$25B settlement means mortgage help for servicemembers, veterans

The Justice Department announced it had reached a $25 billion settlement with the nation’s five largest banks (Wells Fargo, Citigroup, Ally, JP Morgan Chase and Bank of America) and 49 states regarding nationwide mortgage fraud last month. 

In addition to this settlement, the Justice Department further negotiated agreements with these lenders to provide additional assistance to military servicemembers and veterans who have been caught in the housing market crisis and who have been unable to obtain any relief from the Expanded Homeowners’ Assistance Program.

However, as these additional agreements have just recently been reached, specific details and how to obtain information from the lenders are inconsistent as the parties work through interpretations of language and implementation.  

So, what does all this mean for you? As part of the agreements reached, the above-mentioned lenders will:

1. Review every servicemember foreclosure since 2006 to determine if they were wrongfully foreclosed upon and issue compensation.  The Justice Department’s Civil Rights Division will oversee the review to determine whether there were any violations of the Servicemembers Civil Relief Act (SCRA).  Wells Fargo, Citigroup and Ally will refund the minimum amount of lost equity plus interest plus $116,785.  JPMorgan Chase has agreed to provide the home free and clear of any outstanding mortgage, or if the house has already been sold, the home’s full value at the time of the sale.

2. Refund monies to servicemembers who were denied the opportunity to lower their interest rates, and thereby reduce their monthly mortgage payments (by Wells Fargo, Citigroup and Ally).  For all servicemembers who validly requested a lower interest rate under the SCRA but were denied, a review will also be conducted back to 2008 to determine whether or not the servicemember was charged an interest rate in excess of 6% . The aforementioned lenders will, upon review, be required to refund with interest, the amount charged in excess of the 6% interest rate plus triple the amount refunded, or $500, whichever is greater.

3. Provide assistance to those servicemembers who were unable to take advantage of the Expanded Homeowners’ Assistance Program.  For those who did not qualify or were not eligible for assistance under the Expanded HAP program, the servicers will now provide short sale agreements and deficiency waivers for those who sold their homes for less than what they owed on them.  A deficiency waiver prohibits the lender from attempting to collect the difference between the balance owed on the mortgage in question and the sales price of the property, as long as the amount is less than $250,000.  As a result, servicemembers will receive compensation for the loss in their home’s value as a result of a Permanent Change of Station (PCS) move between July 1, 2006 and December 31, 2008, or who received PCS orders after October 1, 2010.  Said monies will come directly from the lenders and not from tax payers, as had been the case under the Expanded HAP program.    

4. Deposit $10 million into the Veterans Affairs fund which guarantees loans for veterans.  Funds will be deposited into the account which allows the VA to guarantee loans for veterans at favorable terms.

5. Extend some of the foreclosure procedures provided by the Servicemember Civil Relief Act for those currently serving in war zones.  Generally, the SCRA prohibits a lender from foreclosing on an active-duty servicemember’s home without obtaining a court order to do so.  In addition, the SCRA requires that in order for this protection to apply, the servicemember must have obtained their loan prior to becoming active-duty.  Under this Agreement, the SCRA protection now applies to those servicemembers who received Hostile Fire/Imminent Danger Pay and were stationed away from their home within nine (9) months of the foreclosure.  The Agreement also no longer requires that the loan be obtained prior to active-duty status.