Military Homeowners Get New Mortgage, Foreclosure Safeguards

CFPB safeguards

Military homeowners have new mortgage protections thanks to the Consumer Financial Protection Bureau.

2014 is a year of change for the mortgage industry, with a host of new regulations and protections for borrowers and lenders alike. Some of the most important safeguards will better insulate veterans, service members and military families from mortgage-related financial issues.

“It’s no secret that the housing crisis in recent years was particularly hard on military families,” Holly Petraeus, who leads the Office of Servicemember Affairs for the Consumer Financial Protection Bureau, wrote recently at the CFPB blog. “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.”

In fact, mortgages are at the heart of more than 1 in 3 complaints the consumer watchdog receives from military members. This is a demographic that believes in homeownership, and it’s also one that’s constantly on the move. Servicing and foreclosure issues have dogged military homeowners nationwide, often spurred by shoddy record keeping and shady lender practices.

Let’s take a look at some of the major mortgage industry updates aimed at helping military members and their families.

Mortgage Protections

Military homeowners face some unique financial challenges given the nature of their service and sacrifice. Service members facing a PCS or otherwise in need of mortgage help have encountered confusion, conflicting information and worse from mortgage lenders and servicers in recent years.

Some of the most important changes will help homeowners in jeopardy:

  • Loan Modifications: Lenders will be limited in their ability to “dual track” your mortgage, which occurs when they talk with you about a potential loan modification while moving to foreclosure on your home.
  • Exhaustive Foreclosure Prevention: Asking for help once should now be enough. Rather than having to apply multiple times and submit paperwork over and over again, military homeowners who seek foreclosure prevention help will only need to apply once. Lenders and servicers will be required to consider all potential options and avenues that could help the veteran.
  • Coherent Customer Service: You shouldn’t be getting lost in a phone queue or bouncing around from person to person when you call your servicer for help. Servicers will be required to assign a representative to work with you and to have a tracking system to ensure your paperwork doesn’t get lost.
  • PCS policies: Servicers should have clear plans and policies for how they deal with PCS-related issues. In addition, a PCS relocation constitutes a qualifying hardship for mortgages owned by Fannie Mae or Freddie Mac, meaning military members can seek a modification without being behind on their mortgage. These homeowners are also automatically eligible for a short sale.

Service members with VA loans can also explore the VA’s compromise sale program. Qualified homeowners can ask the VA to step in and pay the difference between what they’re able to sell for and what they owe.

SCRA Relief

Spearheaded by the CFPB, these protections will help military homeowners across the country. It’s also important to remember that active duty service members have a host of other civil and financial protections through the Servicemembers Civil Relief Act (SCRA).

SCRA provisions cover things like mortgages, termination of leases, eviction and more.

Military homeowners and veterans with and without VA-backed mortgages can also contact their VA Regional Loan Center for help with mortgage-related issues.

Photo courtesy of Jim Larrison