Saving Service Members’ Homes from Illegal Foreclosure

How more than 15,000 service members and veterans were denied their rights as homeowners – and how to keep it from happening again

By Craig Collins - December 18, 2012

The Government Accountability Office estimates that investigators discovered 15,000 instances when financial institutions had failed to properly reduce service members’ mortgage interest rates, and more than 300 improper foreclosures, since roughly the onset of the housing crisis.

The GAO further concluded there was plenty of blame to go around:

From 2007 to 2011, the nation’s “prudential regulators” responsible for supervising depository institutions’ compliance with various federal consumer laws, including SCRA – the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), U.S. Office of the Comptroller of the Currency (OCC), and National Credit Union Administration (NCUA) – had reviewed fewer than half the nation’s banks and credit unions for compliance. Of those reviews, only about half had involved an examination of the loan files.
The other federal agencies involved in SCRA oversight – the Department of Justice (DOJ), the Department of Veterans Affairs (VA), the Federal Housing Administration (FHA), and the Federal Housing Finance Agency (FHFA) – also gather compliance information, but these agencies and the prudential regulators don’t share information among themselves.
The VA, in its oversight of mortgage servicers, does not specifically review for SCRA compliance.
While SCRA requires that the Department of Defense (DoD) and the Department of Homeland Security (DHS oversees the Coast Guard) inform service members of their SCRA rights, the modes by which this information is delivered often prove insufficient. Military officials said the service members – especially National Guard and Reserve units – often receive SCRA information along with a host of other topics as part of a pre-deployment briefing, and often don’t retain the necessary awareness. Neither DoD nor DHS measure the effectiveness of the SCRA education methods.

GAO’s investigation yielded several recommendations:

The prudential regulators should work together to increase the frequency with which examiners conduct testing of foreclosure and, when applicable, other mortgage files, and use testing methods that provide specific assurance of SCRA compliance.
The VA should include SCRA compliance review in its mortgage servicer monitoring program.
The institutions that regulate and enforce SCRA should share information about SCRA oversight.
DoD and DHS should assess the effectiveness of their efforts to educate service members, and devise better methods for making military members aware of their SCRA rights and benefits.

Into the Sunset

The housing crisis has been particularly hard on military families; in 2008, foreclosures were four times more likely in military towns than elsewhere in America. Between 2008 and 2010, foreclosures in military ZIP codes increased 32 percent.