Mortgage Foreclosure Against Vets

In May 2013, an Atlanta TV station investigated mortgage foreclosure fraud targeting veterans.  They had heard from dozens of veterans who are fighting to save their homes from foreclosure.

A local attorney says the veterans are being targeted, and he calls it the most revolting thing he’s ever seen. The station learned taxpayer money is involved. 

A handful of big banks are offering settlements to some veterans who were foreclosed on, but it’s not much and it only applies to certain cases. 

Army veteran John and his wife, Lydia, said their hell started after they applied for a home loan modification. 

“I was not in foreclosure. I wasn’t behind in my mortgage,” Smith said. “They were the ones who insisted I apply for a loan modification.” 

Smith said Chase Bank told him the modification would take 45 days, but instead it took two years. He said during the process, Chase told him not to pay on the mortgage. 

”And one day, all of a sudden, I started getting papers in the mail that it was $1,600 for three months, and then $20,000 for the next,” Smith said.

Chase wouldn’t comment to the news station on Smith’s case, and Citi Mortgage said they would not discuss specifics about customer accounts, including one involving Air Force veteran Richard Leder. 

”I was told to go delinquent by Citi Mortgage over the phone,” Leder said. “They didn’t put it in writing.” 

Leder said he knew he’d have to pay eventually, so he set the money aside. Still, the bank foreclosed on his home five months later. 

”I had the money to bring my house current in cash, $100 bills,” Leder said. “They wouldn’t take it. They weren’t interested.” 

Atlanta attorney Robert Thompson hasn’t represented the Smiths or Leder, but said he has seen hundreds of cases like theirs. 

“It’s the most revolting thing I’ve ever seen,” Thompson said. 

Thompson believes banks are targeting some veterans, like the Smiths, who have a mortgage loan from the U.S. Veterans Administration. Thompson said VA loans are insured, and because of that, banks often sell the loan to another mortgage company, but they still get to keep the insurance money. 

”So they sold the loan, so they’re not owed any money.

They will collect the money from reselling the house, and they’ll collect the insurance from the face value on the house to start with. So that’s doubling and tripling their money off the veterans and the government and the taxpayer,” Thompson said. 

John Smith said since he first talked to the TV News in January, Chase Bank has tried to settle with him. 

”They wanted to know what kind of compensation that we wanted for putting us through this stress and aggravation,” Smith said. 

”There’s not enough money to compensate me both emotionally and physically for what I went through,” said Smith’s wife, Lydia. 

The Smiths have hired an attorney, who traced the actions of the bank. 

”I just know they submitted a claim, and the VA paid it, and that’s all we were told,” said Latrice Latin. “The claim for the house would be the amount that they sold the mortgage for.” 

Latin confirmed the bank could be collecting more than $100,000 off fees from the VA loan. 

The Smiths still are fighting to keep their house. 

”I wrote a blank check for up to and including my life for my country,” Leder said. “And the banks and the government have screwed me out of everything.”

Citi Bank issued the following statement to to the TV station via email:  “We will decline to discuss specifics about customer accounts.  We work very hard with distressed borrowers to identify solutions to help them avoid foreclosure and remain in their homes.  Set guidelines must be followed, and it is very important that borrowers be responsive to us and provide required documents within specified deadlines.  If the information is not provided in time, viable options for the borrower may expire.  We strongly encourage borrowers to remain engaged and in contact with us from the receipt of the first letter or contact regarding the status of their account.  Timing is a critical component of our ability to provide assistance.”

Feb 2012: Military homeowners who were illegally foreclosed upon during the last five years will receive a minimum payment of nearly $117,000 plus lost equity and interest, according to a settlement reached this week between the Justice Department and the nation’s largest mortgage servicers.

The agreement comes after months of negotiation and investigation into repeated violations of the Servicemembers Civil Relief Act by some of the country’s biggest banks. JP Morgan Chase last April agreed to pay $56 million to settle claims that it overcharged active military members on their mortgages in violation of the SCRA, which insulates service members against foreclosure, excessive rate hikes and other financial obligations.

Now, Wells Fargo, Citigroup and Ally Financial will pay at least $116,785 plus additional costs to any military homeowner whose foreclosure violated the relief act. JP Morgan’s earlier settlement requires the company to return an illegal foreclosure to the homeowner and sponge any debt or pay the cash equivalent of the home’s value at the time of sale.

Additionally, Wells Fargo, Citigroup and Ally will scour internal records for violations of the SCRA’s provisions regarding interest rate increases, which cap rates for credit obligations at 6 percent. Homeowners forced to pay rates above that threshold will receive a refund with interest of the amount charged above 6 percent plus triple the amount refunded, or $500, whichever is more.

“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.”

The financial giants will also institute SCRA training programs for employees and correct any damage to a servicemember’s credit report.

The deal also featured some additional protections for military members. Under this agreement, foreclosure protection extends to servicemembers regardless of when they obtained the mortgage, as long as they were receiving Imminent Danger Pay and were stationed away from home within nine months of foreclosure.

The four servicers, along with Bank of America, will be required to offer military members forced to move because of a Permanent Change of Station loan modifications or short sale agreements along with mandatory deficiency waivers.

Mortgage companies nationwide have been under pressure for more than a year to scrutinize military mortgage accounts. A Government Accountability Office report concluded that two of the country’s largest mortgage banks improperly foreclosed on the homes of nearly 50 active duty service members.

Government regulators discovered the inappropriate foreclosures during an analysis of about 2,800 loans that went into foreclosure in 2010. Millions of foreclosures from the past few years have yet to be examined for irregularities. The GAO report didn’t identify the two mortgage companies.

Homeowners who believe their rights were violated should contact their nearest Armed Forces Legal Assistant office.