full letter here - California Reinvestment Coalition

CALIFORNIA REINVESTMENT COALITION
August 25, 2015
Mark Richardson
Comptroller of the Currency
OCC- National Bank Examiners
1166 Avenue of the Americas, 21st Fl.
Mail Code NY1-P021
New York, NY 10036-2708
Naomi Camper
Head, Office of Nonprofit Engagement
JPMorgan Chase
New York, NY
Re:
CRC comments regarding JPMorgan Chase CRA Examination
Dear Mr. Richardson and Ms. Camper,
The California Reinvestment Coalition submits these comments on JPMorgan Chase’s (Chase)
CRA performance in California. We request that these comments be considered as part of the
OCC’s current CRA examination of JPMorgan Chase. We further request that these comments
be placed in Chase’s Public CRA File.
The California Reinvestment Coalition (CRC), based in San Francisco, is a nonprofit
membership organization of nonprofit organizations and public agencies across the state of
California. We work with community-based organizations to promote the economic
revitalization of California’s low-income communities and communities of color through access
to financial institutions. CRC promotes increased access to credit for affordable housing and
economic development for these communities.
While JPMorgan Chase engages in positive reinvestment activities in California communities,
provides home loans, helps finance affordable housing and offers the Liquid Card as an account
with positive features appealing to unbanked and underbanked consumers, CRC and its members
nevertheless believe JPMorgan Chase does not do enough to provide affordable housing,
economic development and low cost financial services in low income communities and
communities of color, and in some cases, engages in practices that are harmful to communities.
1
Chase is less transparent than other banks.
Every year, CRC asks major banks serving California for information about how well they are
meeting the needs of California’s low and moderate income communities and communities of
color for loans, investments and services. We very much appreciate the information that we
receive as it helps our members and CRC understand industry trends, identify industry leaders
and bank priorities, and develop well-informed comments about CRA performance. Nine major
banks responded to our 2014 data request about 2013 calendar year activities, and two other
banks provided additional information and made reinvestment commitments. So far, thirteen
major banks have responded to our 2015 request for data about 2014 activities.
JPMorgan Chase has become one of the least responsive banks to such requests. Last year, Chase
did not provide answers to many questions, and provided very limited data in response to others,
sufficient only to provide a broad overview of activity. JPMorgan Chase also provided uneven
and questionable responses to further requests for information that we submitted to prepare for
our annual meeting between CRC members and the Bank. Unlike thirteen other major banks,
including several of the nation’s largest banks, Chase has yet to respond to our 2015 request for
2014 data. The relative paucity of data and clear information substantially impedes the ability of
community groups to engage constructively with the bank.
Additionally, at times when we have requested focused meetings to discuss certain issues with
the Bank, such as the Bank’s implementation of its mortgage securities settlement agreement
with the Department of Justice, the Bank has refused. This is so even though Citibank and Bank
of America, the two banks with similar agreements with DOJ, have agreed to such discussions
with advocates. Similarly, a meeting to discuss the Bank’s implementation of successors in
interest (widows and orphans) mortgage servicing rules, was scuttled during the meeting itself
due to crossed internal and external communications. This meeting has not been rescheduled
though it has been many months since the aborted first attempt to meet.
Chase’s CRA performance in California appears low.
CRC and its members utilize a set of benchmarks to determine how well a bank is meeting
community credit needs. Banks can demonstrate their performance in two ways: by 1) entering
into a Community Benefits and Reinvestment Plan that specifies in a clear and transparent
manner the bank’s CRA goals over a multi-year period; and 2) providing clear data on the bank’s
CRA performance.
JPMorgan Chase has not committed to a CRA Plan and has provided limited data about its
performance in California. This is especially disheartening as Washington Mutual, the Bank
Chase acquired in order to enter the California market, had a public CRA Plan, and provided
comprehensive information on its annual CRA related activities. The OCC should require Chase
to develop a clear, transparent, multi-year, and strong CRA Plan to signal to communities that
Chase will meet community credit needs, and how it will do so.
Of eleven (11) California banks whose 2013 data, information and reinvestment commitments
we reviewed and analyzed, JPMorgan Chase appeared to devote the seventh (7th) highest
percentage of deposits to CRA activity annually, even though Chase ranks second (2nd) highest
2
by share of California deposits. Banks much smaller than Chase have committed to annual CRA
activity valued at 20% of California deposits. By comparison, JPMorgan Chase’s 2013 CRA
activity in California was closer to 8% of its California deposits.
Based on data provided by Chase, the Bank may exceed the CRC benchmark for community
development investment (.3% of deposits annually), match the CRC benchmark for contributions
(.025% of deposits annually), and trail the CRC benchmarks for contributions to housing and
economic development (50% of contributions).
CRC has heard complaints from CRC members about Chase’s absence from, and possible
disinterest in, serving rural California, including a drop off in Rural Development preservation
deals after purchasing Washington Mutual. CRC members also urge Chase to be a stronger
supporter of micro lending and technical assistance programs. CRC members have also noted
that JPMorgan Chase is one of the few banks not to offer an EQ2 (Equity Equivalent) investment
product for CDFIs and similar organizations. In the past, the Banks’ SBA lending to small
business owners of color has been poor, the Bank should be more involved in the Capital Access
program, and the Bank should develop a robust small business referral program so the bank can
provide a warm handoff to community lenders for small business loan applicants who cannot
qualify for a Chase small business loan. In general, CRC members have noted for years that
contributions went down when Washington Mutual was bought by JPMorgan Chase.
A large number of consumer complaints have been filed against JPMorgan Chase.
One important measure of how well a Bank is meeting community credit needs can be found in
complaint data. The CFPB Consumer Complaint Database represents a primary, accessible,
uniform way in which consumers can express their concerns about bank performance. A review
of the CFPB database reveals that nearly 27,000 (26,979 to be precise) complaints have been
filed by consumers with the CFPB against JPMorgan Chase since December 2011. Nearly half of
all such complaints (49.5%, or 13,350 complaints) are related to JPMorgan Chase’s “Mortgage”
products; nearly a quarter (22.5%, or 6,087 complaints) are related to “Credit Cards”; and nearly
a fifth (19.6%, or 5,286) are related to “Bank Account or Service.”
This large number of complaints filed with the CFPB, as well as the number of complaints filed
with the OCC directly, should be reflected in the Bank’s CRA Performance Evaluation. But to
provide some further context, which may be favorable to JPMorgan Chase, of the four largest
banks, JPMorgan Chase received the third highest number of CFPB complaints. Bank of
America with 48,205 complaints, and Wells Fargo, with 34,134 complaints, both received more
consumer complaints as reflected in the CFPB Consumer Complaint Database than did
JPMorgan Chase. Citibank, with 20,201 complaints, received fewer CFPB complaints than
JPMorgan. The OCC should confirm in the Bank’s Performance Evaluation the number, nature
and disposition of OCC complaints filed against the Bank, and how that relates to those of the
Bank’s peers.
3
JPMorgan Chase ranks low in terms of reputation.
In June of 2015, the American Banker published a ranking of the banks by reputation based on
customer scores and non customer scores. Out of 32 banks ranked, Chase ranked 30 out of 32,
surpassing only Wells Fargo and Bank of America. Yet, according to the American Banker,
Chase’s customer score was “strong, robust.” For rankings by non customers, Chase ranked
higher, 26 out of 32, but its score was deemed “weak/vulnerable.”1
JPMorgan Chase has engaged in problematic mortgage and foreclosure practices.
The Bank has been subject to numerous complaints and settlement agreements relating to its
mortgage lending (FHA), loss mitigation, securitization and foreclosure practices. Specifically,
JPMorgan has entered into settlements over alleged wrongdoing with the U.S. Department of
Justice, 49 state Attorneys General, and its bank regulators in response to litigation and
regulatory action relating to FHA lending and the False Claims Act, faulty securitization
practices, the National Mortgage Settlement and robo-signing, the Independent Foreclosure
Review process and ensuing settlement, and improprieties before the U.S. Bankruptcy Court.
Defrauding FHA. In 2014, the Bank settled with the U.S. Department of Justice over allegations
of defrauding the FHA and, in essence, the U.S. taxpayer. As part of the settlement, Chase
admitted that, for more than a decade, it approved thousands of FHA loans and hundreds of VA
loans that were not eligible for FHA or VA insurance because they did not meet applicable
agency underwriting requirements. JPMC further admitted that it failed to inform the FHA and
the VA when its own internal reviews discovered more than 500 defective loans that never
should have been submitted for FHA and VA insurance.2
Faulty securitization practices. In settling for a record $13 billion with the U.S. Department of
Justice in November of 2014 over faulty securitization practices, the Bank admitted that it knew
that residential mortgage-backed securities that it marketed did not comply with underwriting
guidelines and weren't fit for sale. Then Attorney General Eric Holder was quoted during the
announcement of the settlement, "Without a doubt, the conduct uncovered in this investigation
helped sow the seeds of the mortgage meltdown. JPMorgan was not the only financial institution
during this period to knowingly bundle toxic loans and sell them to unsuspecting investors, but
that is no excuse for the firm's behavior."3 Related to this settlement, Chase agreed to pay $300
million to settle claims that its faulty securitization practices harmed California’s pension funds
for state workers, CalPERS and CalSTRS.
CRC recommendation: No CRA credit for settlement activities. One specific concern of CRC and
our members is that the Bank (and Bank of America, Citibank, and other similarly situated
banks) will seek to obtain CRA “credit” for engaging in activities that are a result of its
obligations, and for which it seeks “credit,” under the DOJ settlement and other settlement
1
Bonnie McGeer, “Bank Reputations on the Rise, our 2015 Rankings Show,” American Banker, June 25, 2015.
U.S. Department of Justice, “JPMorgan Chase to Pay $614 Million for Submitting False Claims for FHA-insured and VA-guaranteed Mortgage
Loans,” Press Release, February 4, 2014, available at: http://www.justice.gov/opa/pr/jpmorgan-chase-pay-614-million-submitting-false-claimsfha-insured-and-va-guaranteed-mortgage
3 Kevin McCoy, “Settlement ends civil mortgage-related investigations that dealt a black eye to the leading bank survivor of the 2008 financial
crisis,” USA Today, November 20, 2014.
2
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agreements. To allow CRA credit for these activities would be to condone regulatory “doubledipping.” The Bank cannot be permitted to receive credit for performance and programs, no
matter how positive, it agreed to engage in to provide redress for alleged wrongdoing. In other
words, the Bank should not be able to seek and receive credit for activities that are meant to
compensate consumers and communities for harm caused by the Bank. The regulators should in
this instance, and in all similar instances, refuse CRA credit for any activity for which the Bank
seeks and receives credit under the settlement agreement.
Fair lending and the GAO Report. With regard to this settlement agreement, the Bank should be
required to disclose publicly the race, ethnicity and census tract of borrowers who receive
assistance under the settlement agreement. This is especially important given the 2014 GAO
report which found, in analyzing non-public data for four, large, unnamed servicers, that there
were statistically significant differences in loan modification outcomes for Limited English
Proficient and African American borrowers.4
In fact, CRC suspects that JPMorgan Chase was one of the four servicers that had its private,
loan modification data analyzed by GAO and where fair lending disparities were found.
JPMorgan Chase is certainly a “large” servicer, and additionally, Chase was one of five servicers
specifically named in the report as servicers that discussed fair lending protocols with the GAO.
We have sought to confirm with JPMorgan Chase, with GAO and with the Treasury Department
whether Chase was one of the four unnamed servicers providing non-public data to GAO, but
none of these entities will answer our question at this time. We urge the OCC to determine if
JPMorgan Chase was one of the four unnamed servicers with problematic loan modification
outcomes, make this information public, and require JPMorgan Chase to report loan modification
outcomes publicly by race, ethnicity, gender, and census tract.
IFR. CRC and other community groups view the Independent Foreclosure Review process to be
a disaster. But at its core, regulators found highly problematic foreclosure practices at JPMorgan
Chase and other banks. In April of 2011, after extensive investigation, the OCC found that
JPMorgan Chase had: filed affidavits making assertions not based on personal knowledge or
review of relevant records; filed documents that were not properly notarized; initiated
foreclosure proceedings without ensuring all documents were properly endorsed, assigned or in
the possession of the right person; failed to devote sufficient financial, staffing and managerial
resources to ensure proper administration of its foreclosure processes; failed to devote to its
foreclosure processes adequate oversight, internal controls, policies, and procedures, compliance
risk management, internal audit, third party management, and training; failed to sufficiently
oversee outside counsel and other third-party providers handling foreclosure-related services;
and by reason of this conduct, the Bank engaged in unsafe or unsound banking practices.5
Implementation of the IFR process was subject to much justified criticism and resulted in the
OCC and the Federal Reserve settling with the banks in favor of getting consumer relief out the
door more quickly, while ensuring banks put in place better servicing practices going forward.
Significantly, while certain JPMorgan Chase peer banks were released from the consent decrees
4
General Accountability Office, “Troubled Asset Relief Program: More Efforts Needed on Fair Lending Controls and Access for Non-English
Speakers in Housing Programs,” GAO-14-117: Published: Feb 6, 2014, available at: http://www.gao.gov/products/GAO-14-117
5 In the Matter of JPMorgan Chase Bank, N.A. New York, NY, OCC Consent Order with JPMorgan Chase,, April 2011, available at:
http://www.occ.gov/news-issuances/news-releases/2011/nr-occ-2011-47e.pdf
5
in June, JPMorgan Chase was not. Specifically, the OCC determined that JPMorgan Chase Bank,
N.A. failed 10 areas identified as part of the consent decree.6
The amended order with JPMorgan Chase notes that the “Bank is in continuing noncompliance
with and in violation of the Consent Order, and continues to engage in unsafe and unsound
practices.” As a result, the OCC is restricting certain business activities that Chase conducts,
such as: acquisition of residential mortgage servicing or residential mortgage servicing rights
(does not apply to servicing associated with new originations or refinances by the banks, or
contracts for new originations by the banks); new contracts for the bank to perform residential
mortgage servicing for other parties; outsourcing or sub-servicing of new residential mortgage
servicing activities to other parties; off-shoring new residential mortgage servicing activities; and
new appointments of senior officers responsible for residential mortgage servicing or residential
mortgage servicing risk management and compliance.7
The Bank’s CRA Rating should consider whether Chase completely remediates problems
identified. The OCC Deputy Comptroller for large banks was quoted as saying, “One way or
another there will be additional action… the meter is running relative to the six banks and the
nature and severity of the additional action will be based on the length and severity of their
continued non-compliance. We expect their remediation time frame to be measured in months,
not years here. And if institutions take longer than that, we wouldn’t necessarily wait until
completion either.”8 If the OCC will be expecting quick action from JPMorgan Chase, the results
of that effort should factor into this performance evaluation.
Perjury before the U.S. Bankruptcy Court. In March of 2015, Chase entered into a settlement
with the U.S. Department of Justice’s U.S. Trustee Program over acknowledged practices by
Chase of filing more than 50,000 payment change notices that were improperly signed, under
penalty of perjury, by persons who had not reviewed the accuracy of the notices. Chase also
acknowledged that it failed to file timely notices of mortgage payment changes and failed to
provide timely, accurate escrow statements. “It is shocking that the conduct admitted to by Chase
in this settlement….continued as long as it did, said Acting Associate Attorney General Stuart F.
Delery. “Such unlawful and abusive banking practices can deprive American homeowners of a
fair chance in the bankruptcy system, and we will not tolerate them.”9
CRC Counselor Surveys: In May of 2014, CRC released our tenth survey of California housing
counselors in a report co-released by Housing and Economic Rights Advocates. When asked
which was the worst servicer, JPMorgan Chase received the 5th most votes from nonprofit
housing counselors serving California’s at-risk homeowners.
The report included ten case studies of clients seen by Housing and Economic Rights Advocates.
Three of the ten stories involved JPMorgan Chase as servicer and are copied here.10
6
Kate Berry, “OCC Crackdown Shows Continued Failures in Mortgage Servicing,” American Banker, June 18, 2015.
In the Matter of JPMorgan Chase Bank, N.A., Columbus, Ohio, Amended OCC Consent Order with JPMorgan Chase, June 2015, available at:
http://occ.gov/static/enforcement-actions/ea2015-064.pdf
8 Rachel Witkowski, “OCC Tightens Restrictions on JPM, Wells Over Mortgage Servicing,” American Banker, June 17, 2015.
9
U.S. Trustee Program, “U.S. Trustee Program Reaches $50 Million Settlement with JPMorgan Chase to Protect Homeowners in Bankruptcy:
Settlement Addresses Robo-Signing and Other Improper Practices in Bankruptcy Cases,” Press release, March 3, 2015.
10 Declarations from each borrower can be found in the appendix of the CRC Report, “Chasm Between Words and Deeds X,” May 2014, found at
http://www.calreinvest.org/system/resources/W1siZiIsIjIwMTQvMDUvMTkvMjJfMjFfMDhfOTc1X0NSQ19SZXBvcnRfQ2hhc21fQmV0d2Vlbl9Xb3
Jkc19hbmRfRGVlZHMucGRmIl1d/CRC%20Report%20Chasm%20Between%20Words%20and%20Deeds.pdf
7
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Teresa Rowland: Teresa Rowland first requested mortgage assistance from JPMorgan Chase in
2008, after she suffered a financial hardship. After years of effort, she was offered a permanent
HAMP modification in October 2011. Though she has made every payment called for by the
modification agreement on time, Chase failed to make the modification permanent, and
continued to treat the loan as in default, bombarding her with calls and letters saying she was
over a hundred thousand dollars in default, and accusing her of not making payments.
Chase sent four different loan modification agreements to the Rowland family over two years;
the second and third—received in January 2012 and May 2013—contained substantially worse
terms than the original loan modification, and included errors in the unpaid principal balance,
the current due date and the modification terms. Chase made a shocking series of mistakes on
Ms. Rowland’s case, a number of which Chase has acknowledged. In February of 2013, a
representative from Chase’s Executive Offices assigned specifically to resolve the problem even
said he was stunned and “mystified” by the situation.
The Rowland family finally received a final loan modification agreement in July, 2013 that
substantially tracked the original loan modification agreement. But just when Ms. Rowland
thought the incredible saga was behind her, she learned that her loan had been transferred to
Select Portfolio Servicing starting August 1, 2013. Two months after the transfer, SPS had not
honored the modification agreement, and was still treating Ms. Rowland’s loan as in default.
Ian Kelly. Ian Kelly currently lives in the Oakland home formerly owned by his father, Gregory
Kelly, who passed away in July of 2013. Before he passed, Gregory Kelly placed his home in a
trust, naming his son Ian as the beneficiary so that he could take ownership of the family home
upon his death. Ian’s father fell behind on the payments as he was battling cancer. Chase, the
servicer, offered a workout plan, but after the payments increased, the family could no longer
afford the plan. Chase pursued a foreclosure, setting a sale date of December 2013.
Ian Kelly applied for a loan modification review in November 2013, seeking a simultaneous loan
modification and assumption of his father’s loan, and submitting extensive documentation.
Chase was slow to act and respond throughout the entire process, requesting the same
documents multiple times. Additionally, both Mr. Kelly and HERA had difficulty reaching their
SPOC, or, indeed, anyone who could provide them with information. Chase ultimately responded
that they did not have authorization to talk to Ian Kelly, or his representatives at HERA. After
HERA escalated the matter, Chase contacted HERA and informed it that Chase would be
conducting a review to see if Mr. Kelly would be able to assume the loan. While waiting to hear
back from Chase about his eligibility for a loan mod and assumption, Mr. Kelly received a
Notice of Trustee sale scheduled for February 13. Chase proceeded to send confusing letters and
forms, but not any information regarding Mr. Kelley’s eligibility for assistance.
Fearing that Chase would foreclose on him before deciding on his loan mod application, Ian
Kelly began exploring a short sale. Chase immediately halted review of his loan
modification/assumption application, then informed Mr. Kelly that it would not approve a short
sale, and rescheduled the sale date for April 14, 2014. On March 5, Chase advised Mr. Kelly
and HERA that he should resubmit his loan modification application and start all over. Mr.
Kelly still does not when or if Chase will make a decision on his loan modification application
and allow him to stay in the home his father left to him.
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Sheetal Sharma. Sheetal Sharma owns a house with her sister Varsha and her mother, Snehlata,
in Los Angeles. The house was owned by her father until he passed away in June 2010.
Although Ms. Sharma provided EMC with a death certificate, a deed transferring title to her, her
mother, and her sister, and trust documents which established her and her sister as trustees,
EMC refused to provide information about the loan to her. Though EMC accepted mortgage
payments made by Ms. Sharma after her father’s death, it refused to speak with her about the
loan or tell her how much was due.
EMC ignored the trust documents, and instead insisted it would speak with her only if she
produced proof that she was the executor of her father’s estate -- even though she had received
title to the property through a trust, not probate, and there was no executor and no estate. As
EMC refused to give her any information and proceeded towards foreclosure, Ms. Sharma
withheld payment and instead deposited the money in a bank account. A notice of default was
filed, with EMC continuing to refuse to talk to Ms. Sharma, despite repeated calls. In September
2010, EMC acknowledged Ms. Sharma and her sister as Co Successor Trustees, but continued to
deny them access to any information about the account.
After Chase took over servicing of the loan, it continued to direct correspondence to Ms.
Sharma’s deceased father, at one point in 2011 writing her father and asking him to call Chase
to finalize a request for a power of attorney. Ultimately, in 2011, Chase allowed Ms. Sharma and
her sister to apply for a loan modification, but then denied the modification, claiming they had to
assume the loan and bring it current first. Ms. Sharma and her sister have submitted numerous
applications for modification and assumption at Chase’s request since that time without success.
On December 30, 2013, Chase sent Ms. Sharma’s deceased father another letter.
The above borrower story is representative of our ongoing concern that JPMorgan is not properly
implementing Fannie Mae, Freddie Mac, HAMP and CFPB guidance on successors in interest
(widows and orphans). The OCC should ensure that Chase is in full compliance with all
applicable servicing rules, especially those that relate to successors in interest.
Bank of America PE as good precedent. We note here that in its most recently released
Performance Evaluation, Bank of America was downgraded because the bank entered into
settlement agreements with the OCC and DOJ regarding allegations of unfair or deceptive acts or
practices, noncompliance with the Fair Housing Act and Equal Credit Opportunity Act (ECOA),
and noncompliance with the Service members Civil Relief Act (SCRA) relating to its foreclosure
practices. The Performance Evaluation confirmed, “as a result of these findings, the CRA
Performance Evaluation was lowered from Outstanding to Satisfactory.”11
California’s Attorney General sued Chase for improper debt collection practices.
In May of 2013, California Attorney General sued JPMorgan Chase for fraudulent and unlawful
debt collection practices. Specifically, the AG alleged that Chase engaged in extensive robo-
11
Office of the Comptroller of the Currency, “PUBLIC DISCLOSURE: COMMUNITY REINVESTMENT ACT
PERFORMANCE EVALUATION, Bank of America, N.A., Charter Number: 13044,” December 31, 2011, p. 15.
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signing, improper service of notice to consumers, and filing irregularities that impacted over
100,000 California credit card users over a 3 year period.
“Chase abused the judicial process and engaged in serious misconduct against California credit
card borrowers,” Attorney General Harris said. “This enforcement action seeks to hold Chase
accountable for systematically using illegal tactics to flood California’s courts with specious
lawsuits against consumers. My office will demand a permanent halt to these practices and
redress for borrowers who have been harmed.”12
Similar allegations had resulted in a July 2015 order with CFPB and 47 state Attorneys General
and the District of Columbia for selling bad credit card debt and illegally robo-signing court
documents, The CFPB and states found that Chase sold “zombie debts” to third-party debt
buyers, which include accounts that were inaccurate, settled, discharged in bankruptcy, not
owed, or otherwise not collectible. The order requires Chase to document and confirm debts
before selling them to debt buyers or filing collections lawsuits. Chase must also prohibit debt
buyers from reselling debt and is barred from selling certain debts. Chase is ordered to
permanently stop all attempts to collect, enforce in court, or sell more than 528,000 consumers’
accounts. Chase will pay at least $50 million in consumer refunds, $136 million in penalties and
payments to the CFPB and states, and a $30 million penalty to the Office of the Comptroller of
the Currency (OCC) in a related action.13
JPMorgan Chase finances REO to Rental, which has a negative impact on communities.
CRA ratings should be downgraded to the extent that banks are engaged in harmful practices.
JPMorgan Chase should suffer a CRA rating downgrade as a result of its strong involvement in
the REO to Rental craze, which prevents wealth accumulation for first time homebuyers,
displaces tenants, destabilizes communities, and threatens neighborhoods vulnerable to Wall
Street and investor decisions about what happens at the end of the short rental securitization
term (of two to five years).
In late June, CRC released “REO to Rental in California: Wall Street Investments, Big Bank
Financing, and Neighborhood Displacement.”14 The report is framed around a survey of eighty
(80) CRC member groups and their views about, and experiences with, the REO to Rental wave,
whereby institutional and cash investors are purchasing large numbers of foreclosed REO
properties (and distressed mortgage loan pools), with the intent of converting homeownership
opportunities into rentals.
In general, CRC members expressed concern that REO to Rental is squeezing out first time
homebuyers, displacing tenants, circumventing local real estate professionals (including
professionals of color), and changing neighborhoods. Eighty percent (80%) of respondents felt
12
Office of the Attorney General, “Attorney General Kamala D. Harris Announces Suit Against JPMorgan Chase for Fraudulent and Unlawful
Debt-Collection Practices,” press release, May 9, 2013.
13
Consumer Financial Protection Bureau, “CFPB, 47 States and D.C. Take Action Against JPMorgan Chase for Selling Bad Credit Card Debt and
Robo-Signing Court Documents,” July 8, 2015, at http://www.consumerfinance.gov/newsroom/cfpb-47-states-and-d-c-take-action-againstjpmorgan-chase-for-selling-bad-credit-card-debt-and-robo-signing-court-documents/
14 Available at http://www.calreinvest.org/news/new-report-reo-to-rental-boom-in-california-is-bad-for-tenants-bad-for-1st-time-homebuyers-bad-for-communities
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that large institutional investors are having a “negative” impact on their communities. There is
also great concern that neighborhoods will suffer if REO to Rental properties are sold en masse
at the expiration of the two to five year periods that mark many of the rental securitization
transactions which are financing the expansion of REO to Rental. Other key findings of the
report include:
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48% of respondents said that investors were not keeping homeowners in their homes
Respondents noted investors were creating changes in neighborhood demographics, with:
o 42% of respondents reporting fewer long term residents
o 34% of respondents reporting less income diversity
o 31% of respondents reporting less racial and ethnic diversity
43% of respondents felt banks should NOT get CRA credit for financing REO to Rental
70% of respondents said that homebuyers were “always” or “often” losing out to cash
investors
66% of respondents described the impact on local realtors as “Hurts my business”
50% of respondents said that nonprofit housing developers are outbid by cash investors
37% of respondents reported at least some additional fair housing complaints due to
investing Limited Liability Corporations and Limited Partnerships, and
The biggest complaints cited were eviction, not accepting §8, leases issues, and fair
housing.
Representative quotes from respondents and consumers who contacted CRC include:
“I am currently fighting over an issue over making some much needed exterior repairs…I rent a
home from Invitation Homes after losing a three year battle to refinance my home with
Chase…This home is well on its way to becoming an eye sore.. I consider the rents they charge
to be excessive given the true state of rehab and maintenance they complete.”
“You are very slowly changing the society from homeowners to renters. What happened to the
American Dream?”
“The large institutional investors are ignoring their properties by not taking care of repairs or
habitability issues.”
“Poor habitability standards, unfamiliarity with local renter protection laws, decreased
participation in tax base, barrier to wealth accumulation by local communities.”
“Displacement comes by way of eviction, but it also comes by way of rent increases that are too
steep for existing tenants to manage.”
“Keep Wall Street out of this. They are destroying the American Dream of home ownership.”
“It didn’t work with mortgages, no reason to expect it will work any better with leases.”
“They’re banks! What do you expect? They created the crash and exploited every advantage that
they could take.”
None of this community harm can occur without financing, and banks like Chase have financed
and facilitated these concerning trends. For example, JPMorgan Chase has made loans to Silver
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Bay Realty Trust. More dangerous, banks have also aided investors in turning the rental income
streams from these properties into securities. In fact, JPMorgan Chase is reportedly originating a
$1.2 billion loan secured by mortgages on 7,265 income producing single-family homes owned
by Blackstone and Invitation Homes in what is the largest single-family rental securitization to
date. Reports by Tenants Together and Right to the City affiliates, amongst others, have noted
concerns about the impacts of big Wall Street landlords on tenants.
Branch closures hurt LMI communities.
Chase may be closing approximately 300 branches nationwide according to a February investor
call.15 In California, earlier this year, Chase was closing 5 branches in LMI neighborhoods in
Hayward, Woodland, Napa, and Sacramento.
CRC disputes the notion that mobile banking can be a substitute for an adequate branch presence
in low and moderate-income neighborhoods. Branches are critical to providing access to low and
moderate income customers and people of color. Branch closures, especially in LMI
communities, reduce access and frustrate efforts to meet community credit needs. A recent report
by National CAPACD, National Urban League, and National Council of La Raza, based on
surveys of over 5,000 consumers, found that, “Despite the growing prevalence of online or
mobile banking services, most people admitted some level of discomfort with using the services.
Only 11% of all respondents reported that they were comfortable conducting financial
transactions online or using their mobile phone—7% of AAPIs, 13% of African Americans, and
16% of Hispanics.”16
Chase Overdraft fees harm consumers.
Few bank products strip wealth and deprive consumers of wealth building opportunities as
strikingly as overdraft fees. And JPMorgan Chase appears to collect more in these pernicious
fees than any other bank. For the first three months of 2015 alone, Chase collected a whopping
$415 million in overdraft fees, $40 million more for the quarter than did Bank of America.17
Most overdraft fees are paid by those least able to afford the fee – low income consumers. A
2008 report from the FDIC found that a mere 9% of accountholders paid 84% of all overdraft
and NSF fees.18 Further, the FDIC found that the majority of individuals who choose not to have
a checking account do so because of their fear of overdraft fees.19
JPMorgan Chase saw approximately 40% of its fees on transaction accounts generated from
overdraft. This is higher than 11 out of 21 banks surveyed, including Bank of America, Wells
Fargo, and Citibank.
15
Kaja Whitehouse, “JPMorgan to close 300 branches,” USA Today, February 24,2015, at:
http://www.usatoday.com/story/money/2015/02/24/jpmorgan-investorday-separation-question/23927433/
16
BANKING IN COLOR: New Findings on Financial Access for Low- and Moderate-Income Communities. National CAPACD, National Urban
League and National Council of La Raza. 2014, p. 17, at http://iamempowered.com/sites/default/files/bankingincolor_web.pdf
17 FFIEC Call Reports/Thrift Financial Reports, May 2015, at: https://cdr.ffiec.gov/public/
18 http://files.consumerfinance.gov/f/201306/_cfpb_whitepaper_overdraft-practices.pdf
19
Federal Deposit Insurance Corporation, “2011 FDIC Survey of Banks’ Efforts to Serve the Unbanked and Underbanked,” December 2011, p. 8.
11
On the other hand, JPMorgan Chase appeared to charge the 6th lowest overdraft fee per $1,000 in
checking account balances, lower, though not by much, than Bank of America, Citibank, and
Wells Fargo.20 JPMorgan Chase received over 500 complaints to the CFPB relating to overdraft
concerns.
Chase also did poorly in a “mystery shopping” test of how branch account opening personnel
explain overdraft policies that CRC conducted with three other organizations in California,
Chicago, New York city, and North Carolina in 2014. The test revealed that in most cases, Chase
and other bank personnel gave incomplete or inaccurate information about the bank’s overdraft
policies and incorrectly presented opting in to some form of overdraft service as among the best
ways to avoid fees. For example, representatives of Chase (and other banks) told mystery
shoppers they could avoid overdraft fees by depositing money by the end of the business day,
without any further clarification of when that bank’s business day ends. One Chase branch
employee suggested to a shopper that overdraft was a way to make emergency purchases. Some
Chase bank representatives improperly described overdraft as an automatic account feature.
We discussed these findings with Chase senior officials in 2014 and were told that the bank had
recently revamped its training of branch personnel. We have not conducted a follow up test so
we cannot verify any impact the training may have had.
EBT Surcharges: Charging California’s poorest residents $2.8 million in fees.
CRC continues to be disappointed by Chase’s refusal to waive “foreign” ATM surcharges for
unbanked public assistance recipients for whom all ATMs are “foreign.” California has the
nation’s largest community of public benefits recipients that use state-issued electronic benefits
transfer cards to receive and access cash aid. The average recipient of CalWORKs, California’s
program that provides Temporary Assistance for Needy Families, receives only about $500 a
month.
Chase charges $3 per ATM transaction to families that often have extremely limited choice about
what machine they can use. During fiscal year 2012-2013 (the last year for which we have data),
Chase took $2.8 million in fees from these families, equal to more than 1% of what the families
withdrew in benefits. These fees have a real and painful impact on families. A recent survey by
CRC of EBT card users reveal stories of families having to choose between paying bus fare to
get to a surcharge free ATM and paying the fee at the closest ATM, and spending TANF
assistance on ATM surcharge fees that could have been used to buy medicine for sick children.21
By contrast, seventeen banks and twenty credit unions voluntarily waive out of network
surcharges to EBT card users. In fact, Washington Mutual, which Chase bought in order to enter
the California market, was the largest provider of free ATM EBT access in our state. CRC has
recently asked all three CRA regulators to provide credit under the services test to banks that
voluntarily waive these fees.
20
21
Analysis by Adam Rust, Reinvestment Partners, July 2015.
http://bit.ly/ChargedforBeingPoor
12
According to Chase, the decision to not waive surcharge fees is because the bank no longer has
the state contract to provide EBT card benefits. The refusal to waive the fee is therefore an act of
retribution inflicted on the most vulnerable of citizens who have no role in choosing the
contractor for the state program. The policy also hurts California taxpayers, since Chase is
converting public assistance dollars intended for eligible recipients into profit for its own bottom
line. Given that Chase is exiting the EBT business altogether, we assume that Chase will be
charging EBT card holders ATM surcharges nationally.
Chase should immediately and voluntarily waive ATM fees on EBT recipients in California.
Alternatively, Chase should work with the state to be an “in network” ATM provider for EBT
card users. Within the next year, California will award the new contract for EBT services. The
state’s final Request for Proposal requires the next contractor to subcontract with at least two
(and possibly three) ATM networks, at least one of which must be among the state’s largest
providers. Currently, the state’s in network ATM provider is the MoneyPass network, in which
39 banks and thirteen credit unions participate. However, even with all of its participating
institutions, MoneyPass serves only 9% of all EBT transactions. Chase alone served 9% of EBT
transactions in 2012-2013. By becoming the second in network ATM provider, Chase would
double surcharge free access to California’s poorest residents.
JPMorgan Chase Liquid Card new features increase functionality but Chase’s consumer
accounts should be more accessible to low and moderate income customers.
We applaud the increased functionality of adding bill pay to the Chase Liquid Card. CRC
features the Chase Liquid Card as an example of a consumer financial service that comes close to
meeting our SafeMoney standards for low income and low margin households.22 Among prepaid
cards, we believe that the Liquid is a good alternative for those households whom banks exclude
from access to bank accounts using ChexSystems and other barriers.
However, we still urge Chase to develop a comparable bank account that consumers can use to
establish a financial history that other banks and lenders will recognize. Competitors such as
Bank of America, Citibank and Union Bank have developed accounts that meet CRC SafeMoney
standards. We are very glad to learn that Chase will review Liquid history to underwrite credit
services, but are concerned that prepaid card users, Liquid users among them, still lack access to
an extremely important benefit of bank accounts: the ability to leverage one’ account history to
access other financial services.
In addition, we have heard from consumers that they have had difficulty opening Liquid Card
due to reports about them maintained by ChexSystems. This raises concerns about the extent to
which this prepaid card, a completely risk-free service (from the bank’s perspective), is actually
an alternative for consumers that are locked out of accessing mainstream accounts. A few banks
have recently simplified and made transparent their policies for using ChexSystems to exclude
potential customers. Chase should similarly simplify and make its policies transparent so that
consumers and financial educators working to increase the number of “banked” households can
make informed decisions about where to try to open an account or refer clients.
22
http://bit.ly/SafeMoneyChart
13
We acknowledge Chase for its acceptance of various forms of identification to allow for bank
access to a wide array of customers while maintaining compliance with regulatory requirements,
including by accepting ITINs, amongst other forms of identification. At the same time, CRC is
urging all financial institutions to accept municipal identification for the purpose of opening a
bank account in order to ensure the Bank is provide fair and equal access to account products to
unbanked persons, underbanked consumers, and protected classes. Chase should agree to such a
request and become a leader in removing barriers and ensuring access to mainstream banking for
all consumers.
Relatedly, CRC urges all financial institutions to track formally unbanked customers and to
monitor and report on whether they remain as customers of the bank. Chase may be well
positioned to conduct this level of tracking, given its reported experience with the Liquid Card.
JPMorgan’s home mortgage lending is fairly distributed and provides a good vehicle for
LMI and of color borrowers and neighborhoods to build and retain wealth.
Chase originates a lower percentage of home loans applications to Asian American borrowers
than the industry in the aggregate (14.1% of Chase originations were to Asian American
borrowers in CA compared to 16% for the industry as a whole), and Chase only originated 1,244
home loans to African Americans in the state for all of 2013.
Yet, for the most part, Chase meets or exceeds the industry’s proportional home lending to:






African American borrowers (2.7% of Chase home loans v 1.7% for the industry),
Latino borrowers (16.8% of Chase loans v. 11.3% for the industry as a whole),
Low-income borrowers (10.8% v. 5.1%, with Chase originating home loans to lowincome borrowers at roughly twice the level of the industry’s home lending to lowincome),
Moderate income borrowers (15% v. 12.3%),
Neighborhoods of color (44.5% v. 41.9%) and,
LMI neighborhoods (15.4% v. 13.4%) in California.
CRC analysis focused on conventional, 1st lien home purchase and refinance originations to
owner occupants in 1 to 4 unit dwellings in 2013. JPMorgan Chase has also been an FHA lender,
which represents an important way to meet the credit needs of borrowers who may not qualify
for a conventional, prime loan.
What is disconcerting and unhelpful are comments by Chase CEO Jamie Dimon questioning
whether the Bank will retreat from FHA lending altogether. “The real question to me is, should
we be in the FHA business at all?” Dimon said. “And we’re still struggling with that.”23 FHA
and conventional mortgage lending represent critically important ways for JPMorgan Chase to
meet community credit needs, and the Bank should cease any consideration of exiting the
business, or threatening to do so.
23
Trey Garrison, “JPMorgan’s Dimon threatens to quit FHA loans,” HousingWire, July 21, 2014.
14
Small business lending may be good, if not comprised of credit card loans.
In reviewing 2012 and 2013 small business lending data for Chase Bank and for JPMorgan
Chase in Alameda, Fresno, Los Angeles, Sacramento and San Diego counties – counties chosen
for being key counties in diverse parts of the state – a key question is whether the much talked
about “economic recovery” is reflected in the bank’s lending data.
One important caveat is that it is unclear how much of Chase’s lending is credit card lending,
which CRC does not find to be value added. It appears that Chase Bank loans may be comprised
of credit card lending. Chase Bank has four offices of which one is located in the Caymans, and
three are located in Delaware (one is a consumer credit office in the same location as one of the
two brick and mortar branches). Almost every loan from Chase Bank is for less than $100,000
and no loans are to businesses with annual revenues less than $1 million. Chase Bank lending
overall has decreased between 5 and 10 % in the two years (2012-2013) reviewed.
In analyzing the small business lending record of the JPMorgan Chase lender, which may better
reflect the kinds of loans that small businesses need, key findings include:




JPM lending overall has decreased by almost 50% in all the counties, except Fresno, from
2012 to 2013.
JPM lending in loan amounts of $100,000 or less decreased by roughly half in Alameda,
Los Angeles and San Diego Counties in those years. Sacramento stayed at the same level
and Fresno increased slightly.
JPM lending to businesses with annual revenues of $1 million or less dropped
precipitously between 2012 and 2013 with the most dramatic decrease in California’s
most populous county of Los Angeles. The exception was Fresno where lending tripled.
JPM lending to businesses with annual revenues of $1 million or less in low or moderate
income areas also dropped precipitously between 2012 and 2013 with the most dramatic
decrease again occurring in California’s most populous county of Los Angeles.
Exceptions to this were Fresno and Sacramento Counties.
Since the vast majority of all Chase CRA qualified lending is from Chase Bank (35,484 loans out
of 37,406 loans by Chase entities in the 5 survey counties in 2013; and 37,949 loans out of
40,994 loans made in the 5 survey counties in 2012), it has an overwhelming impact on the small
businesses with which it is in contact. Yet, Chase Bank seems to do no lending to businesses
with revenues less than $1 million annually and all of that appears to be for corporate cards, not
the kind of credit that most very small businesses need.
For its part, JP Morgan Chase’s small business lending has dropped dramatically overall in the
three major metropolitan areas of Alameda, Los Angeles and San Diego counties from 20122013. Its loans of $100,000 or less dropped across all five counties. JP Morgan Chase’s small
business lending to businesses with annual revenues of $1 million or less dropped dramatically in
the same three counties as well as in Sacramento County. The portion of these loans to
businesses in low or moderate income neighborhoods dropped even more dramatically in the
three counties which again dramatically limits opportunities for minority and women businesses
statistically.
15
Neither of Chase’s banks is lending appropriately to critical small businesses. Chase is
originating few loans to very small business, which are more likely to be minority or women
owned, and appears to overemphasize credit card lending. As such, Chase is not assisting the
most vulnerable businesses to bridge the economic divide and offer opportunity to those in most
critical need.
These trends appear to be continuing. Based on preliminary analysis of just released small
business data for 2014, the vast majority of Chase small business loans in California are being
originated from its Chase Bank USA, NA entity (110,624 loans out of 115,101 total loans, or
over 96% of Chase loans from Chase Bank USA, NA). And this Chase lender reports zero (0)
loans in 2014 to California businesses with under $1 million in revenue. JPMorgan Chase Bank,
NA reports only 28% of its 4,477 small business loans went to businesses with less than $1
million in revenue.
The OCC should confirm whether most of Chase’s small business lending is conventional and
SBA lending, and not credit card lending. Regardless, Chase small business lending in California
focuses on large businesses and does not meet the credit needs of small businesses in our state.
16
Chase Bank Total Small Business Lending
25,000
20,000
15,000
10,000
2012
5,000
2013
0
JP Morgan Chase Total Small Business Lending
2,000
1,500
1,000
2012
500
2013
0
1,600
1,400
1,200
1,000
,
800
600
400
200
0
JP Morgan Chase Small Business Lending
Loans Less than $100,000
2012
2013
1,200
JP Morgan Chase Small Business Loans
Annual Revenue Less than $1,000,000
1,000
800
600
400
2012
200
2013
0
250
JP Morgan Chase LMI Small Business Loans
Annual Revenue Less than $1,000,000
200
150
100
50
0
2012
2013
Chase Bank Small Business Lending
Alameda County
Fresno County
LA County
Sacramento County
San Diego County
All Loans
2013
2012
4,112
3,734
755
673
23,862 22,640
2,161
1,911
7,059
6,526
91%
89%
95%
88%
92%
Loans <$100K
2012
2013
4,110
3,734
91%
755
673
89%
23,855 22,632
95%
2,161
1,911
88%
7,059
6,522
92%
Biz Revenue <$1M
2012
2013
0
0
0
0
0
0
0
0
0
0
LMI Loans <$100K
2012
2013
1,059
871
82%
137
147
107%
4,766
4,634
97%
558
538
96%
1,137
1,099
97%
LMI Portion Total <$100k
2012
2013
26%
23%
18%
22%
20%
20%
26%
28%
16%
17%
JP Morgan Chase Small Business Lending
Alameda County
Fresno County
LA County
Sacramento County
San Diego County
All Loans
2012
2013
243
151
70
101
2,058
1,148
119
118
555
404
62%
144%
56%
99%
73%
Loans <$100K LMI Loans <$100K
2012
2013
2012
2013
181
92
51%
37
28
66
78
118%
18
31
1,585
693
44%
357
191
82
82
100%
34
36
413
265
64%
82
52
76%
172%
54%
106%
63%
Biz Revenue <$1M
2012
2013
121
47 39%
18
57 317%
1190
370
31%
57
51 89%
292
116
40%
Biz Revenue <$1M
2012
2013
121
47
39%
18
57
317%
1,190
370
31%
57
51
89%
292
116
40%
LMI Rev <$1M
2012
2013
1,080
888
82%
139
149
107%
5,028
4,744
94%
576
559
97%
1,207
1,123
93%
LMI Rev <$1M
2012
2013
21
17 81%
2
2 100%
262
110 42%
18
21 117%
70
24 34%
LMI Portion Total R
2012
2013
17%
36%
11%
4%
22%
30%
32%
41%
24%
21%
Chase Bank + JPM Small Business Lending
Alameda County
F
Fresno
County
C
t
LA County
Sacramento County
San Diego County
All Loans
2012
2013
4,355
3,885
825
774
25,920 23,788
2,280
2,029
7,614
6,930
89%
94%
92%
89%
91%
Loans <$100K
2012
2013
4,291
3,826
89%
821
751
91%
25,440 23,325
92%
2,243
1,993
89%
7,472
6,787
91%
% LMI Rev <$1M/Total Loans
2012
2013
0.48%
0 24%
0.24%
1.01%
0.79%
0.92%
0.44%
0.26%
0 26%
0.46%
1.03%
0.35%
Conclusion
Despite some positive initiatives, Chase’s overall performance in California Needs To Improve,
and that is the CRA rating the Bank deserves. Given the size and reach of JPMorgan Chase
Bank, its failure to meet local needs has a large and negative impact on California communities.
Chase should be doing significantly more to help California families build wealth and
accumulate assets, and to help California communities stabilize and revitalize while staving off
the threats of gentrification and displacement.
Thank you for the opportunity to comment. If you have any questions, you can reach me at (415)
864-3980.
Very Truly Yours,
Kevin Stein
Associate Director
17