Bank of America to pay military members $36M in foreclosure settlement

Bank of America will pay roughly $36.8 million to military members whose homes were illegally foreclosed upon from 2006 to 2010, the U.S. Justice Department announced this week.

The money will be paid under a settlement the department reached in 2011 with BAC Home Loans Servicing LP, a Bank of America subsidiary, for alleged violations of the Servicemembers Civil Relief Act. The act makes it illegal to foreclose on the homes of members of the military while they are on active duty unless the lender gets court approval. The act also requires lenders to lower mortgage interest rates to at least 6 percent for members of the military while they are on active duty.

Under the settlement, the military members will each be given at least $116,785 -- plus compensation for any lost equity, including interest.

Bank of America has already started compensating 142 service members whose homes were illegally foreclosed on from 2006 to the middle of 2009, the Justice Department said. The bank will also provide payouts to 155 military members who were victims of illegal foreclosures from mid-2009 to the end of 2010.

In 2012, the Charlotte-based bank was one of five big mortgage-servicing companies that entered into what was dubbed the National Mortgage Settlement with the Justice Department over foreclosure abuses affecting all types of borrowers, not just members of the military. Wells Fargo, Citibank, JPMorgan Chase and Ally Financial are the other four banks involved in that settlement.

The Justice Department this week said that, under the national settlement, it is conducting an ongoing review of the five banks' practices to pinpoint any violations of the Servicemembers Civil Relief Act that might have occurred during Jan. 1, 2006, to April 4, 2012.

The $36.8 million in payments by Bank of America to the 297 military members represents only nonjudicial foreclosures, meaning those that don't require court approval.

"As the National Mortgage Settlement audits progress, the Justice Department will be requiring payments by Bank of America for judicial foreclosure and interest rate violations and by the other four servicers for judicial and nonjudicial foreclosure and interest rate violations," the department said.