JPMorgan Chase Bank must face a lawsuit by California mortgage borrowers accusing it of violating state law by not paying interest on mortgage escrow accounts, a federal judge in San Francisco ruled on Friday.
Chase had argued that the California law is preempted by the federal Home Owners Loan Act (HOLA), which governs thrift banks, including the original issuer of the borrowers’ mortgages, Washington Mutual. Regulations issued under HOLA do not require interest on mortgae escrow accounts. U.S. District Judge Edward Chen ruled however, that HOLA does not apply to Chase simply because it acquired Washington Mutual’s loans.
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