Feds investigate banks after SCRA complaints - Military News | News From Afghanistan, Iraq And Around The World - Military Times

Feds investigate banks after SCRA complaints

The Justice Department’s Civil Rights Division is investigating JPMorgan Chase, Saxon Mortgage Services and other lenders for alleged violations of the Servicemembers’ Civil Relief Act.

The investigations involve allegations of overcharging on mortgage fees and foreclosing on service members’ homes without court orders, according to Justice Department spokeswoman Xochitl Hinojosa.

Justice officials have authorized lawsuits against some lenders for violations, but Hinojosa declined to provide further information.

Under the SCRA, homes with mortgage contracts that pre-date a service member’s entry onto active duty cannot be foreclosed on during that active duty or within nine months after release from active duty without a court order.

The Justice investigation of Saxon Mortgage Services surfaced during federal district court proceedings in the Western District of Michigan the week of March 7, in which a settlement was reached involving the alleged improper foreclosure of the home of Army National Guard Sgt. James Hurley in 2004. Hurley sued Deutsche Bank and Saxon Mortgage, which was acquired by Morgan Stanley in 2006.

According to information brought out in court, “there are 23 families out there who may be entitled to significant compensation because of improper foreclosures by Saxon Mortgage,” said Louisiana attorney and retired Air Force Col. John Odom, who represented Hurley along with Michigan attorney Matthew Cooper.

“The word needs to get to these people,” Odom said. “If you had a pre-service mortgage obligation and while you were on active duty a nonjudicial foreclosure took place, you may have legal recourse. You need to contact your legal assistance office.”

More than two years ago, a Justice Department official told Military Times that officials were aware of the Hurley case and were reviewing it, describing it as “pretty significant SCRA case.” The Civil Rights division has been investigating violations of the SCRA since that duty was transferred to it in 2006.

JPMorgan Chase officials declined to comment on the investigation. The company has admitted it found during an internal review that it overcharged several thousand troops on their mortgage loans, and had improperly foreclosed on 18 service members’ homes without going to court.

The lender has taken steps to compensate the service members, and is in the process of settling a lawsuit filed by Marine Capt. Jonathon Rowles and two other service members alleging Chase Home Finance violated their SCRA rights. Chase has also revised its policies to provide more direct services to military personnel.

Saxon officials declined to comment on the Justice Department investigation, a spokesman said. He said Saxon has revised its policies and procedures to ensure compliance with SCRA, and to search the Defense Department’s SCRA database to independently verify active-duty status before referring loans to foreclosure, and again prior to actual foreclosure sales.

The case against Deutsche Bank and Saxon Mortgage

Hurley lost his home in 2004 when a bank foreclosed on his house after he received active-duty orders. A sheriff’s sale was held in which the bank bought the property, then sold it to another person. Later, after Hurley had deployed to Iraq, Hurley’s wife and two toddlers were evicted. He later sued Deutsche Bank Trust and Saxon Mortgage Services for violation of his SCRA rights.

Details of the settlement were not available, but “the Hurleys are well pleased,” Odom said.

“We are very pleased to have settled this matter with Sgt. Hurley,” said officials with Saxon Mortgage Services, in a statement. “As we have said previously, Saxon is always willing to make reasonable accommodations to amicably resolve a matter, especially for our service men and women.”

Hurley’s property will not be returned to him, Odom said.

When attorneys questioned the current owner of the property in a deposition last December, “he said the bank had never contacted him about purchasing the property so it could be deeded back to Hurley,” Odom said.

A year ago, Judge Gordon Quist reversed his earlier ruling and issued a summary judgment in favor of Hurley and against Deutsche Bank and Saxon Mortgage, ruling that the bank had violated his rights under the SCRA, and ruling that Hurley may seek punitive damages.

“The loan servicers, and not trustees, initiate and manage all foreclosures,” said Deutsche Bank spokesman Scott Helfman.

He said the bank has no comment on the settlement, “given that the bank was not involved in the original decision to foreclose or any of the ensuing litigation.”

Odom disagreed, noting that the court had entered a summary judgment against the bank a year ago. He said Deutsche Bank purchased the Hurley property at the illegal nonjudicial foreclosure sale in October 2004. He also noted that Deutsche Bank — not Saxon Mortgage — was the plaintiff in the eviction proceeding of Hurley’s family, and Deutsche Bank also was the vendor when Hurley’s property was illegally sold to the third-party purchaser.