Members of the military who were victims of wrongful foreclosures will receive substantial compensation from their mortgage servicers.
The U.S. Department of Justice has reached an agreement with four large lenders -- JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial -- to provide "any service member who was a victim of a wrongful foreclosure a minimum payment of $116,785 plus the service member’s lost equity," says Assistant Attorney General Thomas E. Perez.
"To ensure consistency with an earlier private settlement, JP Morgan Chase will provide any service member who was a victim of a wrongful foreclosure either his or her home free and clear of any debt or the cash equivalent of the full value of the home at the time of sale," Perez said in a speech Friday.
The individual agreements are in addition to the $25 billion mortgage settlement announced last week.
Under the agreement, the lenders will review files dating back to Jan. 1, 2006, to determine whether any service members were foreclosed on in violation of the Servicemembers' Civil Relief Act, or SCRA. The act prohibits foreclosure on a service member's property without a court approval. When the servicer files a foreclosure suit in court, it is required to notify the court that the homeowner is on active duty. The act also specifies that a service member cannot be charged more than 6 percent in interest on a mortgage loan if the borrower is on active duty and requests a lower interest rate.
Citi, Wells and Ally also will review files going back to January 2008 to determine whether any service member was charged more than 6 percent in interest after requesting a lower rate. Those who had that right violated will receive three times what they paid in excess interest, or $500, whichever is larger. Chase has already compensated members through an earlier private settlement.
Now that is what I call a settlement. It's certainly much better than the mere $2,000 that nonmilitary borrowers may receive under the $25 billion federal-state mortgage settlement.
The Department of Justice says military members who are eligible for compensation will be contacted. Keep in mind it will take time to review files and identify eligible members. If you have questions, you may call the DOJ at (800) 896-7743.
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