A report released this week revealed that hundreds of military veterans were wrongfully foreclosed on by some of the nation’s largest banks - in direct violation of federal law.
According to the report, over 700 foreclosures were conducted against active-duty service members by Bank of America, Wells Fargo, JPMorgan Chase, and Citigroup. These past activities were uncovered as part of analysis required by recent mortgage fraud settlements reached with the states and the federal government.
Many of these service members - including Sgt. James B. Hurley - were deployed at the time of the foreclosure. This is a violation of the Service Members Civil Relief Act, which forbids foreclosures (and similar legal proceedings) from being enacted against active-duty military personnel without explicit court orders.
Penalties for violating the SCRA can be steep; Bank of America was previously fined a minimum of $22 million in 2011 for 160 cases of wrongful foreclosures. JPMorgan also previously paid a fine worth millions in 2011. Questions immediately arose following the report. For example, lenders have repeatedly stated that while they did incorporate flawed - and in many cases, fraudulent - mortgage documentation in their foreclosure decisions, foreclosures weren’t enacted by mistake. If that is the case, asked regulators, then decisions to wrongfully evict military members from their homes - even during an overseas combat tour - were deliberate and part of systemic intent to carry out foreclosures without due process.
A not-insignificant part of the government’s arguments against major lenders over the past two years during mortgage settlement agreements revolved around the notion of deliberate intent to defraud or otherwise deprive homeowners from their homes. At the very least, the government argued, internal processes were flawed through ineffective oversight and gross negligence.
These revelations, however, indicate that problems from 2006 to 2010 were significantly more widespread and pronounced than previously believed.
Foreclosures were not the only problems, either; over 6,000 military homeowners were overcharged by JPMorgan alone.
What This Could Mean
It would be hard-pressed to say that the mortgage fraud process has run its course. After all, regulators agreed in January to drop the independent review process of the National Mortgage Settlement in lieu of reviews sponsored by the banks themselves.
With that being said, future punishment and regulation depends largely on public ire levied against the banks for malfeasance. It is not difficult to imagine public outrage being stoked anew at news of widespread fraud against military service members - especially when the public hears of active-duty military members who returned home from combat to find that their homes were no longer theirs.
Under current terms of the settlement, banks agreed to lend aid to wronged individuals - military and non-military - in exchange for more-favorable settlement terms. One term gives the banks leeway in how they distribute monetary aid to wronged borrowers. Another gives the banks full credit for the amount of a loan that is modified. For example, modifying a $150,000 loan by $15,000 no longer gives a credit worth $15,000; it gives a credit worth $150,000.
It is always possible that individual members who were wronged will initiate lawsuits against offending lenders. The National Mortgage Settlement did not provide banks with immunity from individual claims, so service members can (and might) sue the aforementioned banks for illegal foreclosures.
As far as official sanction goes, however, it is unlikely that the government will initiate a new legal action against the banks in light of this report. Short of additional funds paid out voluntarily by the banks - or short of individual lawsuits that result in favorable verdicts or settlements - banks could possibly avoid future punishment for SCRA violations.
|Simon Campbell has spent over 15 years in all the various facets having to do with real estate including sales, purchases, investment and research. His experience also includes commercial and residential property management and even real estate appraisal. He is recognized among his peers as an expert in the real estate field. Now after gaining such a wealth of personal experience, Simon has changed directions and is now sharing his knowledge and experience with others through writing on bankforeclosuressale.com blog , mentoring and consulting.|