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Assistant Attorney General Thomas E. Perez Speaks on Protections and Benefits for Military Families in Federal-state Mortgage Settlement Call
WASHINGTON ~ Friday, February 10, 2012

As prepared for delivery -

Good Afternoon.  Thank you for joining us today to discuss the provisions in the $25 billion federal-state mortgage servicing agreement that are designed both to protect servicemembers’ rights under the law and to provide them significant additional benefits.  I am honored to be joined by two of the Department of Justice’s critical partners on servicemember issues.  Delaware Attorney General Beau Biden and Holly Petraeus, Director of the Consumer Financial Protection Bureau’s Office of Servicemember Affairs.   Attorney General Biden led, along with the Department, the negotiations over the servicemember provisions on behalf of state attorneys general.  And we relied heavily on Holly Petraeus’ counsel and advice in crafting the relief for servicemembers. Throughout this process she has been a tireless advocate on behalf of the men and women of our military.   I thank both of you for your partnership and leadership.  I also 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.

Today I would like to highlight the substantial benefits to servicemembers in the agreement announced yesterday.  The federal-state agreement contains provisions specifically designed to benefit military families.  In addition, the Department of Justice was able to reach individual agreements with four servicers – JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial – that will provide substantial financial compensation to servicemembers whose rights under the Servicemembers Civil Relief Act were violated. The financial compensation to servicemembers is in addition to the $25 billion settlement.

The federal-state agreement contains provisions to ensure that our servicemembers receive the full protection of current law, as well as substantial new benefits.  For example, under the Department of Defense's Homeowners' Assistance Programs (HAP), certain military borrowers who are forced to sell their homes at a loss due to a permanent change in station are eligible for a payment from DOD to help offset the loss.  But eligibility was limited to certain time periods.  Through the settlement, the servicers are now required, for certain servicemembers who are ineligible for HAP, to provide them with a short sale agreement and provide a mandatory deficiency waiver. Unlike in HAP, though, the costs of this program will not be paid by DOD and the taxpayers, but by the servicers.  Other provisions ensure that a servicemembers home cannot be foreclosed on without a court order when they are serving in a hostile fire zone or provide access to loan modifications, in certain circumstances when a servicemember is forced to relocate but cannot sell their home.  These are just a few of the examples of the servicemember provisions in the federal-state agreement.

In addition, four servicers – JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial – agreed to resolve potential claims of the Department Justice for violations of the Servicemembers Civil Relief Act.

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.  It allows our servicemembers to 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 received the mortgage loan prior to entering military service.  And if a foreclosure is filed in court, it requires the servicer to notify the court that a servicemember is on active duty.  Finally, the SCRA provides that a servicemember can have his or her interest rate lowered to 6% on debt that was acquired before entering military service.   In the agreement announced yesterday, we resolved potential claims under the foreclosure and interest rate provisions of the SCRA.

JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial have agreed to conduct a full review, overseen by the Department of Justice’s Civil Rights Division, to determine whether any servicemembers were foreclosed on in violation of the SCRA since Jan.1, 2006.  Wells Fargo, Citigroup and Ally will be required to provide any servicemember who was a victim of a wrongful foreclosure a minimum payment of $116,785 plus the servicemember’s lost equity.  The servicemember’s payment could be higher as a result of the review conducted by the banking regulators.  To ensure consistency with an earlier private settlement, JP Morgan Chase will provide any servicemember who was a victim of a wrongful foreclosure either his or her home free and clear of any debt or the cash equivalent of the full value of the home at the time of sale.  In addition, servicemembers will receive compensation for any additional harm suffered.  All compensation for servicemembers wrongfully foreclosed on is also in addition to the $25 billion settlement amount.

In addition, Citigroup, Wells Fargo and Ally have also agreed to conduct a thorough review, overseen by the Department, to determine whether any servicemember – from Jan. 1, 2008, to the present – was charged interest in excess of 6 percent on his or her mortgage, after a valid request to lower the interest rate, in violation of the SCRA.  Servicers will be required to provide any servicemember who was wrongfully charged interest in excess of 6 percent with a payment equal to a refund, with interest, of any amount charged in excess of 6 percent plus triple the amount refunded or $500, whichever is larger.  This compensation for servicemembers is in addition to the $25 billion settlement amount.  JP Morgan Chase had already compensated servicemembers charged interest in excess of 6 percent on their mortgage through the earlier private settlement.

Any servicemember who believes his or her rights were violated by one of these servicers can contact the Justice Department directly at 1-800-896-7743.  However, servicemembers do not need to apply for this relief or contact the Department to be eligible.  The department will have access to information to determine whether or not servicemembers are victims and the settlement requires those individuals to be contacted.  The investigative process of reviewing servicing and DOD records will take time.  We will, however, work diligently to complete our review as soon as possible.  And I want to reassure people if they qualify, they will be found through bank and military records.  

All four servicers agreed to numerous other measures, including SCRA training for employees and agents and developing SCRA policies and procedures to ensure compliance with the SCRA.  The servicers will also repair any negative credit report entries related to the allegedly wrongful foreclosures and will not pursue any remaining amounts owed under the mortgages.

These settlements, when combined with the department’s settlements with Bank of America and Saxon covering non-judicial foreclosures filed last year, mean that we will have the vast majority of all foreclosures against servicemembers under court ordered review.   

In our earlier settlement with Bank of America, the bank agreed to pay $20 million to 157 servicemembers that were allegedly wrongfully foreclosed on between 2006 and mid-2009.  The bank also agreed to a Department of Justice review of all foreclosures from mid-2009 through 2010 and to compensate any servicemember foreclosed without a court order in violation of the SCRA.  As a result, the total settlement in the Bank of America case, will be well in excess of $20 million.

The four servicers have agreed under this settlement to pay every servicemember full compensation for any violations of their SCRA rights.  If we identify a servicemember whose rights have been filed, for instance as a result of a wrongful foreclosure, they will be paid a minimum of $116,785 without any cap on the total amount to be paid.

I would like to commend JPMorgan Chase, Wells Fargo, Citi and Ally for entering into these agreements.  From our first conversations, these servicers made it clear that they shared our goal of ensuring that any servicemember harmed as a result of a violation of the SCRA will receive full compensation.  With these agreements we will assure that will happen.

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.

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