Servicemembers who were improperly foreclosed on will receive six-figure settlements as part of a secondary agreement to the $26 billion foreclosure abuses settlement announced last week.
Members of the U.S. military who are determined to have been victims of a wrongful foreclosure during the past six years will receive payments of at least $116,785, plus additional compensation equal to any home equity they may have lost. Some payments may be higher, depending on a review by banking regulators.
The payments will go to servicemembers who were wrongly foreclosed on after Jan. 1, 2006 and had mortgages with Wells Fargo, Citigroup or Ally Financial/GMAC. Those who had mortgages with JP Morgan Chase and were wrongly foreclosed during that time will have either their home returned to them free and clear of debt or a cash payment equal to the value of the property at the time of foreclosure.
The JP Morgan Chase settlement is structured to be consistent with a private settlement that was reached previously. Servicemembers who suffered additional harms will also receive compensation from the four lenders.
The settlement and compensation is in addition to the $26 billion agreement reached last week to settle claims over improper foreclosure practices by the nation's five largest mortgage lenders. The fifth, Bank of America, previously reached a settlement with the Justice Department to compensate servicemembers who were wrongly foreclosed on from 2006 to mid-2009.
The settlements stem from reported violations of the Servicemembers Civil Relief Act (SCRA), which places limits on how far creditors can go in collecting debts from active duty servicemembers. Among its provisions, servicemembers serving in a live fire zone may not be foreclosed on without a court order.
Servicemembers will also be compensated if they were charged in excess of 6 percent on a mortgage loan after Jan. 1, 2008, provided they made a valid request to have their rate lowered. The SCRA provides that a servicemember can have their interest rate lowered to 6 percent on debt acquired before entering military service.
The settlement was announced by U.S. Assistant Attorney General Thomas Perez in remarks delivered on Friday in Washington, D.C.