In addition to a plan announced earlier this week to give millions of homeowners a break on the mortgage fees they pay every month, President Barack Obama and his administration also announced that they would step up efforts to help servicemembers who were wrongfully foreclosed upon in the last few years.
The White House recently revealed the terms of a massive settlement between the federal government and some of the nation’s largest mortgage lenders, many of whom wrongfully foreclosed on servicemembers in recent years, according to a report from American Forces Press Service. The settlement – which will see five lenders pay a total of $26 billion to the federal government, with at least $20 billion being returned to homeowners – was originally announced on February 9 but more details have since been announced.
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For example, lenders, under the supervision of the federal government, must review the records for every servicemember whose home was foreclosed upon since 2006 and provide any who were hit with these actions improperly with compensation of at least $116,785, but equal to lost equity, plus interest. In addition, lenders will have to refund any money servicemembers paid because they were wrongfully denied access tolower mortgage rates.
Further, servicemembers who were forced to sell their homes in a short sale – in which they received less than they owed on the property – due to a permanent change in station will also receive some relief, the report said. The banks will also pay $10 million into a Veteran Affairs fund that guarantees loans on favourable terms, and must extend foreclosure protections under the Servicemember Civil Relief Actto those serving in harm’s way.
“These new steps are the result of an extensive interagency effort made by this administration to protect and support service members and veterans, and this initiative will help military families overcome obstacles to purchasing and maintaining a home,” defence Secretary Leon Panetta said, according to the report. “I thank the president for ensuring that our service members receive the support they need so they and their families can pursue their dreams while carrying out their vital missions around the world.”
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The lenders’ settlement came after an investigation from 49 states’ attorneys general as well as the federal government, which alleged abuses in the way the five largest mortgage issuers dealt with consumers during and immediately following the recession.