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26 Aug 2012

Colorado Springs Foreclosures on Military Members May Be Illegal

A report released recently by the federal Government Accountability Office indicates that more than 300 members of the military had their homes illegally foreclosed upon in the last few years.

Our Colorado Springs foreclosure lawyers know that there are special protections in place specifically for members of the armed forces. Unfortunately, sometimes those rules are not properly applied by banks and mortgage lenders - which is why these soldiers will need someone who will fight for them.


Here's what is happening:

The Servicemembers Civil Relief Act, or SCRA, sets forth a number of provisions to protect those in the armed services from being unfairly closed upon, particularly while they are serving active duty assignments overseas.

Those protections include:

  • An interest rate cape and reduction set at 6 percent if the borrower is on active duty and has requested a lower rate. The rate is capped for an additional 1 year after the soldier comes back from active duty.
  • Unlike civilian foreclosures, mortgage lenders have to receive court approval before foreclosing on a military member's home.
  • If a foreclosure suit is filed, mortgage lenders have to notify the court if the borrower is an active duty servicemember.

However, despite these protections, the mortgage companies are not following through. Mortgage lenders either aren't noting when a homeowner is on active duty, or even when they are, the terms are ignored anyway.

Soldiers face unique challenges with a foreclosure because when they are assigned to a different base, they can't sell their old home. As in a lot of cases these days, they may owe more than the home is worth.

Soldiers who are moved to a new base are supposed to automatically receive approval for a short sale if the home was bought prior to the end of June and the loan was owned by either Freddie Mac or Fannie Mae.

Also, earlier this year, the U.S. Justice Department reached a deal with four major lenders - Citigroup, Wells Fargo, Ally Financial and JPMorgan Chase - regarding wrongful foreclosures against servicemembers. Any soldier who was wrongfully foreclosed upon is entitled to a minimum payment of about $117,000. Compare this to non-military borrowers, who under the recent $25 billion settlement agreement reached with 49 states' attorneys general, receive about $2,000.

Stephen H. Swift

Managing Attorney
Law Office of Stephen H. Swift, P.C.

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