A total of 952 members of the U.S. armed forces will receive $123.4 million from a settlement with five mortgage servicers announced Monday by the U.S. Justice Department.
The payments will be made under a federal law protecting service members from foreclosures, in conjunction with the $25 billion nationwide mortgage settlement reached in February 2012.
Under the National Mortgage Settlement, 666 service members and their co-borrowers will receive $88 million from JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial. Another $35 million already was paid out to 286 service members and their co-borrowers from Bank of America from a 2011 settlement.
The lenders had been accused of violating the Servicemembers Civil Relief Act, which prohibits non-judicial foreclosures against service members who are on or recently left active duty, and took out their mortgages before their service began. The foreclosures at issue took place between Jan. 1, 2006 and April 4, 2012, the Justice Department said.
A non-judicial foreclosure allows a bank or mortgage servicer to sell the home without having to file a lawsuit against the owner. A "notice of default" is issued and the home is then sold at public auction.
"These unlawful judicial foreclosures forced hundreds of service members and their families out of their homes. Service members should never have to worry about losing their home to an illegal foreclosure while they are serving our country," Acting Associate Attorney General Stuart Delery said in a statement.
The banks have cooperated with the government to compensate affected service members, the Justice Department said. The service members will receive $125,000 plus any equity in the lost property and interest on that equity under the settlement from the lawsuit. Co-borrowers will receive compensation for any of their share of lost equity.