Lenders under scrutiny for overcharging troops on their mortgages
Banks to pay damages to servicemembers who were overcharged on interest payments
Under the Service-members Civil Relief Act, rights are given to individuals who take out a mortgage loan before prior to the date of mobilization of a National Guard or Reservist or prior to when an active-duty service member joins the military.
The Act caps mortgage rates at 6% and allows any excess interest to be forgiven as of the effective date of mobilization for Guard or Reservists, or the beginning date of active-duty service.
To qualify for rights under the Act, the service member must provide written notice of the request for relief pursuant to the Act, along with a copy of their official orders.
Unfortunately, despite the rights guaranteed under SCRA, various lenders have committed a number of violations of service members’ rights. JPMorgan Chase will pay more than $2 million to approximately 4,000 service members who were overcharged interest and did not have their interest rates reduced under SCRA.
It is also alleged by service members that Chase engaged in aggressive collection methods by threatening to foreclose on their property and for inaccurate accounting. Approximately 14 military families were improperly foreclosed on by Chase, who is currently in the process of getting those families back into their homes.
Deutsche Bank has also been accused by a service member of illegally foreclosing on his home in 2004 in violation of SCRA, The New York Times reported last week.
However, Deutsche Bank is still in court disputing whether the service member is owed any compensatory or punitive damages as a result of the illegal foreclosure.
It was reported that the attorneys completing the foreclosure were made aware of the service member’s active-duty service several months after the foreclosure sale took place, and did not act to ensure the foreclosure had been conducted legally or take steps to prevent the property from being sold to another party.
Currently, Sens. Jack Reid (D-RI) and John Kerry (D-MA) have asked for federal investigations by the Justice Department and the Federal Reserve to look into the possibility of improper banking practices by lenders regarding mortgage protections guaranteed by the SCRA.