BY Holly Petraeus
originally printed in the Consumer Financial Protection Bureau blog
It’s no secret that the housing crisis in recent years was particularly hard on military families. Service members and their spouses at installations around the country, and even abroad, cited problems with mortgages as some of their most serious financial challenges. But now, the CFPB has written new mortgage rules that can help.
More than a third of the consumer complaints we’ve received from the military are mortgage-related. And at listening sessions around the country, concerned military families have told me about the painful consequences of poor mortgage servicing, sloppy lender recordkeeping, and inconsistent foreclosure practices. Obviously, service members aren’t the only homeowners who have run into trouble with mortgage servicers or faced financial hurdles. But the demands of military service sometimes increase the severity of the problems or limit the solutions available to address them.
So, I’m happy to report that we’ve written new rules that address some of the worst problems in the mortgage servicing industry and bring new rights and protections to borrowers, including service members. For military families, this means that when they seek help for a troubled mortgage or have to move because of Permanent Change of Station (PCS) orders, they will get fewer nasty surprises and face less risk of losing their home.
Here are some changes that should help service members:
Restrictions on dual tracking. In the past, servicemembers dealing with mortgage troubles sometimes found that their mortgage servicer had moved forward to foreclose on their home at the very same time it was working with the service member on a potential loan modification. That’s called “dual tracking” and our new rules set up clear guidelines that restrict this practice.
More help for troubled borrowers. Too often service members have had to apply over and over again for programs that might help them keep their homes, being asked to send in the same paperwork repeatedly. Our new rules require mortgage servicers to evaluate a borrower who files a complete application for help for all the options that are available to that borrower. That means no more multiple rounds of applications and wasting of precious time and resources for the homeowner seeking help!
You can find out about options for helping service members with a troubled mortgage by watching our Military Educator Forum on the subject, finding a HUD-approved housing counselor , or calling 888-995-HOPE (4673). You can also Ask CFPB for answers to your mortgage related questions.
No more runarounds and missing documents. Our rules require mortgage servicers to train their people to answer your questions and, if you do run into trouble, the servicer has to assign people to help you. The servicer also has to have policies in place to make sure they don’t lose your paperwork.
Those are some of the new rules. In addition, servicemembers should know that we issued guidance in June 2012, along with other regulators, saying that mortgage servicers should have processes in place to handle requests for assistance from service members with PCS orders, and that they should clearly communicate their policies.
In 2011, two important players in the mortgage market —Fannie Mae and Freddie Mac —updated their policies to say that a PCS move is considered a “qualifying hardship” for mortgage assistance options for service members. In other words, service members do not have to be behind on their mortgage payments before they can ask for help. It was also announced that a homeowner with a Fannie or Freddie loan and PCS orders will automatically be eligible for a short sale.
Also, those service members who do a short sale (selling their home for less than they owe on the mortgage) will not have to pay the difference between the original loan amount and the proceeds from the sale if the property is their primary residence and it was purchased on or before June 30, 2012.
Finally, the U.S. Department of Veterans Affairs (VA) also has provisions for a short sale called a “compromise sale.” Service members should contact their lender or the VA for more information on this program. We work closely with the military community to get the word out about any policy changes that affect servicemembers. We encourage service members and their spouses to talk to their JAGs or military Personal Financial Managers (PFM) about these issues, too.
We hope our new mortgage rules will allow service members to spend more time on their important mission and less time worrying about their mortgages. Learn more about our work on mortgages.