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GAO Report Finds Banks Illegally Foreclosed on About 50 Servicemembers' Homes

May 6, 2011

Recently, JP Morgan Chase paid $56 million to settle a class-action lawsuit alleging widespread misconduct in handling the mortgages of active-duty soldiers, sailors, airmen and Marines. That lawsuit alleged the bank had overcharged borrowers and in some cases foreclosed on them incorrectly in violation of the Servicemembers Civil Relief Act. The SCRA entitles people on active duty to request lower interest rates on mortgages, and forbids foreclosures and certain other civil actions against them. Chase later said it had identified just under 30 families who were foreclosed in violation of the law. So our Rubidoux foreclosure defense attorneys were very interested to see a new federal report that identified nearly 50 foreclosures made in violation of the SCRA.

The report comes from the Government Accountability Office, which looked at the SCRA as part of a larger review of federal regulators' oversight of "robo-signing." In its review of loan servicers' mistakes, the GAO mentioned finding "almost 50 instances" of foreclosures started against active-duty servicemembers who should have been protected by the SCRA. That number came from a review of about 2,800 loan files, and the GAO said the nearly 50 cases came exclusively from two lenders. It did not identify those lenders, but said the mistake raises concerns about servicers' internal controls. Five Senators, all Democrats, reacted with a letter to banking regulators asking for national loan servicing standards and calling active-duty foreclosures "egregious."

As Oceanside foreclosure defense lawyers, we hope this case brings new life to the issue of loan servicers failing to determine whether they even had the right to foreclose. When the story broke, banks claimed there were no or very few cases where the underlying foreclosure was not justified by the facts, but that assertion has been proven wrong several times now. These SCRA cases may be the most widespread type of wrongful foreclosure coming from robo-signing. If the GAO's numbers hold up nationally, about 1.7 percent of all military foreclosures were in violation of the SCRA. It's not clear how many of the nation's millions of mortgages belong to active-duty military personnel, but the number of illegal foreclosures could be in the thousands. Each one represents a family that is already struggling with the financial and emotional stresses of deployment overseas.

At Howard Law PC, we represent Californians of all backgrounds who are fighting their lenders and loan servicers for a fair chance at avoiding foreclosure. That includes people who are currently or were once in the military, who are especially hard hit by the foreclosure crisis. Our Seal Beach foreclosure defense attorneys hear frequently from people who have tried for months to have their applications considered for a loan workout, only to be asked for yet more paperwork, new paperwork not previously requested or to send it again because the servicer "lost" it. We do not believe that this is the natural behavior of successful banks; we believe lenders do this because it helps them make more money than they would if they were honest. We help our clients sue to stop foreclosures caused or exacerbated by mistreatment, egregious mistakes and violations of the law.

If you've been trying to work with your bank for months on a loan workout and gotten the runaround instead, Howard Law can help. For a free, confidential case evaluation, send us a message through our website or call our Anaheim office at 1-800-872-5925.