By and large, the complaints submitted by the military track with those of the population at large. In the last fiscal quarter, the Bureau handled on average more than 250 complaints per week from military families. Complaints have come from every state, and every rank and branch of the Armed Services.

  

Servicemembers, veterans, and their families who complained to the CFPB have received more than $1 million in relief since July 2011. Not all servicemembers, veterans and their family members who submitted complaints received money; a number of them received non-monetary relief – such as cleaning up their credit reports, stopping harassment from debt collectors, and correcting account information – and some had their complaints closed without relief.  The Bureau has seen monetary relief returned to military consumers across all products. Among companies that reported monetary relief, this includes:

According to the snapshot report, the top three complaints by servicemembers, veterans, and their families are mortgages, debt collection, and credit cards.

  

  

The CFPB’s Office of Servicemember Affairs May 3013 Semi-annual Complaint Report conveys data on six product types:

The Bureau began handling mortgage complaints began in December 2011.   During 2012, they received 3455 complaints from servicemembers, veterans and their families.   Throughout the year, mortgages predominated those complaints by an average of 53%.  

Of the approximate 1800 complaints, 58% were related to loan modification, collection or foreclosure.   Loan servicing, payments, and escrow accounts represented 24% and the loan application, originator or broker represented 10%.

  

The CFPB claims that military consumers have complained about mortgage servicers’ lack of knowledge about military-specific programs. They report that servicers are unaware of the guidance offered by the CFPB and the other prudential regulators that servicers must provide accurate and timely information about available assistance options when a military family gets a Permanent Change of Station (PCS) order. Military consumers have also complained that servicers do not know about the short-sale guidelines aimed at assisting servicemembers with PCS orders, or that a PCS move may be considered a qualifying hardship for various foreclosure-prevention programs. 

 

 

The Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency (“the Agencies”) issued guidance to mortgage servicers to address mortgage servicer practices that may pose risks to homeowners who are serving in the military and to ensure compliance with applicable consumer laws and regulations. Specifically, this guidance addresses risks related to military homeowners who have informed the servicer that they have received military Permanent Change of Station (PCS).

  

For military homeowners, PCS orders to move to a new duty station present unique challenges. Although PCS orders are non-negotiable and operate under short, strict timelines, homeowners with PCS orders remain obligated to honor their financial obligations, including their mortgages. If their homes have declined in value, they may be unable to sell the home and obtain sufficient funds to pay off the mortgage debt and may continue to be obligated to make monthly payments after relocating to the new duty station. 

  

The Agencies have particular concerns about the following practices which have the potential to mislead or otherwise cause harm to homeowners with PCS orders:

  

Failing to provide homeowners with PCS orders who notify their servicers of such orders with accurate, clear, and readily understandable information about available assistance options for which the homeowner may qualify based on the information known to the mortgage servicer. The options should be consistent with the servicer’s public representations and agreements with government agencies and others regarding the servicer’s intent to offer such assistance to all qualified homeowners. These options include the Making Home Affordable Program and programs offered by or through Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the Department of

Veterans Affairs (VA), and the Department of Agriculture-Rural Development (USDA-RD). This guidance does not obligate servicers to offer any particular loss mitigation programs.

  

Asking homeowners with PCS orders to waive their legal rights under the Servicemembers Civil Relief Act (SCRA)2 or any other law as a prerequisite to the mortgage servicer either providing information to the homeowner about available options or evaluating the homeowner’s eligibility for assistance.

  

Among the protections under SCRA are restrictions on foreclosures of servicemembers’ property securing pre-military-service mortgages for which the servicemember is still obligated, while the servicemember is in “military service,” as that term is defined in § 511(2), or within nine months thereafter. The period of nine months will revert to 90 days after December 31, 2012.

  

Advising homeowners with PCS orders who are current on their loans and able to make the monthly payment to intentionally skip making payments in order to create the appearance that they are having financial difficulties in order to obtain assistance for which they would not otherwise qualify. Providing accurate, factual information to a homeowner about available loss mitigation programs for delinquent homeowners is not a practice that raises this concern.

  

Failing to provide a reasonable means for homeowners with PCS orders to obtain information on the status of their request for assistance.

  

Failing to timely communicate the servicer’s decision regarding requests for assistance from homeowners with PCS orders and failing to include an explanation of the reason for the denial, where required, so that the homeowner has an opportunity to address any deficiencies, if applicable. Timeliness will be judged on all of the facts and circumstances.

  

Mortgage servicers should ensure that their employees are adequately trained about the options available for homeowners with PCS orders. Information provided to homeowners with PCS orders regarding any available assistance options, such as the Making Home Affordable Program and other programs offered by or through Fannie Mae, Freddie Mac, the FHA, the VA, and the USDA-RD, should be accurate and readily understandable. The Agencies expect the institutions they supervise will maintain mortgage servicing policies and procedures appropriate to achieve these objectives, commensurate with the institution’s customer base and the size and the complexity of its operations.

  

If the Agencies determine that a servicer has engaged in any acts or practices that are unfair, deceptive, or abusive, or that otherwise violate Federal consumer financial laws and regulations, the agencies will take appropriate supervisory and enforcement actions to address violations that harm consumers and seek all appropriate corrective actions, including requiring the mortgage servicer to strengthen its programs and processes.

 

 

Anna DeSimone is President and Founder of Bankers Advisory, Inc. She can be reached at anna@bankersadvisory.com