Just in time for Memorial Day, Bank of America agreed to pay millions of dollars to settle claims that it wrongfully foreclosed on the homes of scores of active-duty service members. As the Charlotte Observer reported in the article entitled, "Bank of America Unit To Pay $20 Million Over Military Foreclosures , Countrywide Financial, which BOA acquired in 2008, foreclosed upon approximately 160 service members while they were serving overseas. A lawsuit filed by the Department of Justice in federal court in California alleged that BOA violated the Civil Relief Act by failing to consistently check on the military status of borrowers before initiating foreclosure proceedings. The DOJ began investigating BOA after U.S. Marine Corps referred a case involving a service member facing foreclosure by Countrywide.
Under the terms of the settlement, BOA agreed to: (1) establish a $20 million fund to compensate service members; (2) pay all costs associated with any homes that were foreclosed upon without court orders between June 1, 2009, and Dec. 31, 2010; and (3) undertake corrective actions, including starting a dedicated customer service unit for service members and a loan balance reduction program for military members who are behind on their payments.
As the article notes, this settlement is only the latest Countrywide-related problem for BOA. The bank is also one of the many banks considering a settlement with various states attorneys general related to various mortgage servicing errors. Most of BOA’s issues arise out of loans originated by Countrywide before BOA purchased the California-based lender as it teetered on the brink of collapse.
Prior to the BOA settlement, the Justice Department settled with both Morgan Stanley and JPMorgan Chase % Co. over similar allegations. Morgan Stanley, which agreed to pay $2.36 million as part of its settlement, allegedly foreclosed on approximately 18 service members without court orders. JPMorgan, which agreed to pay $27 million, acknowledged that it overcharged approximately 6,000 service men and women who were overcharged on their mortgages. JPMorgan also agreed to cut interest rates on soldiers' home loans and return homes that were wrongfully foreclosed upon. Finally, both banks issued statements apologizing to the U.S. military personnel for their actions.