CitiMortgage’s $2.2M Settlement with Service Members Approved

Last week, a $2.2 million settlement that would end the class action lawsuit accusing CitiMortgage Inc. of improperly charging interest on mortgages for members of the military was approved by a South Carolina judge.

Lead plaintiff Raymond Wray alleges in his class action lawsuit that CitiMortgage adopted administrative polices and procedures when calculating interest rates for service members that violated the Servicemembers Civil Relief Act (SCRA). The plaintiff alleges that CitiMortgage used a subsidy to charge him interest in excess of the mortgage rates required under the SCRA while he served as a member of the military and therefore he lost equity in his home.

CitiMortgage argues that the allegations were false. The company contends that its method of calculating the 6 percent interest cap fell within the SCRA statute and claims that the plaintiff had reduced his principal balance faster under CitiMortgage’s subsidized program. However, CitiMortgage’s arguments were shot down in 2013. A federal judge ruled that the plaintiff’s claims were feasible and refused to dismiss the class action lawsuit.

The plaintiff and CitiMortgage reached the proposed settlement agreement in March of this year. In it, the parties proposed that each of the 4,300 Class Members receive a $150 award each. The settlement will total $2.2 million. CitiMortgage must also agree not to return to the method of subsidizing interest rates for the next two years or to employ any other method “that would be less beneficial to its borrowers,” according to the class action settlement agreement.

Last week, U.S. District Judge Cameron McGowan Currie approved the agreement. The CitiMortgage class action settlement will apply to thousands of service members who own homes across the nation. “The court finds the [settlement] was reached in good faith, based on arms’ length negotiations, and following substantial discovery and lengthy adversary proceedings,” Judge Currie wrote in the order. “There is no evidence of collusion between the parties. The court, therefore, finds that the proposed settlement is procedurally fair.”

Representatives for the Class also indicate that the settlement agreement will not disqualify military members from receiving relief under the Department Of Justice’s expansive 2012 settlement with CitiMortgage over widespread accusations that the bank’s mortgage practices violated federal law.

In February, the Justice Department revealed to the public that unlawfully foreclosed-upon military service members will receive a collective $123 million from a total of five banks that participated in the $25 billion settlement agreement with the federal government.

Wray is represented by Richard A Harpootlian and Christopher P Kenney of Richard A. Harpootlian Law Office.

The CitiMortgage Class Action Lawsuit is Raymond Wray v. CitiMortgage Inc., Case No. 3:12-cv-03628-CMC, filed in the U.S. District Court for the District of South Carolina, Columbia Division.