Injunction Granted in Case Alleging Predatory Lending Practices filed by Law Office of Kenneth Eade
In a first amended complaint, filed January 6, 2012, the plaintiff alleges that WAMU issued both a first mortgage and the HELOC in what Eade alleged as a predatory loan practice, to cover the purchase price of a home in Southern California, according to the first amended complaint in the case. As a result of the real estate crash, both loans went into foreclosure in 2008. Despite the fact that the plaintiff obtained a buyer on a short sale for the property, WAMU ignored the short sale offer and foreclosed, according to the first amended complaint. According to the Court order, on September 25, 2008, nine days after the foreclosure sale, WAMU was seized by the FDIC and its banking assets were purchased by JP Morgan Chase. However, despite the California anti-deficiency statutes, which bar collection of a deficiency on purchase money mortgages after foreclosure, JP Morgan Chase attempted to collect nearly a $250,000 deficiency on the HELOC, and reported it negatively on the plaintiff's consumer credit profile. The first amended complaint in the case alleges a violation of the California Consumer Legal Remedies Act (CLRA) and the federal Fair Credit Reporting Act (FCRA).
In his reply memorandum to the opposition to the injunction filed Febuary 16, 2012, Eade contended that it was "in the public interest that Chase should not be permitted to report outstanding deficiency balances that are barred from collection by state statutes that were enacted to provide those same consumers with relief. Such statutes were enacted to balance the equities between the consumer and the banks; to protect the consumer and give him power against entities such as the defendant, one of the largest banks on the world... The California legislature enacted the anti-deficiency statutes in light of the foreclosures and abusive deficiency judgments obtained by lenders during the Great Depression. Spangler v. Memel, 7 Cal. 3d 603 (1972). Eade contended in the reply that the real estate lending practices of the large banks were a huge contributing factor to the Economic Crisis of 2008, and the Defendant should not benefit from the result of these practices, especially in light of the ban on collection of deficiency balances in California."
Eade also stressed in the reply memorandum, the "importance of fairness to the consumer is a vital element of the legislative history of the Fair Credit Reporting Act. That, in cases where creditors are able to exercise non judicial remedies to recover their collateral to loans and then seek deficiencies, such as in this case, it is essential that consumers such as the Plaintiff have a remedy for creditors who break the law."
The Court found that the plaintiff established a likelihood of success on the merits of his case in granting the injunction, and found that the balance of the equities and public interest tipped in favor of the plaintiff. The Court found that Chase is providing derogatory information to reporting agencies based on a debt that it is likely legally barred from collecting and enjoined it from doing so pending the outcome of the case, according to the Order.