Banks Issue $123 Million to 952 Troops for Illegal Foreclosures

More than 950 service members will receive over $123 million from a settlement announced Monday by the U.S. Justice Department with five mortgage servicers for non-judicial foreclosures in violation of the Service Members Civil Relief Act (SCRA).

Under the National Mortgage Settlement, 666 service members and their co-borrowers will receive $88 million from GMAC Mortgage, Citi, Wells Fargo and JP Morgan Chase. Another $35 million was already paid out to 286 service members and their co-borrowers from Bank of America.

The 952 service members will receive $125,000 plus any equity in the lost property and interest on that equity under the settlement from the lawsuit. Co-borrowers will receive compensation for any of their share of lost equity.

A non-judicial foreclosure allows a bank or mortgage servicer to sell the home without having to file a lawsuit against the owner. A "notice of default" is issued and the home is then sold at public auction.

The SCRA protects service members from these non-judicial foreclosures while they are serving in the military or within the "applicable post-service period" as long as the mortgage originated before their military service began, according to a Defense Department statement. 

The non-judicial foreclosures addressed in the lawsuit occurred from Jan. 1, 2006 to April 4, 2012.

"These unlawful judicial foreclosures forced hundreds of service members and their families out of their homes," Acting Associate Attorney General Stuart F. Delery said in a statement. "While this compensation will provide a measure of relief, the fact is that service members should never have to worry about losing their home to an illegal foreclosure while they are serving our country. The department will continue to actively protect our service members and their families from such unjust actions."

The five mortgage servicers involved in the lawsuit are JP Morgan Chase Bank N.A.; Wells Fargo Bank N.A. and Wells Fargo & Co.; Citi Residential Lending Inc., Citibank, NA and CitiMortgage Inc.; GMAC Mortgage, LLC, Ally Financial Inc. and Residential Capital LLC; and BAC Home Loans Servicing LP formerly known as Countrywide Home Loans Servicing LP (Bank of America).

"We look forward, in the coming months, to facilitating the compensation of additional service members who were subjected to unlawful judicial foreclosures or excess interest charges. We appreciate that JP Morgan Chase, Wells Fargo, Citi, GMAC Mortgage and Bank of America have been working cooperatively with the Justice Department to compensate the service members whose rights were violated," said Acting Assistant Attorney General Vanita Gupta in a statement.

Service members who need to contact the banks about the payments should use the following points of contact:

-- Bank of America borrowers should call Rust Consulting, Inc., the settlement administrator, toll-free at 1-855-793-1370 or write to BAC Home Loans Servicing Settlement Administrator, c/o Rust Consulting, Inc., P.O. Box 1948, Faribault, MN 55021-6091.

-- Citi borrowers should call Citi toll-free at 1-888-326-1166.

-- GMAC Mortgage borrowers should call Rust Consulting Inc., the settlement administrator, toll-free at 1-866-708-0915 or write to P.O. Box 3061, Faribault, Minnesota 55021-2661.

-- JPMorgan Chase borrowers should call Chase toll-free at 1-877-469-0110 or write to P.O. Box 183224, OH-7160/DOJ, Columbus, Ohio 43219-6009.

-- Wells Fargo borrowers should call the Wells Fargo Home Mortgage Military Customer Service Center toll free at 1-877-839-2359.

-- Michael Hoffman can be reached at Michael.Hoffman@military.com.