(MintPress) — As many as 300 active duty servicemembers have lost their homes or are currently in the process of foreclosure. Big banks, including Bank of America, are alleged to have illegally foreclosed on the homes of military families covered under the Servicemembers Civil Relief Act (SCRA), a piece of legislation preventing banks from foreclosing on the homes of active duty servicemembers.
Morgan Murphy, a veteran living in Alabama, alleges to be one of the victims of this growing problem. He, like many service members affected, has filed a lawsuit against Bank of America, claiming the bank wrongfully foreclosed upon his home. While Murphy served in Afghanistan, Bank of America attempted to collect outstanding debts on his home, an action that is prohibited under the Servicemembers Civil Relief Act (SCRA), amended in 2003. Murphy’s lawsuit is expected to grow considerably to include other plaintiffs suffering from similar mistreatment.
Class action suit
Murphy confirmed the terms of his mortgage with Bank of America officials before his deployment to Afghanistan in September 2010. Bank officials promised Murphy would be covered by SCRA until the end of 2012. However, during his deployment, the bank began the process of foreclosure, damaging Murphy’s credit score.
Murphy’s lawyer, Romaine Scott III, expects his client’s legal action to turn into a class action suit. Although it is unclear how many individuals will ultimately be a part of this suit, Scott III said in a recent interview, “Quite honestly, I expect it to be a pretty large number of people.”
The Government Accountability Office released a report earlier this month showing 300 known cases in which big banks wrongfully foreclosed or evicted families of active duty servicemembers. The report also named 15,000 people as victims of inflated interest rates.
The problem extends further. Last month, the Department of Justice (DOJ) announced that it had reached an agreement with Capital One which requires the bank to pay $12 million to settle violations of SCRA. The DOJ identified 4,000 people affected in the Capital One case. However, this figure is expected to rise in the coming months as more victims come forward. Those affected in the Capital One case claim they are the victims of wrongful foreclosures, car repossessions and inflated credit card interest rates.
The foreclosure crisis
The reasons for the spike in foreclosures across the U.S. continue to be debated by financial experts. Many argue that lenders misled borrowers by offering subprime mortgages to families without the financial means to make payments.
The resulting “subprime mortgage crisis,” beginning in 2008-2009, has led to hundreds of thousands of home foreclosures across the U.S. RealtyTrac.com, a website dedicated to recording home foreclosures, reports that there are currently 1.4 million foreclosure homes on the market, nearly half of which were because of subprime mortgages.
In June alone, 1 out of every 666 housing units received a foreclosure notice. The problem has prompted community members and members of activist groups to take action.
In California, where 47,490 homes were issued foreclosure notices in June, members of the Occupy movement began an indefinite, round-the-clock vigil outside Gov. Jerry Brown’s Sacramento home. The vigil began Monday and has no official end date. Participants have demanded an immediate moratorium on home foreclosures, saying:
“On Monday, we will begin a vigil with no end date in front of the governor’s Sacramento home on behalf of the millions of Californians who have lost their homes or are facing the loss of their homes through foreclosure and other distressed property actions. We want the governor to use his executive power to declare a state of fiscal emergency and an immediate foreclosure moratorium.”
The moratorium will be temporary since California homeowners will soon be covered by the Homeowner Bill of Rights, a state bill set to go into effect January 2013. The legislation prevents unfair bank practices such as “dual-track foreclosures,” a tactic sometimes used by banks to foreclose upon a home even while they are in loan modification negotiations with the homeowner.
Others, including Occupy Homes Minnesota, have taken a more direct approach by living in foreclosed homes and occupying bank lobbies in an effort to prevent foreclosures.