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Bank of America and Morgan Stanley settle military foreclosure cases

May 26, 2011|Reuters

Washington — Units of Bank of America Corp. and Morgan Stanley have agreed to pay more than $22 million to settle charges that they improperly foreclosed on active-duty members of the U.S. military, the Justice Department said Thursday.

The Bank of America unit, which was part of Countrywide Financial, will pay $20 million to resolve allegations it foreclosed on the homes of about 160 service members between January 2006 and May 2009 without court orders, the Justice Department said.

Saxon Mortgage Services Inc., part of Morgan Stanley, will pay $2.35 million to resolve allegations that it did the same to about 17 service members between January 2006 and June 2009, the government said.

Both companies will compensate other members of the military who were foreclosed on without a court order during the period from the end of the settlement time frame through 2010, the Justice Department said.

In both cases, Countrywide and Saxon did not regularly check whether the borrower was an active-duty member of the military. Some of those who faced foreclosure on their homes were serving in the U.S.-led wars in Iraq and Afghanistan.

The Countrywide investigation was prompted when a member of the U.S. Marine Corps reported the problem after facing foreclosure. The Saxon probe began after a sergeant also complained to authorities.

Bank of America bought Calabasas-based Countrywide in 2008 as the U.S. housing market was imploding and homeowners around the country began defaulting on their mortgages. A BofA executive said that the errors were unacceptable and that the bank regretted the mistakes.

"While most cases involve loans originated by Countrywide and the improper foreclosures were taken or started by Countrywide prior to our acquisition, it is our responsibility to make things right," BofA Executive President Terry Laughlin said in a statement.

The bank has set up a dedicated unit to handle military borrowers and has instituted a program to help those who are behind on their payments and leaving active duty.

Morgan Stanley also offered an apology to the families.

"Our servicemen and women deserve the highest level of customer service. Saxon has taken meaningful steps to ensure it has appropriate policies and procedures in place to comply fully with" the law, Morgan Stanley said in a statement.

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