DOJ suing Northwest Trustee Services for illegally foreclosing on veterans

Claims foreclosure trustee violated Servicemembers Civil Relief Act

Northwest Trustee Services, the “largest foreclosure trustee in the Pacific Northwest,” illegally foreclosed on dozens of military veterans and servicemembers over the last few years, the Department of Justice claims in a new lawsuit.

The DOJ announced Friday that it is suing Northwest Trustee Services for violating the Servicemembers Civil Relief Act, which prohibits lenders and mortgage servicers from foreclosing on a servicemember’s home while they are on active military service and for the next year without a court order, if the mortgage was originated before the servicemember’s military service.

According to the DOJ, in the last six years, Northwest foreclosed on at least 28 homes owned by servicemembers without the necessary court orders.

In a statement provided to HousingWire, James Galbraith, general counsel of Northwest Trustee Services, vehemently denied the DOJ's allegations.


“This is nothing more than a baseless lawsuit by the federal government. The fact is, Northwest Trustee Services has always supported our brave men and women in uniform and has a rigorous vetting system in place to ensure that they are protected from foreclosure,” Galbraith said.

“We take any allegations very seriously, which is why we have fully cooperated with the federal government and launched an internal review to evaluate tens of thousands of documents,” Galbraith added. “Based on our findings, we believe the federal government is wrong and expect vindication in a final ruling.”

The lawsuit comes after the DOJ launched an investigation into Northwest’s foreclosure practices at the urging of United States Marine veteran Jacob McGreevey of Vancouver, Washington, who submitted a complaint to the DOJ’s Servicemembers and Veterans Initiative in May 2016. 

Portland’s The Oregonian has been all over McGreevy’s story, previously chronicling his fight against Northwest and PHH Mortgage, his mortgage servicer, for foreclosing on his home shortly after he returned from active duty.

According to the DOJ, Northwest foreclosed on McGreevey’s home in August 2010, less than two months after he was released from active duty in Operation Iraqi Freedom. 

In 2016, McGreevey sued both PHH and Northwest, but a U.S. District Court Judge accepted PHH and Northwest’s argument that McGreevy had waited too long to file his case, and dismissed the case on that basis.

Here’s how the Oregonian describes that process in one of its reports:

Altogether, he served four tours in either Iraq or Afghanistan. In between deployments, McGreevey would return to Vancouver, where he bought a house on Northeast 24th Court. But he fell behind on payments.

PHH Mortgage repossessed his house in June 2010. Knowing next to nothing about the consumer protections afforded him as a member of the military, McGreevey didn't contest it. The foreclosure became final the following September.

McGreevey had advanced from private to staff sergeant by the time his final deployment ended in 2012. Though diagnosed 80% disabled with post-traumatic stress syndrome, hearing loss and a back injury, he set about reinventing himself for civilian life. He earned a business degree from Portland State University and got a job at a bank.

That's when he learned about consumer protection laws, including the Servicemembers Civil Relief Act.

From there, McGreevy sued Northwest and PHH. But, McGreevy’s case was dealt a blow earlier this year, when the DOJ sided with Northwest and PHH in McGreevy’s lawsuit.

But now, the DOJ has reversed its position and cites McGreevy’s case as the impetus for its lawsuit against Northwest. It should be noted that the DOJ has taken no action against PHH in this case, to this point.

According to the DOJ, its investigation revealed that, beyond McGreevey, Northwest foreclosed on other homes of SCRA-protected servicemembers in violation of the SCRA since 2010.

“The loss of a home is a devastating blow for anyone – but far worse for active duty service members often called to war zones far from Western Washington,” said U.S. Attorney Annette Hayes.

“Our investigation revealed that Northwest Trustee Services repeatedly failed to comply with laws that are meant to ensure our service members do not have to fight a two front war – one on behalf of all of us, and the other against illegal foreclosures,” Hayes continued. “My office will continue to work closely with our colleagues in the Civil Rights Division in Washington, D.C. to protect Western Washington service members from this kind of misconduct.”

According to the DOJ, it is seeking monetary damages for affected servicemembers, as the SCRA provides for civil monetary penalties of up to $60,788 for the first offense and $121,577 for each subsequent offense. 

But Sean Ridell, who served in the Marines and is McGreevy’s lawyer, told the Oregonian that he wants much more than just money.

“I want Northwest Trustee and PHH put out of business, their buildings burned down and the ground salted so that nothing ever grows for what they did to veterans,” Ridell said.

The DOJ will also seek injunctive relief to prevent future foreclosures that violate the SCRA, the department said.

“As we reflect this Veterans Day on the great debt we owe to those who have fought so hard for our freedom, we also reaffirm our commitment to protecting the rights of those who serve,” said Acting Assistant Attorney General John Gore of the Justice Department’s Civil Rights Division. “Our men and women in uniform make immense personal sacrifices to keep our country safe.  Losing their home to an unlawful foreclosure should not be one of them.”

[Update: This article is updated with a statement from Northwest.]

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