December 1st, 2011
Econintersect: A 2003 U.S. law requires mortgage service processors must follow special procedures when foreclosing on homes belonging to active-duty members of the armed forces and their families. It is a common practice under laws of many states for a summary default judgment to be issued and the property immediately seized when a borrower does not show up in court. Obviously active-duty servicemen will have difficulty attending court sessions, especially those overseas. This is one of the problems addressed by the 2003 law. According to a report in the Financial Times, the OCC (Office of the Comptroller of the Currency) is reviewing nearly 4,500 foreclosures involving service member homes for possible violations.
Tuesday (November 29) Shahien Nasiripour reported in the Financial Times that the New York Attorney General has launched an investigation into legality of foreclosure actions against active military in the state. According to the article the active military question is only one of a wider range of mortgage servicing practices being investigated.
The following table is a summary of the foreclosure cases using data from the Financial Times.
Outcome expectations for these investigations vary. From the Financial Times:
Samuel Wright, a retired member of the US Navy and director of the Service Members Law Center, said it was likely that the banks may be undercounting the number of possible evictions of US military members, adding that foreclosures on military families were “pretty prevalent” given the number of complaints he has fielded from active-duty military members.
The months-long reviews by the banks’ consultants could determine that the foreclosures were done in full accordance with the law, and that none of the military borrowers were harmed.
John Odom Jr, a Louisiana lawyer who represents members of the military in litigation against financial institutions, said he was doubtful banks would admit to unlawful foreclosures.
“You’ve got institutions that don’t understand what the law says doing self-investigations and self-policing,” Mr Odom said. “I have very, very, very low levels of confidence that they’re going to do this right.”
Dylan Ratigan, in a post at Naked Capitalism, suggests that violations of the law in this case would be a perfect situation to seek criminal prosecution of the banks and the mortgage servicers.