Two of the biggest mortgage lenders in the US will payout a combined $22 million settlement in response to charges that they foreclosed 178 homes of military personnel improperly, it has been revealed.
The news will come as a welcome relief to those families affected, many of whom had been serving in Afghanistan or Iraq when their homes were illegally sold between 2006 and 2009.
Several of those whose homes had been foreclosed had been wounded while serving in Afghanistan or Iraq, while others had since been diagnosed with post-traumatic stress disorder, said officials.
It was alleged that Morgan Stanley and Bank of American Corp. subsidiaries imposed the military foreclosures on the families without obtaining the necessary court orders to do so, said the Justice Department.
Each affected family will receive a payout of an average $125,562.
“This is easily the biggest amount of money we’ve ever seen recovered,” said assistant attorney general Thomas E. Perez after the announcement.
“Those men and women who are out there risking their lives to defend our nation deserve, at the very least, not to have their homes illegally taken away from them,” added Perez.
As well as the settlement, the mortgage lenders had agreed that they would provide better mortgage payment protection for US military personnel, said Perez.
BAC Home Loans Servicing, a subsidiary of Bank of America, and Saxon Mortgage Services, a subsidiary of Morgan Stanley, also said that they would investigate possible improper foreclosure cases from 2009 to 2010 as well.
US military personnel are supposed to be given added protection by the Servicemember’s Civil Relief Act, and cannot have their property seized or be evicted while away on active duty. However, the lenders ignored this law and went ahead with the foreclosures anyway.
The investigation by the Justice Department was launched earlier this year following a separate case by Sgt. James Hurley and the US Marine Corps after his Hartford, Michigan home was foreclosed by Saxon back in 2005, while Sgt. Hurley was serving in Iraq.
Hurley and Saxon reached an out of court settlement earlier this year, it was reported.