Ed note: this was originally posted on the CFPB's blog
When I was at Fort Drum, NY last week I heard from a military spouse who said her family has been separated for four years – partly because of deployments but also because they can’t sell their house. At the same meeting an officer told me that he is underwater on a home he bought at a previous assignment. He wondered if there were any options for him that wouldn’t ruin his credit or require a large sum of money he didn’t have.
I’ve had conversations like these repeatedly in my travels to military communities across the country during the past year. The housing crisis has had a devastating impact on military homeowners, and their unique challenges have made it difficult for them to get help. So I’m glad to see that important protections for military homeowners were included in the recent settlement between the Federal government, 49 state Attorneys General, and five of the largest mortgage loan servicers: Bank of America, JP Morgan Chase, Citigroup, Wells Fargo, and Ally Financial.
The mortgage servicers who signed the settlement have agreed to review their files for violations of the Servicemembers Civil Relief Act (SCRA). They will give monetary relief to those families who saw their homes taken from them in violation of the SCRA, or who did not receive the SCRA interest-rate reduction to which they were entitled. In one way the settlement goes farther than the SCRA: it protects from non-judicial foreclosure all military homeowners who are deployed to a combat zone, even if the mortgage was not obtained before the servicemember entered active duty.
The settlement also has provisions for military homeowners who get Permanent Change of Station (PCS) orders. The banks will provide short-sale agreements and deficiency waivers to those servicemembers who were forced to sell their home at a loss due to a PCS and were not eligible for the military’s Homeowners Assistance Program (HAP). This will help servicemembers who were underwater on homes they bought between July 1, 2006 and December 31, 2008, or who received a PCS after October 1, 2010.
The servicers are also going to pay $10 million to the Veterans Housing Benefit Program Fund, which is used by the Department of Veterans Affairs (VA) to guarantee VA loans on favorable terms for eligible veterans.
You can read more about the settlement here. If you feel that your rights were violated by one of the mortgage servicers in the settlement you can call the Justice Department at 1-800-896-7743. But you don’t have to call in order to get the help offered by the settlement, and you shouldn’t give information or money to anyone who says they will help you get in on the settlement! If the banks in the settlement owe you money they will try to find you; you don’t need to fill out an application or file a claim.
I hope this agreement will bring peace of mind to some of the military families who have been struggling with housing-related challenges, and that it will inspire other mortgage lenders and investors to look at what they can do for their military customers. As a reminder, if you have a complaint about your mortgage servicer you can file it with the CFPB at www.ConsumerFinance.gov. We also appreciate it when you use our “Tell Your Story” feature to let us know about what’s happened to you. Your stories are a big help to the efforts of the Office of Servicemember Affairs to understand the military issues that are important to you.