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Mortgage lenders settle with foreclosed veterans

Bank of America and Morgan Stanley will pay $22 million to satisfy the U.S. Justice Department, which charged the large banks with wrongly foreclosing on the properties of 178 military personnel. The government says the banks' mortgage servicers did not obtain court orders before foreclosure proceedings were activated.

BAC Home Loans Servicing, formerly Countrywide Home Loans Servicing, and Morgan Stanley's Saxon Mortgage Services will pay the multimillion dollar settlement, which awards each service member affected about $125,500. An assistant attorney general said it is the biggest settlement for improper military personnel foreclosures ever awarded.

The mortgage lenders were blamed for bad military business practices between 2006 and 2009, but as part of the settlement, also agreed to review processed military foreclosures through 2010. Accusations by the government held BAC and Morgan Stanley liable for violating the Servicemembers' Civil Relief Act, which bars creditors from evicting or foreclosing on active-duty military servicemembers. The government used individual cases of veterans suffering from post-traumatic stress disorder and other war-related injuries or conditions to solidify its case.

Military foreclosure disputes have surfaced in the news over the last several years. Mortgage lender JPMorgan Chase recently settled a $60 million class-action lawsuit for overcharging 4,000 veterans on home loans and illegally foreclosing on more than dozen military service personnel. The bank agreed in the settlement to reimburse the war veterans and reverse the improper foreclosures.

A new federal Office of Servicemember Affairs was created in January to help guide and protect military families affected by financial issues like foreclosure and bankruptcy.

Source: The Washington Post, "2 lenders to pay to settle civil charges of improperly foreclosing on 178 military personnel," 26 May 2011

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