Good afternoon. Thank you for joining us today to hear about two settlements that will provide critical relief for some of the men and women who serve our nation in the armed forces, and their families. I want to thank our partners at the Department of Defense for their help in these cases and in protecting the rights of servicemembers.
The Civil Rights Division enforces several laws designed to protect the rights of members of the military – so that their brave and selfless service doesn’t put them at risk of losing their jobs at home; so that they don’t have to forfeit their right to vote; so that they can be assured they and their families in the consumer context will not be penalized for their courageous decision to serve our nation.
The Servicemembers Civil Relief Act, or SCRA, provides critical additional consumer and other protections to the men and women serving our nation in the military – it was a recognition that those who are making great sacrifices to protect us deserve to know that we have their backs at home.
The law postpones, suspends, terminates, or reduces the amount of certain consumer debt obligations so that members of the armed forces can focus their full attention on their military responsibilities without adverse consequences for themselves or their families. This means that a soldier won’t have to worry that his or her car will be repossessed while they’re on the front lines overseas. It means that instead of worrying that their spouse and children will be evicted while they’re deployed, they can focus on the critical role they play in protecting our nation.
Among these protections is a prohibition on foreclosure of a servicemember’s property without first getting approval from the court if the servicemember purchased the property prior to entering military service. In the course of our investigations that led to the settlements we’re announcing today, we’ve seen the consequences that can occur when this provision is violated.
For example, we encountered a case involving a servicemember who was severely injured by an Improvised Explosive Device while serving in Iraq, breaking his back and causing traumatic brain injury. The servicer foreclosed on him, despite receiving notice on multiple occasions that he was serving in Iraq. He returned to the United States in a wheelchair with the prognosis that he would never walk again. He spent two years in recovery, during which time he re-learned how to walk and eventually run; however, he still suffers from the impact of the traumatic brain injury.
In another case, we encountered a victim who suffers from Post-Traumatic Distress Syndrome after a tour in Iraq in 2003-2004. Consequently, he regularly receives counseling and takes medication to address his nightmares and nervous condition. In an attempt to avoid foreclosure on his home, he notified the servicer of his active duty status and provided copies of his orders. However, the servicer foreclosed on him twice despite notice of his protected status. In addition, his credit score has been negatively impacted and he has been unable to obtain credit.
We cannot allow the members of our military – who have made great personal sacrifices on our behalf – to attempt to transition to civilian life only to find their credit ruined and their homes in danger because of their willingness to serve in the armed forces.
Today’s settlements will provide relief to men and women who were victims of such violations.
I am pleased to announce first that BAC Home Loans Servicing, LP, formerly known as Countrywide Home Loans Servicing, LP, a subsidiary of Bank of America Corporation, has agreed to pay a minimum of $20 million to settle a lawsuit alleging that the Bank foreclosed, without court orders, on the properties of about 160 servicemembers, in violation of the SCRA. This is by far the largest amount ever obtained by the Department in an SCRA case.
In addition, Saxon Mortgage Services, Inc. has agreed to pay $2.35 million in damages to servicemembers to settle similar allegations, providing relief for 18 servicemembers.
From at least January 1, 2006 through mid 2009, Bank of America/Countrywide and Saxon both failed to determine consistently whether the borrowers on whom they foreclosed were in military service or were otherwise protected by the SCRA, or foreclosed on properties despite having been informed by the servicemember of his or her military status. They have also agreed as part of these settlements to identify and compensate any servicemember wrongfully foreclosed upon from mid-2009 through the end of 2010.
In addition to actual monetary damages, Bank of America/Countrywide and Saxon will repair any servicemember’s negative credit reports and not pursue any remaining amounts owed under the mortgage.
Just as significant is that these settlements, moving forward, will put in place a number of measures to prevent violations including training and policy modifications, such as requiring that the servicer check the Department of Defense website and their own files to determine the military status of a person before they foreclose on him or her. These measures will not only prevent SCRA violations at Bank of America/Countrywide and Saxon, but will set an industry gold standard for all other servicers that to follow in meeting their obligations.
The case against Countrywide resulted from a referral by the United States Marine Corps three days prior to Countrywide’s scheduled foreclosure of a servicemember’s mortgage, despite the fact that the servicemember had sent Countrywide copies of his military orders. The servicemember was a reservist called to active duty and deployed to Iraq at the time of the threatened foreclosure. Countrywide cancelled the foreclosure sale after the United States opened its investigation.
The Department initiated its investigation of Saxon in response to an inquiry from counsel for Sergeant James Hurley, who resolved his claims against Saxon earlier this year in a confidential settlement.
On average, each victim in the Saxon case will receive $130,555 in monetary damages; in the Countrywide settlement, each victim will receive approximately $125,000 in monetary damages. However, the United States will distribute the funds based on the nature of each individual violation and the harm experienced by the servicemember. We will conduct a thorough review of the particular facts and circumstances of each case to determine the precise amount of relief due each servicemember.
These settlements hold the lenders responsible for ensuring that the rights of our men and women in the military are protected while they defend our country. They should send a strong message to lenders and services that they will be held accountable for their own unlawful practices, as well as the practices of others who serve as their agents, in conducting foreclosures in violation of the SCRA.
Although no one case can rectify the multitude of unlawful practices in the housing and lending market that proliferated over the last decade, this settlement represents an important piece of the Department’s comprehensive efforts to address the nationwide housing crisis. It is yet another example of the great work being done in coordination with the President’s Financial Fraud Enforcement Task Force. The Civil Rights Division, along with HUD and the Federal Reserve, chair the Task Force’s non-discrimination working group, and these settlements are an example of the work being done on behalf of victims of fair lending violations.
We will continue to aggressively enforce the law to protect all homeowners from unlawful lending practices, and to protect the rights of servicemembers who put their lives on the line on our behalf. They have our backs, and they need to know that we have theirs.