Military Home Loan Settlement Fund

by HomeLoan.com
​The U.S. Department of Justice had a long day in court recently when it simultaneously filed and settled lawsuits against two mortgage servicing companies. A subsidiary of the Bank of America formerly known as Countrywide Home Loans Servicing, and Saxon Mortgage Services, a subsidiary of Morgan Stanley both agreed to settle federal complaints that they wrongfully foreclosed on the homes of 178 military service members, a violation of the Servicemembers Civil Relief Act. The two firms also agreed to set up a $22 million compensation fund to pay the victims, the largest amount ever recovered by the Justice Department for violations of the civil relief act.

Both companies had been accused of violating a provision of the Servicemembers Civil Relief Act that requires lenders to get court orders before they can foreclose on homes belonging to active-duty service members. Spokesmen from the former Countrywide company agreed to pay $20 million to 160 victims of illegal foreclosures that occurred between January 2006 and May 2009. Following suit, Saxon agreed to pay $2.35 million to 18 service members whose homes were foreclosed on from January 2006 to May 2009. According to the Justice Department, each separate victim in the Bank of America/Countrywide settlement will receive approximately $125,000 in monetary damages and the victims in the Saxon case will receive $130,555.

Even though most of the wrongful foreclosures occurred before Bank of America acquired Countrywide, the Bank said it would upgrade training for loan officers and report any future violations of the civil relief act promptly to the Justice Department. Both companies also agreed that they would take steps to repair any negative impact the foreclosures had caused to the credit scores of the affected military personnel and both also set up direct hot lines for service personnel to call if they believe they are eligible for relief from the settlements. In an effort to curb future abuses, new regulations will require all loan service companies to check the Department of Defense website against their own records to determine if a person is on active military duty status before they take any action toward a foreclosure.

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