Bank of America Settles Charges Of Illegally Foreclosing on Servicemembers

Two lenders have settled charges under the Servicemembers Civil Relief Act (SCRA) that they wrongfully foreclosed upon active duty servicemembers without first obtaining court orders, in violation of the SCRA. Combined, the settlements provide more than $22 million in monetary relief for the victims.           

Under the first settlement, BAC Home Loans Servicing LP, formerly known as Countrywide Home Loans Servicing LP, a subsidiary of Bank of America Corporation, will pay $20 million to resolve a lawsuit alleging that Countrywide foreclosed on approximately 160 servicemembers between January 2006 and May 2009 without court orders.   In addition to the $20 million, Countrywide agreed to pay any servicemember wrongfully foreclosed in the period from June 2009 through 2010. The complaint alleges that Countrywide did not consistently check the military status of borrowers on whom it foreclosed through at least May 31, 2009. The complaint was filed in the Central District of California, where Countrywide is headquartered.
 
Under the second settlement, Saxon Mortgage Services Inc., a subsidiary of Morgan Stanley, will pay $2.35 million to resolve a lawsuit alleging that Saxon foreclosed on approximately 17 servicemembers between January 2006 and June 2009 without court orders. In addition to the $2.35 million, Saxon agreed to pay any servicemember wrongfully foreclosed in the period from July 2009 through 2010.   The complaint alleges that Saxon failed to consistently or accurately check the military status of borrowers on whom it foreclosed through at least June 30, 2009.   The complaint was filed in the Northern District of Texas, where Saxon is headquartered.
 
Of the approximately 160 servicemembers upon whom Countrywide foreclosed without obtaining court orders, Countrywide allegedly foreclosed in many instances where it knew, or should have known, about their military status.   The victims include individuals who have served honorably in Iraq and Afghanistan.   The Department of Justice initiated its SCRA investigation of Countrywide in response to a referral by the U.S. Marine Corps regarding an active duty servicemember who was facing foreclosure by Countrywide.
 
Under the consent decree, Countrywide will establish a settlement fund of $20 million to compensate the servicemembers upon whom Countrywide foreclosed between January 1, 2006, and May 31, 2009.   In addition to this settlement fund, Countrywide has agreed to compensate any additional SCRA-eligible individuals on whom Countrywide foreclosed without court orders between June 1, 2009, and Dec. 31, 2010.   The consent decree also requires numerous corrective measures, including SCRA training for Countrywide employees and agents, developing modified SCRA policies and procedures and referring future SCRA complaints to the Justice Department.   Countrywide will also repair any negative credit report entries related to the allegedly wrongful foreclosures and will not pursue any remaining amounts owed under the mortgages. Countrywide now will check the Defense Manpower Data Center’s website and its own files prior to conducting any foreclosure, and will not foreclose in violation of the SCRA if the borrower is in military service or is otherwise protected by the SCRA.  
 
Of the approximately 18 servicemembers upon whom Saxon foreclosed without obtaining court orders, Saxon allegedly foreclosed on at least 10 servicemembers when Saxon knew or should have known about their military status.   The servicemembers Saxon foreclosed on include men and women who have served honorably in Iraq, some of whom were severely injured in the line of duty or suffer from post-traumatic stress disorder.   The Department of Justice initiated its SCRA investigation in response to an inquiry from Sergeant James Hurley, who resolved his claims against Saxon earlier this year in a confidential settlement.  
 
Under the consent decree, Saxon will establish a settlement fund of $2.35 million to compensate the servicemembers upon whom Saxon allegedly wrongfully foreclosed between 2006 and 2009.   In addition to this settlement fund, Saxon also has agreed to compensate any additional SCRA-eligible servicemembers on whom Saxon foreclosed without court orders between July 1, 2009, and Dec. 31, 2010.   The consent decree also requires numerous corrective measures, including SCRA training for Saxon employees and agents, developing modified SCRA policies and procedures, and referring future SCRA complaints to the Justice Department.   Saxon will also repair any negative credit report entries related to the wrongful foreclosures and will not pursue any remaining amounts owing under the mortgages. Saxon now will check the Defense Manpower Data Center’s website and its own files prior to conducting any foreclosure, and will not foreclose in violation of the SCRA if the borrower is in military service or is otherwise protected by the SCRA.