New York Said to Investigate Home Foreclosures on Active Military Members

The New York Attorney General’s Office is investigating possibly unlawful home foreclosures by banks on active-duty military members, according to a person familiar with the matter.

The inquiry by New York Attorney General Eric Schneiderman is part of his broader investigation into the mortgage operations of major banks, said the person, who declined to be named.

Schneiderman is conducting his probe as state attorneys general and federal officials are negotiating a settlement with mortgage servicers that’s intended to provide mortgage relief to homeowners and set requirements for how the companies carry out foreclosures.

The Justice Department in May announced a settlement with Bank of America Corp. (BAC) and Saxon Mortgage Services Inc. to resolve allegations that the companies wrongfully foreclosed on active-duty service members without first obtaining court orders in violation of the Servicemembers Civil Relief Act.

A federal review of bank foreclosure practices earlier this year found cases in which foreclosures should not have proceeded because the borrower was covered by the SCRA, which protects individuals in military service.

Schneiderman and Delaware Attorney General Beau Biden, who is also investigating mortgage practices of banks, said in a column in Politico said there has been “widespread failure” to adhere to the requirements of the SCRA.

Banks, meanwhile, are taking steps to comply with consent orders requiring them to fix problems in their mortgage- servicing and foreclosure practices, the U.S. Comptroller of the Currency said in a Nov. 22 report. Much of the work to correct weaknesses in policies and procedures will be “substantially complete” in 2012, the OCC said.

Lauren Passalacqua, a spokeswoman for Schneiderman, declined to comment. The office’s investigation into foreclosures on service members was previously reported by the Financial Times.

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net;

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.

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