After waiting for three years, the U.S. armed forces are going to receive the first round of compensation under a federal law, the Service members Civil Relief Act, which protects service members from foreclosures. This compensation forms part of the National Mortgage Settlement (“NMS”), the $25 billion nationwide mortgage settlement announced in Feb 2012.
The five mortgage servicers that formed part of the NMS are JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc. (C), Wells Fargo & Co. (WFC) and GMAC Mortgage, which included GMAC Mortgage, LLC, Ally Financial Inc. (ALLY) and Residential Capital LLC. 952 members of the U.S. armed forces will be receiving $123.4 million for non-judicial foreclosures (between Jan 1, 2006 and Apr 4, 2012) that violated the above-mentioned law.
Under the first round of payments, 666 servicemen will be receiving more than $88 million from JPMorgan, Citigroup, Wells Fargo and GMAC Mortgage. Notably, another 286 service members have already received $35.4 million from BofA, as part of a separate settlement in 2011.
Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division said, “We are very pleased that the men and women of the armed forces who were subjected to unlawful non-judicial foreclosures while they were serving our country are now receiving compensation.”
As per the NMS, each distressed service member will receive $125,000, plus any lost equity in the property, and interest on that equity for mortgages serviced by Wells Fargo, Citigroup and GMAC Mortgage. Payments by BofA, to identified service members with non-judicial foreclosures, were made under a 2011 settlement with the U.S. Department of Justice.
Additionally, to maintain uniformity with the prior private settlement, JPMorgan will either provide the property to identified service members free and clear of any debt or pay the cash equivalent of the full value of the home at the time of sale. Further, the company will extend an opportunity to distressed service members under which they can submit a compensation claim for any additional harm suffered.
Notably, the NMS also make available compensation for two other categories of service members:
- “Those who were foreclosed upon pursuant to a court order where the mortgage servicer failed to file a proper affidavit with the court stating whether or not the service member was in military service;
- Those service members who gave proper notice to the servicer, but were denied the full benefit of the SCRA’s 6% interest rate cap on pre-service mortgages.”
The service members eligible for compensation due to aforesaid alleged violations will be identified later this year.
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