Source - Bloomberg
A unit of Morgan Stanley, the sixth-largest U.S. bank by assets, and other lenders are under investigation by the Justice Department for allegedly overcharging soldiers and foreclosing on their homes without court orders.
“The Civil Rights Division has an ongoing investigation into Saxon Mortgage and other lenders as well as authorized lawsuits against lenders for violations of the Servicemembers Civil Relief Act, specifically for overcharging and foreclosing against the homes of servicemembers without court orders,” Xochitl Hinojosa, a government spokeswoman, said yesterday in an e-mailed statement. Saxon is a subsidiary of Morgan Stanley.
The investigation was revealed in a court document filed last week in a lawsuit brought in federal court in Grand Rapids, Michigan, by U.S. Army Sergeant James Hurley. He served in Operation Iraqi Freedom starting in 2004, and lost his home through an eviction proceeding in 2005 while still in Iraq.
Morgan Stanley acquired Saxon in 2006 for $706 million. The lender used the Fort Worth, Texas-based company for mortgages that it packaged into securities.
The case is Hurley v. Deutsche Bank Trust Company Americas, 08-cv-00361, U.S. District Court, Western District of Michigan (Grand Rapids).
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Video - Today Show - Jan. 17, 2011
A Chase official tells NBC News that 4,000 U.S. service members may have been illegally overcharged on their mortgages and that as many as 14 military families were wrongly foreclosed on.