Military Homeowners to Receive Compensation for SCRA violations

The nation's five biggest banks have agreed to compensate military homeowners whose rights were violated since the housing market collapse under the terms of the Servicemembers Civil Relief Act (SCRA). 

Homeowners who were illegally foreclosed upon since 2006 will receive nearly $117,000 along with interest and lost equity, according to the settlement between the U.S. Department of Justice and banking giants JP Morgan Chase, Citigroup, Wells Fargo and Ally Financial. 

The individual homeowner compensation comes in addition to a $25 billion settlement between the banks and both state and federal government officials.

Trampling the SCRA

These financial institutions were under the microscope for months after a Government Accountabililty Office report found that two of the country's biggest banks illegally foreclosed on about 50 active military homeowners. The SCRA provides active military with protections against foreclosure, significant interest rate hikes and other civil and financial obligations. 

This latest settlement came almost a year after JP Morgan Chase agreed to a $56 million settlement for overcharging military homeowners in violation of the relief act. The company must return illegally foreclosed properties to the homeowners and eliminate any debt or pay the equivalent of the home's appraised value when originally purchased.

Beyond that, the other companies announced they would search their records for SCRA violations regarding interest rake hikes. The relief act caps rates at 6 percent. Any homeowner who received a rate above that cap will get triple the interest rate refund or $500, whichever amount is greater.

"The men and women who serve our nation in the Armed Forces deserve, at the very least, to know that we will protect their rights while they are serving our country," Thomas E. Perez, assistant attorney general for the Civil Rights Division, said in a news release. "We appreciate that Wells Fargo, JP Morgan Chase, Citigroup and Ally agreed, through this settlement, to compensate servicemembers whose rights were violated."

These giant mortgage lenders also agreed to create SCRA training workshops and in-house programs for employees. They will also correct credit issues that may be unfairly affecting a homeowner's score.

New Protections

Some new protections and features have emerged from this settlement. 

Service members who were getting Imminent Danger Pay and stationed away from their home within nine months of the foreclosure will receive protection. The banks must also provide loan modifications or short sale agreements to military homeowenrs who had to move because of a Permanent Change of Station.

If you believe your SCRA rights may have been violated, contact your Armed Forces Legal Assistant office.