JPMorgan Chase (JPM) must defend itself against allegations that it charged millions of dollars in improper fees to mortgage borrowers who were in default, a federal judge has ruled.

Thursday's ruling by Judge Yvonne Gonzalez Rogers of the U.S. District Court in Oakland, Calif., means borrowers may proceed with a lawsuit that accuses JPMorgan of inflating fees for inspections, brokers' estimates and other so-called property preservation services. Vendors hired by JPMorgan's servicer performed the services.

The decision follows rulings in April by Rogers that allowed similar lawsuits against Wells Fargo (WFC) and Citigroup (NYSE:C) to proceed.

The homeowners, who live in California, Tennessee and Oregon, say they are suing JPMorgan Chase on behalf of hundreds of thousands of borrowers who have had a mortgage serviced by the company since May 2011.

The borrowers, who sued JPMorgan Chase last year, charge that the allegedly marked-up fees violated state and federal law, forced them deeper into debt, damaged their credit scores and had the potential to add hundreds or thousands of dollars to their loans.

JPMorgan Chase sought to dismiss the lawsuit, contending it was preempted by an April 2011 settlement with the Office of the Comptroller of the Currency that required the company and seven other servicers to fix problems with their foreclosure processing.

Rogers disagreed although she narrowed some of the charges.

"First, the deficiencies and unsafe or unsound practices identified by the OCC were primarily, if not entirely, devoted to foreclosures," Rogers wrote in an opinion issued Thursday. "The consent order did not require remediation to borrowers for financial injuries outside the scope of the review."

According to the borrowers, loan paperwork issued by JPMorgan Chase failed to inform borrowers that JPMorgan Chase could allegedly profit from default-related services. As of Dec. 2010, JPMorgan Chase allegedly charged borrowers between $95 and $125 for so-called broker's price opinions that allegedly cost the bank $50 or less, the lawsuit charged.

Mark Pifko, a lawyer for the borrowers, said in an email the ruling "marks the first step in the effort to hold the defendants accountable for the conduct alleged in our complaint."

"The fee paid by homeowners for broker price opinions go directly to the third party vendor, with no payment to Chase," Amy Bonitatibus, a spokeswoman for JPMorgan Chase, said of the ruling, which was first reported by Reuters

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