Federal officials reached an agreement over mortgage rate benefits for military borrowers.
Village Capital & Investment LLC has agreed to pay more than $500,000 to resolve federal claims that it mishandled mortgage interest benefits for members of the military and took action against borrowers who sought those protections. The Department of Justice (DOJ) announced the agreement on October 19, 2026, following allegations involving at least 41 servicemembers with home loans backed by the Department of Veterans Affairs (VA). Under the agreement, the mortgage servicing company must pay at least $425,000 to affected servicemembers. It must also pay a $79,380 civil penalty, the highest penalty allowed for a first violation of the Servicemembers Civil Relief Act (SCRA). The agreement also requires changes to company policies and employee training to reduce the chance of similar problems in the future.
The SCRA provides certain financial protections to servicemembers whose debts began before their military service. One of its protections limits interest rates on qualifying debts to 6% during eligible periods of service. The law also requires lenders to apply the benefit back to the date covered military orders take effect. For eligible mortgage borrowers, the lower rate should reduce the amount of interest charged and lower monthly payments.
Federal officials alleged that Village Capital failed to apply the reduced interest rate correctly for some military borrowers. The company allegedly did not lower qualifying mortgage rates to 6% retroactively to the dates covered by the borrowers’ military orders. The DOJ also claimed that the company failed to reduce monthly mortgage payments to reflect the interest that no longer had to be paid. The agency further alleged that some servicemembers received incorrect information about their mortgage rates. According to the claims, company representatives told certain borrowers that their interest rates were already below 6%, even though the rates were higher. Such statements could leave borrowers unaware that they might qualify for a lower rate and reduced payments under federal law.
The claims also involved alleged actions against servicemembers who asked for the interest rate protection. Federal officials said Village Capital accelerated principal payments on certain loans and wrongly reported some mortgages as delinquent to the VA. Accelerating principal payments can require borrowers to pay down the amount owed faster than expected. A delinquency report can also create problems for borrowers by suggesting that required payments have not been made. The agreement resolves the federal government’s claims without requiring the company to go through a trial to determine the outcome. As part of the terms, Village Capital must review and revise its procedures for handling requests under the SCRA. Employees must also receive training on the law and the protections it gives eligible military borrowers.
The DOJ’s Civil Rights Division works with U.S. Attorney’s offices across the country to enforce the SCRA. Since 2011, the department says its enforcement work has secured more than $490 million in financial relief for over 153,000 servicemembers. Servicemembers and their dependents who believe a lender has failed to provide protections under the law can seek help through the nearest Armed Forces Legal Assistance Program office. Information about office locations is available through the federal government’s legal assistance website.
Sources:
VA Home Loan Servicer Village Capital to Pay Over $500,000 for Violating Servicemembers’ Rights
