The action also will help members of the military and veterans who have been wrongfully foreclosed or been denied lower interest rates on their mortgages and reduce fees for Federal Housing Administration borrowers who want to refinance.
The administration action, Providing Relief for Service Members and Veterans, coupled with last month's agreement among the federal government, 49 state attorneys general and major mortgage servicers will:
-- review service member foreclosures since 2006 with an eye toward compensation, paying them an additional $116,785;
-- refund money lost due to denial of lower interest rates;
-- provide relief for service members forced into short sales because of transfers;
-- pay $10 million to the Veterans Affairs fund guaranteeing loans for veterans, and
-- extend certain foreclosure protections to members of the military serving in harm's way.
The administration estimates as many as 3 million borrowers will be eligible for reducing costs in refinancing FHA loans.
"It is unconscionable that members of our armed forces and their families have been some of those who have been most susceptible to losing their homes due to the actions of unscrupulous banks and mortgage lenders," Obama told a Tuesday news conference. "Over the last few years that happened a lot."
The president said a landmark settlement with the nation's banks a few weeks ago let's him act.
"If you are a member of the armed forces whose home was wrongfully foreclosed, you will be substantially compensated for what the bank did to you and your family. If you are a member of the armed forces with a high interest rate [and] wrongfully denied the chance to lower it while you were in active service, which banks are required to do by law, the banks will refund you the money you would've saved along with a significant penalty.
"The settlement will make sure that you weren't forced into foreclosure just because you have a permanent change in station but can't sell your home because you owe more than it's worth," Obama said. "Some of the money will also go into a fund that guarantees loans on favorable terms to our veterans. And there will be more foreclosure protections for every man and woman who is currently serving this country in harm's way."