March 19 (Bloomberg) -- The housing finance setbacks that confronted Army Staff Sergeant Robert Bales, the soldier accused of killing at least 16 civilians in Afghanistan, are one part of his story that many U.S. troops would recognize.
Bales and his wife owned a home in Washington state she was trying to sell for less than its mortgage and another that sits empty with a “Do Not Occupy” sign from the city on the door. At one point, the couple owed more than $500,000 on the homes.
For soldiers who have been deployed to the wars in Iraq and Afghanistan, such financial pain may compound battlefield trauma, said Matthew Weidner, a Florida lawyer whose clients include service members facing foreclosure on their homes.
“There’s also a failure of the military leadership and command structure to realize the damage financial stress can cause and add to the combat stress,” Weidner, a partner in Weidner, Bowden & Weidner P.A. in St. Petersburg, Florida, said yesterday in an interview.
Last month, four of the biggest mortgage servicers agreed to a $25 billion settlement with the Justice Department to end a probe into whether they had improperly foreclosed on the homes of armed service personnel since 2006. Ally Financial Inc., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. agreed to the pact. Bank of America Corp. reached a partial settlement with the government in May 2011.
Wells Fargo, Citigroup and Ally consented to pay $116,785 plus lost equity and interest to any service member who was identified as a victim of wrongful foreclosure.
Justice Department Review
The banks also agreed to a review to be overseen by the Justice Department’s Civil Rights Division to determine whether any service member since 2008 was charged mortgage interest in excess of 6 percent after a valid request to reduce the rate. Maintaining a higher rate is prohibited under the Servicemembers Civil Relief Act.
While many soldiers have shared the burden of mortgage payments that ballooned and home values that plummeted during the housing crisis, Robert and Karilyn Bales were in a much deeper financial hole than most.
“I’ve rarely seen staff sergeants who lived in $300,000 houses,” said John S. Odom Jr., a retired Air Force judge advocate and a partner in Jones, Odom & Politz LLP in Shreveport, Louisiana.
“Other than the fact that his job was as an infantryman carrying a rifle and supervising a squad of infantrymen, he isn’t different than if he had been a lineman for the local power company,” Odom said in an interview yesterday.
Bales, 38, is being held in a military prison in Fort Leavenworth, Kansas, as he’s investigated over the shootings in two villages in southern Afghanistan on March 11.
The family’s two properties were in Washington state, within commuting distance of Joint Base Lewis-McChord, where Robert Bales was based.
The couple borrowed $506,250 on the two residential properties in October 2006, public records show -- $178,500 on a house in Auburn and $327,750 on a home in Lake Tapps. Today, the two houses have a combined assessed value of $358,100, or 29 percent less than the initial loan amounts, county records in Washington state show.
Karilyn Bales had listed the Lake Tapps home, where the family lives, as a “short sale,” for less than the mortgage balance, according to Phillip Rodocker, the real-estate agent who listed the house.
Robert Bales, who was deployed to Afghanistan in December, had departed for the third of his three deployments to Iraq in August 2009 just as the house the couple rented out in Auburn was about to be auctioned at the entrance to the King County, Washington, administration building.
The Bales owed $15,644.19 on the house plus $1,333.46 in trustee’s fees, according to the auction notice. The auction subsequently was canceled without explanation. A Bank of America filing in King County, in August 2011 said the couple was $16,978 in arrears on the rental property.
The house sits vacant and banned for occupancy by the city.
The Obama administration has said it is cracking down on mortgage companies, banks and other financial institutions that have broken U.S. laws aimed at protecting military personnel from predatory lending and foreclosure proceedings while they are deployed.
“I continue to hear stories of service members and veterans being ripped off by businesses that see our troops as easy targets for a quick profit,” Holly Petraeus, associate director of the Consumer Financial Protection Bureau’s Office of Servicemembers’ Affairs, said at a Jan. 25 press conference in Washington. Petraeus is the wife of retired Army General David Petraeus, now director of the Central Intelligence Agency.
The Consumer Financial Protection Bureau has set up a Repeat Offenders Against Military Database to track companies and individuals that repeatedly target the military community.
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