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Citigroup Military Loan Borrower Shut Out of Settlement

A retired Army sergeant who accused a Citigroup Inc. unit of overcharging military personnel on home loans was barred by a judge from joining a $20 billion national settlement with the five largest U.S. mortgage servicers over botched foreclosures.

U.S. District Judge Rosemary Collyer in Washington ruled today that Raymond Wray’s complaint came too late and allowing him to participate could imperil the agreement reached in February 2012 by the federal government and 49 states with the nation’s five largest mortgage servicers.

Citigroup has finished paying its portion of the settlement to borrowers, a court-appointed monitor said today in a statement. The banks gave an additional $5 billion to states for use in mortgage relief as they saw fit.

“The motion to intervene is untimely because it would interfere with a large and complex settlement that had been in effect for 20 months before Mr. Wray filed his motion,” Collyer wrote. “A district court acts within the bounds of its discretion when it chooses to deny intervention to avoid the risk of undoing a hard-won settlement.”

Wray asked to intervene in the settlement as an outgrowth of a lawsuit he filed in 2012 in federal court in Columbia, South Carolina, alleging that Citigroup overcharged active-duty service members by failing to apply the proper mortgage-amortization rate.

Cap, Subsidy

Under the Servicemembers Civil Relief Act, or SCRA, active-duty military personnel can demand banks cap their mortgage interest and amortization rates at 6 percent. While Citigroup officials agreed to cap the interest rates for military customers, the bank refused to “re-amortize loans in excess of 6 percent,” Wray’s lawyers said in a Dec. 24 filing. Instead, the bank applied an “interest subsidy” as a credit toward the service member’s monthly payment, according to the filing.

Service members who didn’t receive their SCRA reduced interest rates will be offered payments negotiated for them under terms of the settlement, according to Collyer’s ruling.

The settlement was reached “without consulting a single service man or woman in uniform,” said Wray’s lawyer, Richard Harpootlian.

Wray is seeking to have his South Carolina suit certified as a class action covering more than 15,000 soldiers, sailors, Marines and Air Force personnel who got Citigroup loans, Harpootlian said in a phone interview.

‘Steamroll Them’

By denying Wray’s request to intervene in the mortgage settlement, Citigroup will be able “steamroll them into a bad deal” because service members won’t be notified of Wray’s South Carolina suit which could potentially offer them better terms, Harpootlian said.

Liz Fogarty, a spokeswoman for New York-based Citigroup, didn’t immediately respond to a phone message seeking comment on today’s ruling.

The four other lenders involved in the nationwide foreclosure-practices settlement were Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and Ally Financial Inc.

The foreclosure settlement case is U.S. v. Bank of America Corp., 12-00361, U.S. District Court, District of Columbia (Washington). Wray’s case is Wray v. CitiMortgage Inc., 12-cv-3628-CMC, U.S. District Court, District of South Carolina (Columbia).

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