B. of A., Morgan Stanley Settle Foreclosure Suit

“The men and women who serve our nation in the armed forces deserve, at the very least, to know that they will not have their homes taken from them wrongfully while they are bravely putting their lives on the line on behalf of their country,” Justice Department Assistant Attorney General Thomas Perez told reporters. “They [military personnel] have our backs and they need to know that we have theirs.”According to the Justice Department, the victims included soldiers who “served honorably” in U.S. military actions in Iraq and Afghanistan.

As part of the deal, a Bank of America (NYSE:BAC)  subsidiary formerly known as Countrywide Home Loan Servicing agreed to pay $20 million to resolve a lawsuit alleging that it foreclosed on about 160 service members in 20 states between January 2006 and May 2009 without court orders. (Countrywide was acquired by Bank of America in 2008 at the height of the financial crisis).

According to Perez, Countrywide will set up a settlement fund with the $20 million to compensate each victim. He added that soldiers that were wrongfully foreclosed upon by Countrywide will receive on average, $125,000, from the settlement. Perez told reporters that the U.S. will distribute the funds based on the nature of each individual violation.

In addition, Bank of America agreed to pay any active-duty military personnel found to be wrongfully foreclosed upon by the bank from June 2009 through 2010. The Justice Department’s complaint alleges that Countrywide did not “consistently check the military status” of borrowers on whom it foreclosed through at least May 31, 2009.

Saxon Mortgage Services Inc., a subsidiary of Morgan Stanley (NYSE:MS) , agreed to pay $2.4 million to resolve allegations that the lender foreclosed on about 17 military personnel in ten states between January 2006 and June 2009 without court orders. Saxon also agreed to pay military personnel that were wrongfully foreclosed upon from July 2009 through 2010. Perez added that Saxon victims will receive, on average, $130,000, in payments.

Also, Countrywide and Saxon will have to repair any negative credit-report entries of affected military personnel.

Perez declined to comment on whether the Justice Department is conducting other investigations involving bank lenders and service-members.

“It is my hope that all of the servicers will take a careful look at these settlement agreements and the framework that is embodied here,” he said.

“These settlements will send strong message that lenders and servicers that they will be held accountable for violations,” Perez said.

In addition to Bank of America and Morgan Stanley, other major banks with servicer units include J.P. Morgan Chase & Co. (NYSE:JPM) , Citigroup Inc. (NYSE:C)  Wells Fargo & Co. (NYSE:WFC)  and Ally Financial Inc.

via B. of A., Morgan Stanley settle foreclosure suit – MarketWatch.

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