A large number of servicemembers, perhaps far more than once suspected, have been wrongfully foreclosed according to the New York Times.
Relying on “people with direct knowledge of the findings” the paper reports that “the nation’s biggest banks wrongfully foreclosed on more than 700 military members during the housing crisis and seized homes from roughly two dozen other borrowers who were current on their mortgage payments, findings that eclipse earlier estimates of the improper evictions.” (See: Banks Find More Wrongful Foreclosures Among Military Members, March 3, 2013)
Allegations against two lenders claiming that they had unfairly foreclosed 175 servicemembers were resolved with a $22 million settlement in 2011. In 2012 the $25 billion robo-signing settlement between major servicers, the Justice Department and most states set aside as much as $116,785 plus lost equity and interest for each servicemember who had been improperly foreclosed.
To now suggest, as the Times claims, that the number of wrongful foreclosures involves some 700 military households raises several important questions.
First, how many of the alleged 700 wrongful foreclosures have been included in past settlements? Without specifics there’s no way to know if some cases among the 700 mentioned have been already resolved.
Second, when will more data be released? The paper reports that “in January, regulators ordered the banks to identify military members and other borrowers who were evicted in violation of federal law.”
January was two months ago.
Here’s the concern: Last year several federal regulators ordered major loan servicers to conduct foreclosure reviews and determine if any homeowners had been improperly foreclosed in 2009 and 2010.
This sounds good but why limit reviews to 2009 and 2010? What about 2007, 2008 and 2009?
No less important, how good was the review process?
As the Office of the Comptroller of the Currency stated in February, although mortgage servicers “had expended nearly $2 billion on the consultants’ review through November 2012, we were still not ready to compensate the first borrower.”
In other words, after spending $2 billion on reviews no money was paid to borrowers.
The review process has now been replaced with a $9.3 billion compensation agreement, however this agreement may not be final given that it too has set off huge questions regarding how the settlement figure was selected and who benefits.
The bottom line is this: VA loans are only available to those with qualifying service. Active duty military personnel are generally protected under the terms of the Servicemembers Civil Relief Act (SCRA) and cannot be foreclosed without a court order. To this point it remains unclear how many additional VA mortgage terminations could result in compensation, meaning those who were foreclosed during the past few years should watch this issue with care.
Photo courtesy Anne Rossley