Millions owed to families in foreclosure deal - Navy News | News from Afghanistan & Iraq - Navy Times

Millions owed to families in foreclosure deal

The $25 billion nationwide foreclosure settlement announced Thursday by the Justice Department includes compensation for service members who have lost their homes to illegal foreclosures since 2006.

It also contains provisions designed to protect military homeowners from future foreclosure or financial loss related to their military duties or orders.

In a release Thursday, Justice said financial institutions JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — formerly GMAC — will review their foreclosures to determine whether any since Jan. 1, 2006, violated the Servicemembers Civil Relief Act.

If any are found, the lenders must pay service members $116,785 each, in addition to any lost equity and interest.

Under a separate agreement, those who held mortgages with JP Morgan Chase will receive their home free and clear of any debt, or the cash equivalent of the full value of the home at the time of sale.

Eligible service members also could receive compensation for harm suffered, according to the release.

Thomas Perez, assistant attorney general of the department’s civil rights division, did not estimate the total amount that could be recouped by the service members, but said a previous settlement, involving 157 personnel and Bank of America, topped more than $20 million.

“The total settlement we expect will be well in excess of $20 million. The servicers have agreed to pay every single service member full compensation for any violation of their rights without any limit,” Perez said.

The payments are above the $25 billion agreed to in the landmark agreement between the federal government, 49 states’ attorneys general and five of the nation’s largest mortgage holders, Perez added.

Also under the agreement, three banks — Citigroup, Wells Fargo and Ally — will review their records to see if any service member from Jan. 1, 2008, until present paid more than 6 percent on their mortgage interest after they’d requested a lower rate.

Those who have paid interest above 6 percent will receive a refund, with interest on any amount charged in excess of six percent plus triple the amount refunded, or $500, or whichever is larger.

JP Morgan Chase already made similar payments in an earlier settlement.

The banks also will remove negative credit entries related to the eligible foreclosures and help the involved service members restore their credit ratings.

Expanding protections

In addition to the monetary payouts for SCRA violations, the agreement made significant changes to the SCRA, including expanding the provision that protects service members from foreclosure if their mortgages were obtained before entering military service.

Now, protections are available to all service members, regardless of when they secured their mortgages, if they received hostile fire/imminent danger pay and were stationed away from their home within nine months of the foreclosure.

The agreement also requires the five banks in the settlement, which include Bank of America, to negotiate loan modifications — including waivers or short sale agreements — for military homeowners who are underwater on their loans but are forced to move because of permanent change of station orders if the homeowner is ineligible for the Defense Department’s Homeowners Assistance Program.

“We simply should not force families to be separated when their commander sends them from say, Dover Air Force Base to McGuire Air Force Base. The banks had been requiring the member to leave behind their family, separating them before they would even have a discussion about whether or not there was the potential for a modification or a short sale discussion,” Delaware Attorney General Beau Biden said following the announcement.

Holly Petraeus, assistant director of the Consumer Financial Protection Bureau’s Office of Servicemember Affairs, praised the resolution, which she said should bring “peace of mind” to military families.

“On my travels to military communities across the country during the past year, I have repeatedly heard about the devastating impact of the housing crisis on military homeowners. I … am pleased this settlement addresses those challenges,” Petraeus said.

The new agreement, combined with previous settlements, puts the vast majority of military foreclosures under court-ordered review, Perez said.

A JPMorgan Chase spokesman said the company has been working with the federal government as well as states attorneys general to address the “complex issues to reach this settlement.”

“The settlement includes far-reaching relief that will help many of our customers and complement our already extensive efforts to improve our borrower assistance and servicing processes,” he said.

Perez could not estimate the time frame for the banks to complete their reviews, which will be overseen by the Civil Rights Division.