Mortgage Servicer Pays $500K Over Interest Rate Errors
Military households with pre-service mortgages may see compensation after a federal settlement regarding interest rate caps.
Updated on Oct. 20, 2026 in Residential
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Village Capital and Investment LLC has agreed to pay $500,000 to settle allegations that it failed to properly apply interest rate caps for military servicemembers. The settlement affects borrowers with 41 pre-service mortgages who were denied the 6 percent interest rate limit mandated by law.
Why it matters
The Servicemembers Civil Relief Act protects military households by limiting interest rates on pre-service debt to 6 percent, helping to manage family logistics during deployments or active duty. This enforcement action highlights the financial risks when servicers fail to honor these mandated rate adjustments.
The settlement includes $425,000 in compensation for affected servicemembers and a $79,380 penalty. This follows allegations involving 41 pre-service mortgage accounts that were not capped at the 6 percent rate required by law.
The players
Department of Justice
The federal agency responsible for enforcing civil rights and consumer protection laws, including the Servicemembers Civil Relief Act.
Village Capital and Investment LLC
A mortgage servicer now required to update its compliance training and procedures following federal settlement terms.
The details
The Servicemembers Civil Relief Act requires mortgage interest rates to be capped at 6 percent once a borrower receives military orders, with monthly payments reduced to reflect the forgiven interest. The Department of Justice alleged that Village Capital misled borrowers about their eligibility, accelerated loan principals, and improperly reported accounts as delinquent when customers requested their legal benefits.
Timeline
2015: Five large mortgage servicers paid $311 million in compensation for past SCRA violations.
October 19, 2026: The Department of Justice announced the settlement with Village Capital.
The Home Front
This settlement continues federal oversight of mortgage servicers' compliance with the Servicemembers Civil Relief Act. It reflects a broader trend of increased scrutiny regarding the automatic application of financial benefits to military household debt.
If you are a military member with a pre-service mortgage, ensure your servicer has applied the 6 percent interest cap by checking your monthly statements. Contact your lender directly to confirm your status and keep a copy of your military orders on file for documentation.
The takeaway
Servicemembers are legally entitled to specific interest rate benefits on pre-service debt that servicers are obligated to honor. Review your loan documentation regularly and contact your lender to verify that your account reflects these mandatory protections.
Further reading
Learn more about mortgage protections in our Residential section.
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Do you trust that financial institutions provide the legal interest rate protections earned by military families?
