Wells Fargo settled a similar class action lawsuit on military foreclosures for $10 million and instituted a modification program. So did Saxon Mortgage, a division of Morgan Stanley. And Bank of America’s program for military personnel reduces principal to 100% of the current market rate. This is particularly notable, since just a day before instituting the program, Bank of America CEO Brian Moynihan rejectedprincipal reductions for the bank’s underwater borrowers, calling them “unworkable” and unfair. Moynihan stated, “There’s a core problem that if you start to help certain people and don’t help other people, it’s going to be very hard to explain the difference.”
Yet that’s what the entire mortgage industry is doing. And the reason for it is simple. The banks know that the military is one of the only widely respected institutions left in the country, and well-publicized instances of abuse of service members will cause a far bigger backlash than they have experienced to this point. What’s more, evidence of wrongful foreclosures on the military will lead to further scrutiny of their actions with other borrowers.
This is what you could call “camo-washing,” similar to the greenwashing that corporations employ to create an appearance of attentiveness to environmental issues. The banks bend over backwards for the benefit of members of the military they have wronged, to distract from the fact that they’re not doing the same for millions of others. It also works to enhance their public image, positioning them as sympathetic and responsible, willing to make good when they screw up.
But the logic is lacking. Banks are fighting any settlement to the foreclosure fraud scandal that forces them to pay penalties to their borrowers. But they’re showering service members with money and free homes. All the attention and care paid to military foreclosures simply underscores the fact that next to nothing is being done with all the wrongful foreclosures on everyone else. Almost three million families will get a foreclosure notice this year, just about the same number as last year and in 2009. But the banks are focusing on a small handful of military foreclosures.
Nobody denies that foreclosing on members of the military while they serve overseas is particularly egregious. But hardworking civilians duped into loans, ravaged by an economic meltdown and stonewalled in their effort to save their homes are not somehow less deserving than the men and women on the front lines.