Housing Bail-Out Arrives for One Group of Americans: Soldiers and Vets

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Call it a war on foreclosure wrongs. The $25 billion foreclosure abuse settlement announced last month between a group of state governments and the largest mortgage banks in the country is meant to help homeowners everywhere who were wronged by foreclosure abuses. But it targets one group very specifically: members of the armed forces.

Active military employees have historically enjoyed special housing protections, the idea being that someone on the front lines might be a little too busy to remember to mail a mortgage payment. But in the newest initiative, announced Tuesday, members of the armed forces who were having their mortgages serviced by four of America’s largest mortgage lenders, and foreclosed upon after 2005, are having their cases reviewed. Servicemembers who were found to have been the victims of wrongful foreclosure will be granted a settlement of $116,785, plus lost equity, plus interest. The banks involved include Ally, Citi, JP Morgan Chase, and Wells Fargo. (The government had already reached a separate settlement with Bank of America, another prominent lender.)

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The Obama administration has consistently refused to quantify how many Americans were the victims of improper foreclosure actions, such as robo-signing, where foreclosure paperwork was processed before having adequate legal review. A report last year in USA Today noted that 20,000 military members and veterans lost their homes to foreclosure in 2010. With foreclosures abuses rather commonplace throughout the general populace — a report by Aequitas Compliance Solutions for the San Francisco assessor found that 59% of the proceedings in a sample had mis-dated or back-dated paperwork — it’s likely that relief under this wrongful foreclosure provision will extend to thousands of families.

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Separately, servicemembers who had asked for modifications to interest rates of above 6%, and did not receive them, will be granted rate relief of at least four times the amount of the overcharges.

Both programs are being overseen by the U.S. Department of Justice as part of its administration of SCRA, the Servicemember Civil Relief Act.

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In addition, servicemembers who were forced to move after 2006 because of a change in posting are granted broader relief, such as greater access to loan modifications and deficiency waivers, which are agreements from the bank that the borrower will not continue to be pursued for monies owed in the case of a short sale.

Separate from this settlement, the government has announced a budget request of an additional $333 million to combat homelessness among veterans, part of an initiative to end homelessness among vets by 2015. Estimates from the National Alliance to End Homelessness are that about 67,000 veterans are on the streets, which means that currently, one out of every eight homeless persons is a vet. The funding would go toward transitional housing, hiring fairs, and coordinators who help veterans with housing problems and disability claims.