April 19, 2024

Mortgage Companies Settle Suits on Military Foreclosures

The Justice Department announced on Thursday that it had simultaneously filed and settled lawsuits against the two companies — a subsidiary of Bank of America formerly known as Countrywide Home Loans Servicing, and Saxon Mortgage Services, a subsidiary of Morgan Stanley.

The companies were accused of knowingly and repeatedly violating the Servicemembers Civil Relief Act, a federal law that extends an array of financial and legal protections to military personnel. Specifically, the companies were accused of ignoring a provision of the law that required them to get court orders before foreclosing on active-duty service members.

Without admitting wrongdoing, the former Countrywide unit agreed to pay $20 million to approximately 160 victims of illegal foreclosures from January 2006 to May 2009. It also agreed to reimburse victims of any other illegal military foreclosures found to have occurred from May 2009 to the end of last year.

Further, it promised to upgrade its training and report future violations of the civil relief act to the Justice Department.

Although most of the improper foreclosures began before Bank of America acquired Countrywide, “it is our responsibility to make things right,” said Terry Laughlin, an executive vice president at the bank. He added, “These errors are not acceptable, and we certainly regret them.”

According to Thomas E. Perez, assistant attorney general for the Justice Department’s civil rights division, the Countrywide settlement is “easily the largest amount ever recovered“ by the Justice Department for violations of the civil relief act.

Saxon was accused of illegally foreclosing on approximately 18 service members, “some of whom were severely injured in the line of duty or suffer from post-traumatic stress disorder,“ according to Mr. Perez.

Without admitting wrongdoing, Saxon agreed to pay $2.35 million to victims of those foreclosures, made from January 2006 to May 2009. It also agreed to pay the victims of any subsequent wrongful military foreclosures, through the end of last year, and to upgrade its training programs.

“First and foremost, we want to apologize to those military families that were affected by any mistakes made in the foreclosure process,” said Mark Lake, a spokesman for Morgan Stanley. “Our servicemen and women deserve the highest level of customer service.”

He said that Saxon “has taken meaningful steps to ensure it has appropriate policies and procedures in place to comply fully” with the civil relief act.

Both companies agreed to repair any damage their improper foreclosures had caused to the credit scores of the affected homeowners.

There have been widely publicized violations of the civil relief act since well before January 2006, the starting date for these settlements. Indeed, the Saxon investigation was based on a complaint by Sgt. James B. Hurley, an Iraq veteran who lost his home in western Michigan in an improper foreclosure in 2005. Saxon and its co-defendant in that case, Deutsche Bank, reached a confidential out-of-court settlement with the Hurleys early this year.

Mr. Perez said the 2006-9 period was chosen because it encompassed the sharp spike in national foreclosure activity that began in late 2006.

The settlement terms expand that window to the end of 2010.

The two mortgage companies have set up a direct hot line for service personnel who believe they are eligible for relief under the settlements. That number is (800) 896-7743, mailbox 6 for the former Countrywide unit and mailbox 995 for Saxon.

Article source: http://feeds.nytimes.com/click.phdo?i=f7d7a251bb3b65a228f7e2a93e402967

Speak Your Mind