Ten leading US lenders may have unlawfully foreclosed on the mortgages of nearly 5,000 active-duty members of the US military in recent years, according to data released by a federal regulator.
JPMorgan Chase and Bank of America this year reached legal settlements in which they agreed to pay damages to nearly 200 service members who claimed that their homes had been improperly seized.
Data released last week by the Treasury’s Office of the Comptroller of the Currency, which regulates national banks, shows that 10 lenders – including BofA, but not JPMorgan, which was not part of the study – are reviewing nearly 5,000 foreclosures of homes belonging to service members and their families to see if they complied with the law.
Under the Servicemembers Civil Relief Act of 2003, mortgage servicers have to follow special procedures when foreclosing on homes belonging to active-duty members of the armed forces and their families. For instance, there are restrictions on so-called default judgments, in which homes are seized after the borrower fails to appear in court.
In April, JPMorgan reached a multimillion-dollar settlement with members of the armed services. The bank admitted to 27 wrongful foreclosures in May. Jamie Dimon, JPMorgan chief executive, apologised for his bank’s errors, calling it a “painful aberration”.
BofA struck a deal this year with the Department of Justice to resolve a government lawsuit alleging about 160 unlawful foreclosures. This month, the company agreed to pay each service member whose mortgage was illegally foreclosed at least $116,785, plus compensation for lost equity.
The data released by the OCC are based on estimates prepared by lenders and their consultants. BofA said it is reviewing 2,400 foreclosures involving active-duty military families to see if they were conducted properly. Wells Fargo is reviewing 870 foreclosures and Citigroup is looking at 700 cases.
Also under review are 575 foreclosures at OneWest, formerly known as IndyMac; 87 at HSBC; 80 at US Bancorp; 56 at Aurora, formerly known as Lehman Brothers Bank; 25 at MetLife; six at Sovereign; and three at EverBank.
In response to demands by US regulators, the largest home loan companies have been reviewing foreclosures in 2009 and 2010 to ensure that borrowers of all kinds were not improperly evicted. The new data on military foreclosures could lead to a new round of lawsuits, experts said.
In May, the US Government Accountability Office said it had identified 50 cases in which military borrowers were illegally foreclosed. In February, John Walsh, the acting head of the OCC, said that only a “small number” of home seizures should not have occurred.
Sherrod Brown, a Democratic senator from Ohio, said last week: “I don’t know if big banks are foreclosing on military families out of carelessness or callousness, but neither is acceptable.”
Dan Frahm, BofA spokesman, said: “We work hard to ensure our military customers receive high-quality service that caters to their unique needs. When we find mistakes, we address them.” Citigroup and Wells Fargo declined to comment. The OCC declined to comment.
Samuel Wright, a retired member of the US Navy and director of the Service Members Law Center, said it was likely that the banks may be undercounting the number of possible evictions of US military members, adding that foreclosures on military families were “pretty prevalent” given the number of complaints he has fielded from active-duty military members.
The months-long reviews by the banks’ consultants could determine that the foreclosures were done in full accordance with the law, and that none of the military borrowers were harmed.
John Odom Jr, a Louisiana lawyer who represents members of the military in litigation against financial institutions, said he was doubtful banks would admit to unlawful foreclosures.
“You’ve got institutions that don’t understand what the law says doing self-investigations and self-policing,” Mr Odom said. “I have very, very, very low levels of confidence that they’re going to do this right.”
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