “[r]emediation efforts are still in progress.” Those remediation efforts
primarily addressed the issues caused by mailing borrowers of non-Chase owned loans.
224. Among the non-Chase owned loans were several loans owned by the Relator’s
entities.
225. The DOJ November 2012 document also set forth the series of admissions as to the
failings:
• Inactive loans included in the pool did not include updated bankruptcy
information;
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EXHIBIT A
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226. The document acknowledged that 108 loans were owned by 21 different
investors, with 83 out of 108 loans (78 percent) purchased by 8 investors. Relator owns 3 of the
227. Within the pool of loans to which Chase sent the first mailing were several
hundred active bankruptcies of various types and more than 12,000 discharged bankruptcies, in
228. The DOJ November 2012 document also stated that the “[m]ethodology would be
to tier older, never paid loans as first into the 2nd mailer pools.”
229. This rationale sought to remove the necessity of borrowers applying for the
credits that would fulfill the objective of keeping people in their homes. Instead, Chase weighed
the financial benefits to its own program higher than meeting the objectives of the Consent
Agreement.
230. In evaluating the loans, Chase designed the searches to focus on various criteria
that would rid Chase of loans that had no possibility of future payments and that had low life
time collectability, thus increasing Chase’s profitability and focusing on borrowers who were
more likely not to need the benefit because their debt was uncollectable.
231. Chase had had no contact with these borrowers in over ten years and had no
knowledge of the status of the loans. Due to the corruption of the data in the RCV1 population,
Chase had no information about these loans and could not have applied the required criteria
232. Chase, in complete disregard for the requirements of the MHA Commitment and
the NMSA Consent Judgment, made no effort to apply the criteria to any of the borrowers to whom
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233. Chase followed up this first mailing with a second mailing of approximately
234. In an internal document entitled “DOJ: Default: Recovery 2nd Lien Credit
Initiative, 3rd Mailing Portfolio Selection, January 23, 2013” (“DOJ January 2013”), reviewed
“21,985 bankruptcy and non-bankruptcy loans are the base population for the next mailing.”
235. Based on this review, Chase identified approximately 8,000 loans for the third
236. As noted, the Consumer Relief requirements of the Consent Judgment provided:
237. Aside from the obvious requirements set forth in ¶ 2(b) of Exhibit D, that the
property be occupied, which could only be determined through communications with the
borrower, the loan forgiveness letters sent by Chase failed to meet the requirements for receiving
Consumer Relief credits under the Consent Judgment for several other reasons.
where the first lien with Chase was current at the time the letters were sent. No modification had
occurred and therefore the second liens were not eligible to be forgiven for credit under the terms
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239. Chase also provided forgiveness letters to individuals on their second lien despite
the fact that the borrower’s first lien was current, which was serviced by lenders other than
Chase and thus forgiveness of the mortgage was not eligible to qualify for credit under the terms
240. Similarly, Chase provided forgiveness letters to mortgages with first liens that had
not been modified but rather were delinquent, thus making them ineligible for credit if forgiven
241. Also, numerous mortgages for which Chase provided debt forgiveness letters had
been recently foreclosed upon by Fannie Mae. This indicates that the underlying first lien
mortgages were not recently modified and thus could not qualify for credit under the Consumer
Relief Matrix.
242. Chase also provided debt forgiveness letters to individuals who had already paid
243. Chase also sent debt forgiveness letters to borrowers who had sold their interest in
the property.
244. In addition to the issues with their own borrowers, Chase also caused issues with
other lenders’ borrowers when recipients of the September 13, 2012 mailing included borrowers
245. These Recipients included borrowers whose loans were owned and serviced by
246. Between 2005 and 2010, S&A entered into several agreements to purchase non-
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EXHIBIT A
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247. Between 2009 and 2010 1st Fidelity entered into several agreements to purchase
non-performing closed end first and second mortgage loans from Chase.
forgiveness letters, borrowers informed the Relator that they would no longer be making
payments on their mortgages. For example, one borrower informed the Relator that he would no
longer be making the $520 monthly payments he had been making since October 2009.
249. Another borrower engaged legal counsel and stated they would call the attorney
general if the loan was not released pursuant to the terms of the fraudulent Chase letter he
received.
250. Each of the letters sent by Chase states that forgiveness of the loan at issue is “as
a result of the recent mortgage servicing settlement reached with the states and federal
government.”
251. The Relator’s entities’ loans were not the only ineligible loans whose borrowers
252. Chase sent debt forgiveness letters to the borrowers of at least 21 note-sale
buyers, like Realtor, who had purchased these mortgage loans from Chase in the past. Some of
253. In total Chase reviewed over 100,000 charged-off, second loans for inclusion in
the three mailings done for the Consumer Relief initiative. During this same period, Chase
reported to the Monitor that it had only 3,736 second mortgage loans that were 180+ days
delinquent for its servicing metric. Chase later reported on or about December 31, 2012 that it
had 3,406 second mortgage loans that were 180+ days delinquent.
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254. Chase sent Relator several data tapes containing over 25,000 loans for his review
and opinion based on his experience as a note-buyer. It later became apparent that Chase
personnel were seeking help to determine whether such loans could be included in the second
255. Said data tapes included many of Relator’s own loans. Relator warned Chase
personnel in writing that these loans were owned by the Relator and should be removed from
their lists.
256. During the period where the IRG group for Chase reported servicing compliance
to the Monitor, the amounts reported were a bare fraction of the total loans reviewed for
inclusion in their population for Consumer Relief credit under their proprietary second lien
extinguishment program.
257. Chase purposely did not report its RCV1 SOR to the Monitor and Professional
Firms when asserting compliance with Servicing Standards Metrics, while at the same time it
asserted that loans in the RCV1 SOR qualified for consumer credit. Essentially, Chase used its
primary SOR to test compliance for its Servicing Standards while using a small portion of its
secondary hidden RCV1 SOR for its consumer credits related to loan forgiveness.
Kassem, Vice President and Portfolio Manager for Mortgage Banking at Chase. Relator
explained that borrowers, whose mortgage notes he held, received loan forgiveness letters, all
259. Significantly, Chase does not dispute that it had forgiven loans it did not own.
Rather than correcting the misrepresentations to borrowers, Chase offered to buy back the
EXHIBIT A
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260. On December 5, 2012 Chase sent the Relator two letters offering to buy back over
As part of the recent mortgage servicing settlement reached with the states
and federal government, JPMorgan Chase Bank, N.A. (Chase) elected to
participate in a second lien extinguishing program. Because of this, we sent
letters to certain customers notifying them that we were extinguishing their
debt with Chase and releasing the associated lien. However, we subsequently
found that several of your customers received this letter in error because of
an incorrect coding entry. These customers and their respective loans were
identified and are appended to this letter and referenced as “Exhibit A.” We
apologize for any inconvenience this may have caused you.
(Emphasis added.)
262. The letter regarding the loans sold to S&A acknowledged that Chase had
inaccurately and without authorization sent the S&A borrowers the debt forgiveness letter.
263. The letter regarding the loans sold to 1st Fidelity acknowledged that Chase had
inaccurately and without authorization sent the 1st Fidelity borrowers the debt forgiveness letter.
264. Chase claimed that the erroneous letters were caused by a “coding error”.
265. The forgiveness letters were sent by Chase in an effort to circumvent the Consent
Judgment. Relator’s borrowers were pulled into this scheme due to the complete corruption of
the data within the RCV1 population from which Chase obtained the names and loans for their
mailings.
266. Chase’s pattern of forgiving loans it no longer owns or services was not only
limited to those loans it sold to the Relator. Through Relator’s extensive experience and
relationship with Chase, he was provided a list of mortgages for which Chase provided loan
forgiveness letters. Through Relator’s investigation it became apparent that many of the
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mortgages were forgiven despite the fact that Chase had sold, or otherwise no longer maintained
267. After months of negotiation between Chase and the Relator, the Relator sold back
some of the loans that were erroneously sent loan forgiveness letters. However the Relator
268. In an attempt to conceal Chase’s fraudulent scheme, and only after Relator
refused to sell back, and only after borrowers had filed complaints with various enforcement
agencies, Chase agreed to repurchase certain affected loans at the full balance owed on each
mortgage.
269. Chase stated that other loans were not a “big enough problem” to resolve and
270. Chase is under an affirmative obligation to report any failure to meet its metrics to
the Monitor and to the MHA-C. Chase did not report that it sent loan forgiveness letters to
271. In an internal email sent by Jason Oquendo, Project Manager (Second Lien
notates accounts that have been chosen for the 2nd Lien Extinguishment Program. The email
describes a “DCL” note code indicating an intact lien exists where RECOVERY can take DOJ
credit. He refers to an internal communication: “ARD text confirmed DOJ eligible from 2nd
mailer – process account for DOJ NonBK Process”. He then describes the final coding process.
“Then append a DOJ note code to all accounts to move them through the RCV1/POTS interface
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272. This email clearly acknowledges the existence of the RCV1 System of Records,
which he refers to as “interface”. He then describes the process for sending 1099-Cs, which he
wants backdated to prior year. “Finally move the accounts to the “R1099C” queue and back date
273. Relator obtained a partial list of borrowers that received IRS Form 1099C in
274. The documentation of the 1099C forms demonstrates Chase’s intention to use
275. Numerous other mortgages listed on R1099C debt forgiveness list had already
been foreclosed by Chase or another company and therefore precluded Chase from applying for
276. Almost the entire population of loans, for which Chase asserted Consumer Relief
Credit under the 2nd Lien Extinguishment program, is identified in the “CLTR” data field on the
277. Chase maintains a policy of not foreclosing on first lien loans that are secured by
properties located in blighted neighborhoods and where the underlying property has little or no
value. These loans are least likely to be repaid, represent the highest reputational risk and the
highest servicing costs to Chase. Instead, Chase seeks another path aimed at circumventing the
issues related to these properties. This internal Chase policy is known as the “Alternative
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278. The AFP process is an ongoing effort to conceal legal violations, relieve Chase of
liabilities, mitigate losses and circumvent the objectives and requirements of the Consent
279. Under Chase’s AFP, thousands of mortgage loans have been, and continue to be,
with homeowners or others, and no outside indication of any type to alert interested parties of
this action.
280. Chase simply files releases of liens to appear as if the borrower had paid off the
underlying loan.
281. These lien releases are not individually reviewed by Chase to ensure that Chase
actually owned or serviced the mortgages or to ensure the accuracy and integrity of the
borrower’s information but instead were “robo-signed”; many of which signed by Amy Knight,
who identified herself as a Vice President at J.P. Morgan Chase Bank and others signed by Ingrid
Whitty and Arocla Whitty who identified themselves as Vice President and Asst. Secretary
respectively of JPMorgan Chase Bank N.A, Successor In Interest By Purchase From The FDIC
As Receiver of Washington Mutual Bank, FA F/K/A Washington Mutual Home Loans, Inc,
Successor By Merger to Homeside Lending, Inc. All of the lien releases indicated that “the
instrument was signed on behalf of its corporation, by authority from its board of directors.”
282. Prior to the implementation of the AFP, the underlying loans remained in
collection as unsecured debts despite their status as federally related loans with all related
attributes.
283. Chase applied the AFP to valueless RCV1 first mortgage loans, which it had not
serviced in accordance with law, thus creating and enhancing community blight.
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284. The use of the RCV1-SOR population in the application of the AFP meant that,
once again, Chase’s malfeasance affected loans that it neither owned nor serviced.
285. Relator’s investigation has revealed that Chase’s practices under AFP violated the
terms of the anti-blight requirements of the Consent Judgment. As a result, Chase has rapidly
enhanced blight, rather than limited it, in many of the country’s hardest hit areas, including areas
within Detroit, Michigan, St. Louis, and St. Louis County, Missouri. This directly violated
government policies and publications, such as Fannie Mae’s Property Preservation Matrix and
Reference Guide, that mandated that throughout the default process, servicers are responsible for
performing all property maintenance functions to ensure that the condition and appearance of
286. Pursuant to the terms of the Consent Judgment, servicers such as Chase were
required to take certain measures to deter community blight. Specifically Exhibit states:
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Exhibit A at A-40.
287. Because of Chase’s policies and procedure in implementing the AFP, Chase
merely released liens in many of the hardest hit areas rather than foreclosing. Despite electing
not to pursue foreclosure, Chase has failed to abide by the Consent Judgment’s mandate
requiring a Servicer who decides not to pursue foreclosure to notify both the borrower and local
authorities so that the property can be adequately maintained and not contribute to community
blight. Additionally, Chase continues to pursue the underlying debt for those loans in the AFP
which require them to be accounted for through HAMP in the primary SOR.
288. Pursuant to the Consent Judgment, the IRG for each of the Servicers are required
to submit quarterly reports to Monitor concerning their adherence to the Servicing Standards and
progress towards their Consumer Relief Requirements. The Monitor is then required to submit
reports regarding the Servicers compliance to the U.S. District Court for the District of
Columbia. The reports submitted to the Monitor and subsequently submitted from the Monitor
289. On June 18, 2013, Monitor submitted to the Court as Document 72, “Monitor’s
Report Regarding Compliance By Defendants J.P. Morgan Chase & Company and J.P. Morgan
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Chase Bank, N.A. for The Measurement Periods Ending September 30, 2012 and December 31,
2012.” This Report identified a Quarterly Report submitted by the IRG to the Monitor on
290. On October 16, 2013, Monitor submitted to the Court as Document 106,
“Monitors Interim Consumer Relief Report Regarding Defendant J.P. Morgan Chase Bank,
N.A.” On February 14, 2013, after completing a Satisfaction Review, the IRG submitted to the
Monitor an IRG Assertion setting out the amount of Consumer Relief earned from March 1,
2012 through December 31, 2012 dated September 11, 2013, signed by Nicole L. Hoboppl, IRG
Manager. This IRG Assertion was filed with the Monitor’s Report as Document 106-B. The
“Monitor’s Report Regarding Compliance By Defendants J.P. Morgan Chase & Company and
J.P. Morgan Chase Bank, N.A. For The Measurement Periods Ending March 31, 2013 and June
30, 2013.” This Report identified Quarterly Reports submitted by the IRG to the Monitor on
May 15, 2013 and August 14, 2013. Each of these Quarterly Reports contained False Claims.
292. On March 18, 2014, Monitor submitted to the Court as Document 143, “Monitors
Final Consumer Relief Report Regarding Defendant J.P. Morgan Chase Bank, N.A.” Filed with
the Monitor’s Report as Document 143-2 was an IRG Assertion setting out the amount of
Consumer Relief earned from January 1, 2013 through April 15, 2013. The IRG Assertion was
dated January 6, 2014 and signed by Nicole L. Hoboppl, IRG Manager. The IRG Assertion
293. On May 14, 2014, Monitor submitted to the Court as Document 160, “Monitor’s
Report Regarding Compliance By Defendants J.P. Morgan Chase & Company and J.P. Morgan
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Chase Bank, N.A. For The Measurement Periods Ending September 30, 2013 and December
31, 2014.” This Report identified compliance reports submitted by the IRG to the Monitor on
November 14, 2013 and February 14, 2014. Each of these compliance reports contained False
Claims.
294. On September 10, 2010, Chase filed a Certification of compliance with its
compliance with its “Commitment to Purchase Financial Instrument and Servicer Participation
COUNT I
Federal False Claims Act, 31 U.S.C. § 3729(a)(1)(G)
Against All Defendants
296. Relator realleges and incorporates herein by reference all the allegations set forth
297. The Relator seeks relief against Chase under Section 3729(a)(1)(G) of the FCA,
31 U.S.C. § 3729(a)(1)(G).
298. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the United States,
and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of the truth,
made, used or caused to be made or used false records and/or statements to conceal, avoid, or
decrease an obligation to pay or transmit money or property to the United States. These false
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statements and false records include various reports to the Monitor and the IRG Assertions
containing certifications that Chase had complied with the Servicing Standards and Consumer
299. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
300. By reason of the forgoing, the United States has been damaged in a substantial
amount to be determined at trial, and is entitled to treble damages and a civil penalty as required
COUNT II
Federal False Claims Act, 31 U.S.C. § 3729(a)(1)(A) & (B)
Against All Defendants
301. Relator realleges and incorporates herein by reference all the allegations set forth
302. The Relator seeks relief against Chase under Section 3729(a)(1)(A) & (B) of the
303. As set forth above, Chase knowingly presented, or causes to be presented, a false
or fraudulent claim for payment or approval and knowingly made, used, or caused to be made or
used, a false record or statement material to a false or fraudulent claim. These false claims and
false records were made in the form of certifications of compliance with its “Commitment to
Purchase Financial Instrument and Servicer Participation Agreement” and records and
304. Chase’s use of false reports and certifications enabled it to obtain payments from
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305. By reason of the forgoing, the United States has been damaged in a substantial
amount to be determined at trial, and is entitled to treble damages and a civil penalty as required
COUNT III
California False Claims Act
Cal. Govt. Code § 12651 (a)(7)
Against All Defendants
306. Relator realleges and incorporates herein by reference all the allegations set forth
307. This is a claim for treble damages and civil penalties under the California False
308. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
California, and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of
the truth, made, used or caused to be made or used false records and/or statements to conceal,
avoid, or decrease an obligation to pay or transmit money or property to the State of California.
These false statements and false records include various reports to the Monitor and the IRG
Assertions containing certifications that Chase had complied with the Servicing Standards and
309. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
310. By reason of the payments and approvals, the State of California has been
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EXHIBIT A
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COUNT IV
Delaware False Claims Act
Del. Code Ann. Tit. 6, § 1201(a)(7)
Against All Defendants
311. Relator realleges and incorporates herein by reference all the allegations set forth
312. This is a claim for treble damages and civil penalties under the Delaware False
313. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
Delaware, and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of
the truth, made, used or caused to be made or used false records and/or statements to conceal,
avoid, or decrease an obligation to pay or transmit money or property to the State of North
Carolina. These false statements and false records include various reports to the Monitor and the
IRG Assertions containing certifications that Chase had complied with the Servicing Standards
314. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
315. By reason of the payments and approvals, the State of Delaware has been
68
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COUNT V
District of Columbia False Claims Act
D.C. Code Ann. § 2-308.14 (a)(7)
Against All Defendants
316. Relator realleges and incorporates herein by reference all the allegations set forth
317. This is a claim for treble damages and civil penalties under the District of
318. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
Columbia, and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of
the truth, made, used or caused to be made or used false records and/or statements to conceal,
Columbia. These false statements and false records include various reports to the Monitor and
the IRG Assertions containing certifications that Chase had complied with the Servicing
319. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
320. By reason of the payments and approvals, the District of Columbia has been
69
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COUNT VI
Florida False Claims Act
Fla. Stat. Ann. § 68.081 (2)(g)
Against All Defendants
321. Relator realleges and incorporates herein by reference all the allegations set forth
322. This is a claim for treble damages and civil penalties under the Florida False
323. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the State of Florida,
and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of the truth,
made, used or caused to be made or used false records and/or statements to conceal, avoid, or
decrease an obligation to pay or transmit money or property to the State of Florida. These false
statements and false records include various reports to the Monitor and the IRG Assertions
containing certifications that Chase had complied with the Servicing Standards and the
324. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
325. By reason of the payments and approvals, the State of Florida has been damaged,
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COUNT VII
Georgia False Claims Act
Georgia (O.C.G.A. § 23-3-121(7)
Against All Defendants
326. Relator realleges and incorporates herein by reference all the allegations set forth
327. This is a claim for treble damages and civil penalties under the Georgia False
328. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the State of Georgia,
and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of the truth,
made, used or caused to be made or used false records and/or statements to conceal, avoid, or
decrease an obligation to pay or transmit money or property to the State of Georgia. These false
statements and false records include various reports to the Monitor and the IRG Assertions
containing certifications that Chase had complied with the Servicing Standards and the
329. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
330. By reason of the payments and approvals, the State of Georgia has been damaged,
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COUNT VIII
Hawaii False Claims Act
Haw. Rev. Stat. § 661-21 (a)(6)
Against All Defendants
331. Relator realleges and incorporates herein by reference all the allegations set forth
332. This is a claim for treble damages and civil penalties under the Hawaii False
333. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the State of Hawaii,
and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of the truth,
made, used or caused to be made or used false records and/or statements to conceal, avoid, or
decrease an obligation to pay or transmit money or property to the State of Hawaii. These false
statements and false records include various reports to the Monitor and the IRG Assertions
containing certifications that Chase had complied with the Servicing Standards and the
334. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
335. By reason of the payments and approvals, the State of Hawaii has been damaged,
72
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 77 of 93
COUNT IX
Illinois Whistleblower Reward and Protection Act
740 III. Comp. Stat. § 175/3(a)(1)(G)
Against All Defendants
336. Relator realleges and incorporates herein by reference all the allegations set forth
337. This is a claim for treble damages and civil penalties under the Illinois
Whistleblower Reward and Protection Act, 740 III. Comp. Stat. § 175/1 et seq.
338. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the State of Illinois,
and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of the truth,
made, used or caused to be made or used false records and/or statements to conceal, avoid, or
decrease an obligation to pay or transmit money or property to the State of Illinois. These false
statements and false records include various reports to the Monitor and the IRG Assertions
containing certifications that Chase had complied with the Servicing Standards and the
339. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
340. By reason of the payments and approvals, the State of Illinois has been damaged,
73
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 78 of 93
COUNT X
Indiana False Claims and Whistleblower Protection Act
Ind. Code § 5-11-5.5-2(b)(6)
Against All Defendants
341. Relator realleges and incorporates herein by reference all the allegations set forth
342. This is a claim for treble damages and civil penalties under the Indiana False
343. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the State of Indiana,
and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of the truth,
made, used or caused to be made or used false records and/or statements to conceal, avoid, or
decrease an obligation to pay or transmit money or property to the State of Indiana. These false
statements and false records include various reports to the Monitor and the IRG Assertions
containing certifications that Chase had complied with the Servicing Standards and the
344. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
345. By reason of the payments and approvals, the State of Indiana has been damaged,
74
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 79 of 93
COUNT XI
Iowa False Claims Act
Iowa Code § 685.2.2.g
Against All Defendants
346. Relator realleges and incorporates herein by reference all the allegations set forth
347. This is a claim for treble damages and civil penalties under the Iowa False Claims
348. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the State of Iowa,
and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of the truth,
made, used or caused to be made or used false records and/or statements to conceal, avoid, or
decrease an obligation to pay or transmit money or property to the State of Iowa. These false
statements and false records include various reports to the Monitor and the IRG Assertions
containing certifications that Chase had complied with the Servicing Standards and the
349. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
350. By reason of the payments and approvals, the State of Iowa has been damaged,
75
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 80 of 93
COUNT XII
Massachusetts False Claims Act
Mass. Ann. Laws Ch. 12, § (9)
Against All Defendants
351. Relator realleges and incorporates herein by reference all the allegations set forth
352. This is a claim for treble damages and civil penalties under the Massachusetts
False Claims Act, Mass. Ann. Laws Ch. 12, §§ 5(B)(1)-(B)(4), 5(B)(8).
353. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
disregard of the truth, made, used or caused to be made or used false records and/or statements to
Commonwealth of Massachusetts. These false statements and false records include various
reports to the Monitor and the IRG Assertions containing certifications that Chase had complied
with the Servicing Standards and the Consumer Relief Requirements of the Consent Judgment.
354. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
has been damaged, and possibly continues to be damaged, in an amount yet to be determined.
76
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 81 of 93
COUNT XIII
Minnesota False Claims Act
Minn. Stat. § 15C.02(a)(7)
Against All Defendants
356. Relator realleges and incorporates herein by reference all the allegations set forth
357. This is a claim for treble damages and civil penalties under the Minnesota False
358. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
Minnesota, and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of
the truth, made, used or caused to be made or used false records and/or statements to conceal,
avoid, or decrease an obligation to pay or transmit money or property to the State of Minnesota.
These false statements and false records include various reports to the Monitor and the IRG
Assertions containing certifications that Chase had complied with the Servicing Standards and
359. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
360. By reason of the payments and approvals, the State of Minnesota has been
77
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 82 of 93
COUNT XIV
Montana False Claims Act
Mont. Code Ann. § 17-8-403(1)(g)
Against All Defendants
361. Relator realleges and incorporates herein by reference all the allegations set forth
362. This is a claim for treble damages and civil penalties under the Montana False
363. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
Montana, and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of
the truth, made, used or caused to be made or used false records and/or statements to conceal,
avoid, or decrease an obligation to pay or transmit money or property to the State of Montana.
These false statements and false records include various reports to the Monitor and the IRG
Assertions containing certifications that Chase had complied with the Servicing Standards and
364. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
365. By reason of the payments and approvals, the State of Montana has been
78
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 83 of 93
COUNT XV
Nevada False Claims Act
Nev. Rev. Stat. § 357.040 (1)(g)
Against All Defendants
366. Relator realleges and incorporates herein by reference all the allegations set forth
367. This is a claim for treble damages and civil penalties under the Nevada False
368. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the State of Nevada,
and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of the truth,
made, used or caused to be made or used false records and/or statements to conceal, avoid, or
decrease an obligation to pay or transmit money or property to the State of Nevada. These false
statements and false records include various reports to the Monitor and the IRG Assertions
containing certifications that Chase had complied with the Servicing Standards and the
369. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
370. By reason of the payments and approvals, the State of Nevada has been damaged,
79
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 84 of 93
COUNT XVI
New Hampshire False Claims Act
N.H. Rev. Stat. § 167:61-b I. (e)
Against All Defendants
371. Relator realleges and incorporates herein by reference all the allegations set forth
372. This is a claim for treble damages and civil penalties under the New Hampshire
373. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the State of New
Hampshire, and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of
the truth, made, used or caused to be made or used false records and/or statements to conceal,
avoid, or decrease an obligation to pay or transmit money or property to the State of New
Hampshire. These false statements and false records include various reports to the Monitor and
the IRG Assertions containing certifications that Chase had complied with the Servicing
374. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
375. By reason of the payments and approvals, the State of New Hampshire has been
80
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 85 of 93
COUNT XVII
New Jersey False Claims Act
N.J. Stat. § 2A:32 C-3 (g)
Against All Defendants
376. Relator realleges and incorporates herein by reference all the allegations set forth
377. This is a claim for treble damages and civil penalties under the New Jersey False
378. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the State of New
Jersey, and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of the
truth, made, used or caused to be made or used false records and/or statements to conceal, avoid,
or decrease an obligation to pay or transmit money or property to the State of New Jersey. These
false statements and false records include various reports to the Monitor and the IRG Assertions
containing certifications that Chase had complied with the Servicing Standards and the
379. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
380. By reason of the payments and approvals, the State of New Jersey has been
81
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 86 of 93
COUNT XVIII
New Mexico False Claims Act
N.M. Stat. Ann. § 27-14-5(G)
Against All Defendants
381. Relator realleges and incorporates herein by reference all the allegations set forth
382. This is a claim for treble damages and civil penalties under the New Mexico False
383. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the State of New
Mexico, and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of the
truth, made, used or caused to be made or used false records and/or statements to conceal, avoid,
or decrease an obligation to pay or transmit money or property to the State of New Mexico.
These false statements and false records include various reports to the Monitor and the IRG
Assertions containing certifications that Chase had complied with the Servicing Standards and
384. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
385. By reason of the payments and approvals, the State of New Mexico has been
82
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 87 of 93
COUNT XIX
New York False Claims Act
N.Y. State Fin. L. § 189.1.(g)
Against All Defendants
386. Relator realleges and incorporates herein by reference all the allegations set forth
387. This is a claim for treble damages and civil penalties under the New York False
388. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the State of New
York, and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of the
truth, made, used or caused to be made or used false records and/or statements to conceal, avoid,
or decrease an obligation to pay or transmit money or property to the State of New York. These
false statements and false records include various reports to the Monitor and the IRG Assertions
containing certifications that Chase had complied with the Servicing Standards and the
389. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
390. By reason of the payments and approvals, the State of New York has been
83
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 88 of 93
COUNT XX
North Carolina False Claims Act
N.C. Gen. Stat. §§ 1-607(a)(7)
Against All Defendants
391. Relator realleges and incorporates herein by reference all the allegations set forth
392. This is a claim for treble damages and civil penalties under the North Carolina
393. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the State of North
Carolina, and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of
the truth, made, used or caused to be made or used false records and/or statements to conceal,
avoid, or decrease an obligation to pay or transmit money or property to the State of North
Carolina. These false statements and false records include various reports to the Monitor and the
IRG Assertions containing certifications that Chase had complied with the Servicing Standards
394. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
395. By reason of the payments and approvals, the State of North Carolina has been
84
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 89 of 93
COUNT XXI
Rhode Island False Claims Act
R.I. Gen. Laws § 9-1.1-3(a)(7)
Against All Defendants
396. Relator realleges and incorporates herein by reference all the allegations set forth
397. This is a claim for treble damages and civil penalties under the Rhode Island False
398. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
statements material to an obligation to pay or transmit money or property to the State of Rhode
Island, and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of the
truth, made, used or caused to be made or used false records and/or statements to conceal, avoid,
or decrease an obligation to pay or transmit money or property to the State of Rhode Island.
These false statements and false records include various reports to the Monitor and the IRG
Assertions containing certifications that Chase had complied with the Servicing Standards and
399. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
400. By reason of the payments and approvals, the State of Rhode Island has been
85
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 90 of 93
COUNT XXII
Tennessee Fraud Against Taxpayers Act
Tenn. Code Ann. §4-18-1-3(a)(7)
Against All Defendants
401. Relator realleges and incorporates herein by reference all the allegations set forth
402. This is a claim for treble damages and civil penalties under the Tennessee Fraud
403. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
Tennessee, and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of
the truth, made, used or caused to be made or used false records and/or statements to conceal,
avoid, or decrease an obligation to pay or transmit money or property to the State of Tennessee.
These false statements and false records include various reports to the Monitor and the IRG
Assertions containing certifications that Chase had complied with the Servicing Standards and
404. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
405. By reason of the payments and approvals, the State of Tennessee has been
86
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 91 of 93
COUNT XXIII
Virginia Fraud Against Taxpayers Act
Va. Code Ann. § 8.01-216.3 (A)(7)
Against All Defendants
406. Relator realleges and incorporates herein by reference all the allegations set forth
407. This is a claim for treble damages and civil penalties under the Virginia Fraud
408. As set forth above, Chase knowingly, or acting in deliberate ignorance and/or
reckless disregard of the truth, made, used, or caused to be made or used, false records and/or
of Virginia, and/or knowingly, or acting in deliberate ignorance and/or with reckless disregard of
the truth, made, used or caused to be made or used false records and/or statements to conceal,
Virginia. These false statements and false records include various reports to the Monitor and the
IRG Assertions containing certifications that Chase had complied with the Servicing Standards
409. Chase’s false reports and certifications enabled it to avoid penalties and claim
credits to which it was not entitled. By falsely claiming such credits, Chase avoided paying
410. By reason of the payments and approvals, the Commonwealth of Virginia has
87
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 92 of 93
1. Defendants pay an amount equal to three times the amount of damages the United
States, the States of California, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa,
Massachusetts, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New
York, North Carolina, Rhode Island, Tennessee, Virginia, and the District of Columbia have
sustained because of Defendants’ actions, plus a civil penalty against Defendants of not less than
$5,000, and not more than $10,000 for each violation of 31 U.S.C. § 3729 and similar provisions
3. Relator be awarded all costs of this action, including attorneys’ fees, expenses,
and costs pursuant to 31 U.S.C. § 3730(d) and similar provisions of the State False Claims Acts;
4. The United States, the States of California, Delaware, Florida, Georgia, Hawaii,
Illinois, Indiana, Iowa, Massachusetts, Minnesota, Montana, Nevada, New Hampshire, New
Jersey, New Mexico, New York, North Carolina, Rhode Island, Tennessee, Virginia, and the
District of Columbia and Relator be granted all such other relief afforded by law as the Court
deems appropriate;
88
EXHIBIT A
Case 1:14-cv-01047-RMC Document 80 Filed 11/17/14 Page 93 of 93
Roberto L. Di Marco
Jennifer M. Foster
WALKER & DI MARCO, P.C.
350 Main Street
First Floor
Malden, MA 02148
Tel. (781) 322-3700
Fax. (781) 322-3757
89
EXHIBIT A