Why JPMorgan Chase Foreclosed on a Distinguished Ohio Judge
Even the long arm of the law isn't immune to abuse at the hand of banks. Just ask Ohio judge Peter Sikora.
JPMorgan Chase (JPM) is threatening to take his house away after he fell behind on his mortgage. And why did Sikora -- a veteran juvenile-court judge distinguished enough to have run for the state's supreme court -- fall behind? Because the bank advised him to stop making payments on his nearly $1 million mortgage in order to qualify for a loan modification. According to Cleveland daily The Plain Dealer:
Sikora, who makes $121,350 a year as a judge, said in a telephone interview Thursday that he has the money to make his mortgage payments. What got him in trouble was following the advice of officials at JP Morgan Chase & Co., he said.
With property values in decline over the past year in Cleveland, and mortgage rates the lowest in decades, Sikora sought to refinance. But the bank, he said, declined his request.
"The bank advised me that the only way they would consider a loan modification would be if I fell behind on my payments," said Sikora, 59, a judge since 1989. "I took their advice and put the money aside."Got that? He had the money to stay current on his mortgage. But after telling him to suspend payment, JPMorgan foreclosed. Of course, it's possible the company didn't really tell Sikora to go delinquent on the loan or that the good judge simply misinterpreted the company's advice. But I'd be more inclined to give JPMorgan the benefit of the doubt if such reports, and lawsuits, weren't a dime a dozen. I've also personally heard from dozens of homeowners seeking a loan mod who said their banks told them to stop making mortgage payments, while consumer advocates say the problem is widespread.
Why would a bank or loan servicer advise a homeowner to do such a thing? Because of the strong financial incentives such companies have to foreclose, rather than modify a loan. Just because a homeowner stops making house payments doesn't mean banks don't make (or lose less) money. For instance, servicers may generally collect late-payment, property inspection and other fees after a home has gone into foreclosure, with proceeds drawn from the property's sale. By contrast, fees are typically waived in a loan modification.
Like so many other homeowners around the country, Sikora appears to have fallen prey to the same half-baked system:
"It's unfortunate that it's gotten to this situation," Sikora said. "I've been talking with them for more than a year, but the bank hasn't been responsive."Related: