updated 5/26/2011 6:30:15 PM ET 2011-05-26T22:30:15

Two mortgage lenders will pay more than $22 million combined to settle federal civil charges that they improperly foreclosed on 178 military personnel, some of whom were serving in the Iraq or Afghanistan wars.

Subsidiaries of Bank of America Corp. and Morgan Stanley failed to obtain court orders before imposing the foreclosures between 2006 and 2009, the Justice Department said Thursday. The cases will result in an average of $125,562 in payments per person. The foreclosed homes were in 22 states.

The settlement is "easily the largest amount recovered" in a case of improper military foreclosures, said Thomas E. Perez, an assistant attorney general.

"The men and women who serve our nation in the armed forces deserve, at the very least, to know that they will not have their homes taken from them wrongfully while they are bravely putting their lives on the line on behalf of their country," Perez said.

Among those foreclosed upon were several service members who had been wounded or who suffered from post-traumatic stress disorder, officials said. One involved an Iraq war veteran who was foreclosed upon while he was receiving counseling for nightmares and "nervous conditions" stemming from his service.

Under the settlement, Perez said, the lenders agreed to create additional mortgage loan protections for military personnel.

The Bank of America subsidiary, BAC Home Loans Servicing, formerly known as Countrywide Home Loans Servicing, and the Morgan Stanley subsidiary, Saxon Mortgage Services, also agreed to look into possible cases of improper foreclosures from the summer of 2009 through 2010.

The law the lenders were accused of violating, the Servicemembers' Civil Relief Act, provides protections to military personnel. Under the law, they can't be evicted and creditors can't seize their property while they're on active duty.

The Justice Department began its investigation earlier this year after separate inquiries from the U.S. Marine Corps and Sgt. James Hurley, whose home in Hartford, Mich., was foreclosed upon by Saxon in 2005 while he was in Iraq. Hurley settled with Saxon earlier this year for an undisclosed amount.

Foreclosure cases involving military personnel serving overseas began coming to light in 2005. Last month, New York-based JPMorgan Chase agreed to settle a class-action lawsuit for more than $60 million. The case involved a Marine Corps captain who said JPMorgan overcharged its military customers who took out mortgages with the bank.

Earlier this year, JPMorgan acknowledged that it had overcharged about 4,000 service members on mortgages and had wrongfully foreclosed on 14 of them. At the time, it paid $2 million to those affected and reversed the foreclosures.

Federal officials say they're working to provide greater financial protections for military families. A federal office dedicated to military financial issues, the Office of Servicemember Affairs, was launched in January and is to be incorporated within the newly created Consumer Financial Protection Bureau.

Previous coverage from NBC News:

Story: Overcharges on soldiers' mortgages investigated
Story: Chase pulls about-face on military loans
Story: JPMorgan to make amends with military clients

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Video: Bank accused of mistreating military families

  1. Closed captioning of: Bank accused of mistreating military families

    >> of the nation's biggest banks, jpmorgan chase is admitting it over charged military families for mortgages including families of troops fighting overseas. lisa miers joins us with exclusive details on this. good morning.

    >> good morning, ann. a chase official acknowledges that what happened here is grim and that some families were wrongly foreclosed on. the bank appears to have repeatedly violated a law designed to protect members of the military and their families from financial stress while in harm's way. this may never have come to light but for a marine captain and his wife.

    >> we love you, honey.

    >> love you, too. i miss you guys a lot.

    >> reporter: these days julia and jonathan, an f-18 pilot conducting missions in asia, talk mostly via skype. always part of the conversation. their two children and their endless battle with chase .

    >> it's a nightmare. it's been my living nightmare.

    >> reporter: the saga began in 2006 when rolls went on active duty . by law, active duty troops generally get the interest rate lowered to 6% and are protected from foreclosure. but chase took months to lower the rate. initially overcharging the family. they say by as much as $900 a month. then two years ago, they say chase began hitting them with collection calls, which escalated.

    >> this is sandy with chase home finance --

    >> reporter: sometimes three a day, claiming they owed as much as $15,000.

    >> saturday and sunday, middle of the night , did not matter if it was a holiday.

    >> reporter: what were they threatening to do?

    >> take the house, report us to the credit agency .

    >> reporter: how much money did you owe the bank?

    >> we didn't owe them anything.

    >> reporter: you didn't miss a payment?

    >> no.

    >> reporter: their records show they kept making payments based on the 6% rate but the bank wrongly charged them and hounded them for money they didn't owe. desperate, the family got a lawyer and sued chase for themselves and other troops.

    >> to worry about fighting the fight and keeping alive, not about whether their families will be on the street.

    >> reporter: a chase official now tells nbc that they did everything right and the bank did a lot wrong. in reviewing other mortgages, chase found an even bigger problem -- 4,000 troops may have been overcharged and 14 families wrongly foreclosed on. chase told us that while any customer mistake is regrettable, quote, we feel particularly badly about the mistakes we maid here. the bank says it's now issuing $2 million in refunds and says most of the families improperly foreclosed on have gotten or will get their homes back. chase says it already refunded any overcharges to rolls but the couple disputes that, ann.

    >> lisa myers , thanks for your reporting on this. still ahead


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