JPMorgan Chase, one of the lenders criticized over improper foreclosures on military families' homes, has agreed to pay $56 million to settle claims it overcharged members of the military on their mortgages.
JPMorgan will pay $27 million in cash to about 6,000 active-duty military personnel who were overcharged on their mortgages, cut interest rates on soldiers' home loans and return homes that were wrongfully foreclosed upon, according to settlement terms filed in federal court in Beaufort, S.C.
JPMorgan officials said three months ago that one of the bank's units had made errors in the handling of mortgages covered by the Servicemembers Civil Relief Act. That law was enacted in 1942 to shield deployed military personnel from financial stress.
"We are sorry and regret the mistakes our firm made on mortgages for members of the military," Frank Bisignano, a JPMorgan official appointed to oversee the company's home-lending unit in February, said in an emailed statement.
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In February, JPMorgan officials said they returned 10 homes to families protected by the law that were found to have been taken improperly in foreclosure actions. The service-members law requires enhanced reviews of soldiers' mortgages and payment histories before such actions are undertaken. JPMorgan officials said at the time that its mortgage unit didn't provide the required review to a total of 18 military families whose homes were foreclosed upon.
The bank said in January it would pay about $2 million to about 4,500 service members after discovering they'd been overcharged on their JPMorgan mortgages.
The service-members law allows soldiers to demand mortgage interest rates be set at 6 percent while they are on active-duty status. The law applies to current loans and those taken out by troops prior to being deployed.
JPMorgan executives discovered the errors after Marine Capt. Jonathon Rowles, a fighter pilot, sued the bank in federal court in South Carolina last year over the mortgage unit's handling of his $255,000 loan.
Under the terms of the settlement, Rowles and an estimated 6,000 other service personnel whose mortgage accounts were mishandled will split $27 million in cash, according to court filings. That will provide an average payout of $4,500 per person. Recoveries in the cases will vary based on service members' individual damage claims.
The accord also calls for JPMorgan to cut interest rates on all mortgages held by deployed troops to 4 percent for one year, the filing shows.
The lender has agreed to return houses that have been improperly foreclosed upon and not yet sold and to pay fair market value for those already auctioned off, according to the filing.
It also will forgive any remaining mortgage debt of military borrowers who were protected by the law and mistakenly foreclosed upon.