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Mortgage lenders reach settlement in foreclosure lawsuit

Our military has been fighting overseas for many years. But some active military service members have been engaged in a two-front war, fighting for our country abroad while fighting for their houses here. It is no secret that the mortgage crisis hit many Chicago area residents hard. In order to allow service members to focus their energies on their duties to the military, Congress passed a law to shield them and their families from debt and foreclosure.

The law, named the Servicemembers Civil Relief Act, provides that certain debt obligations can be delayed or eliminated altogether. Specifically, a lender must first have court approval before foreclosing on a military member's house if the mortgage was taken out before the person entered military service. In addition, if a lender seeks foreclosure against a service member in court, it must inform the court if the person is on active duty. Lastly, military members can have their interest rates reduced to 6 percent on debt acquired prior to joining the military.

A lawsuit alleged, however, that a number of commercial lenders violated the terms of this law. A settlement was reached last week and the lenders--which include Citigroup, Wells Fargo, Ally Financial and JPMorgan Chase--will be required to reimburse affected service members.

JPMorgan Chase had already reached a settlement and will give military members their houses free of debt or an amount in cash equal to the fair market value of the house at the time of sale. The settlement mandates that the other three lenders pay at least $116, 785 with interest and lost equity to service members whose homes were wrongfully foreclosed.

Source: The New York Times, "Mortgage Relief for Service Members," John H. Cushman, Jr., Feb. 12, 2012.

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