Weekly Real Estate News
Summary
Village Capital & Investment agreed to pay more than $500,000 to settle federal allegations involving servicemember mortgage-rate protections and retaliation against borrowers. The settlement includes at least $425,000 in borrower compensation and a $79,380 civil penalty. The allegations were not adjudicated at trial.
Village Capital & Investment LLC, a servicer of loans guaranteed by the Department of Veterans Affairs, has agreed to pay more than $500,000 to resolve federal allegations that it mishandled mortgage interest-rate protections for servicemembers and retaliated against borrowers who sought those protections.
The Justice Department announced the settlement Monday, October 19, saying the alleged conduct affected at least 41 servicemembers’ mortgages. Under the agreement, Village Capital will pay at least $425,000 in compensation to affected borrowers and a $79,380 civil penalty, which DOJ described as the maximum penalty for a first violation of the Servicemembers Civil Relief Act (SCRA).
What federal officials allege
The SCRA generally caps interest on qualifying debts incurred before military service at 6% during eligible periods of service. DOJ alleges Village Capital did not retroactively apply that cap to the date servicemembers received their orders and did not appropriately lower monthly mortgage payments to reflect forgiven interest.
Federal officials also allege the servicer told some borrowers that their mortgage rates were already below 6% when the actual rates were higher. According to DOJ, Village Capital retaliated against borrowers who requested benefits by accelerating principal payments and falsely reporting mortgages as delinquent to the VA.
These are the government’s allegations resolved through a settlement, not findings after a trial. The announcement does not establish that a court adjudicated the allegations.
Servicing changes required
The agreement requires Village Capital to revise its policies and procedures and provide employee training intended to prevent future SCRA violations. The monetary relief includes compensation for affected servicemembers in addition to the civil penalty.
For VA mortgage servicers, the case underscores the operational importance of correctly identifying eligible borrowers, applying rate protections, calculating payments and handling credit and delinquency reporting. Compliance failures can have consequences beyond the initial interest calculation, especially when a borrower requests a statutory benefit.
The DOJ announcement was issued October 19, 2026. It did not specify the exact time of the underlying servicing conduct in its public release.
Source: U.S. Department of Justice, October 19, 2026.
