On Monday September 10, the CFPB participated in an interagency discussion hosted by the Federal Reserve on servicemember protections and SCRA compliance.  Representatives from the prudential regulators and the Department of Justice also participated in the webinar.  Holly Petraeus, Assistant Director of the CFPB’s Office of Servicemember Affairs, kicked off the substantive portion of the discussion, highlighting what she identified as the two top issues facing military homeowners that were raised during her visits to roughly 35 military installations.  Ms. Petraeus pointed out that one of the biggest challenges facing military homeowners is that many of them are not aware of their rights under the SCRA and that a number of banks are still not applying those protections properly.  Additionally, Ms. Petraeus indicated that military homeowners that are underwater due to the economic downturn face challenges unique to their community; especially in situations where the homeowner receives permanent change of station orders (PCS Orders).

Following Ms. Petraeus, Ann Thompson, an Analyst in the Office of Nonbank Supervision at the CFPB described the Interagency PCS guidance issued in June of 2012.

Ms. Thompson indicated that the CFPB examination procedures involve a review of policies and procedures of mortgage servicers to ensure that the servicers have processes to deal with military borrowers with PCS orders.

Following Ms. Thompson, we heard from representatives from Treasury, and FHFA concerning how those regulators are responding to the needs of the military community when dealing with PCS Orders.  Laurie Maggiano, Director of Policy Homeownership Preservation Office at the Department of treasury, outlined enhancements that have been made to the HAMP Program to account for military homeowners who are still current on mortgage loans but have been displaced due to military service.  Laura Arce, a Policy Analyst from the Federal Housing Finance Agency, outlined changes that were proposed to the Fannie and Freddie short sale guidelines.  FHFA worked with the GSEs to merge four existing short sale programs into one to increase efficiency and help more borrowers.  The new guidelines go into effect November 1, 2012.

Fannie Guides

Freddie Guides

Eric Halperin, Special Counsel for Fair Lending at the Department of Justice, gave an overview of the recent string of SCRA enforcement actions brought by DOJ and the recent settlement agreements with some of the major institutions in the industry.  Mr. Halperin highlighted that DOJ can bring a suit against any person who engages in a pattern or practice of violating the SCRA or violates the SCRA in a way that raises an issue of “significant public importance.”

SCRA Cases

Representatives from the OCC, NCUA, FDIC, and FRB summarized some of the existing SCRA protections and provided practice tips for general SCRA compliance and risk management, including checking the Defense Manpower Data Center website multiple times during the foreclosure process (not just at the start) and contacting the borrower directly because the DMDC may not include all protected borrowers.

DMDC Website

The discussion was followed up by a Q&A session where the panelists answered questions submitted by the listeners.  A copy of the audio and slides of the presentation are available on the Federal Reserve’s Outlook Live website.