A Morgan Stanley unit is under investigation by the Justice Department for foreclosing on nearly two dozen military families without a court hearing, a violation of Federal law meant to protect active duty service members.
The Federal law at stake is the Servicemembers Civil Relief Act, whose origins date back to the Civil War, when Congress barred civil actions from being taken against soldiers while they were at war.
News of the Justice Department’s inquiry was revealed during proceedings last Tuesday in the case of a Michigan National Guard member who lost his house to Saxon Mortgage Services, a division of Morgan Stanley, while he was fighting in Iraq. Saxon settled with him on Thursday. Details were not revealed but the vet’s lawyer said his client was “well pleased” with the results.
In the middle of court, the National Guard member’s lawyer served a subpoena on the general counsel for Saxon. Their lawyers filed a motion to stop it, arguing that “any reference to the investigation, the negotiation of a consent decree, or the allegations that are the basis for that investigation, would also be unfairly prejudicial to Saxon.” By talking about what they didn’t want talked about, the lawyers inadvertently tipped off reporters to the investigation they didn’t want talked about.