BLOG VIEW: Last week, MortgageOrb spotlighted a new report from the Government Accountability Office (GAO) revealing problems in financial regulatory oversight of compliance relating to the Servicemembers Civil Relief Act (SCRA).
‘At least 15,000 instances of financial institutions failing to properly reduce servicemembers' mortgage interest rates and over 300 improper foreclosures have been identified by federal investigations and financial institutions in recent years,’ the GAO said in its report.
Furthermore, the GAO noted that although the U.S. Department of Justice (DOJ) has explicit SCRA enforcement authority, it has only brought three cases against mortgage servicers for SCRA violations during the past five years.
Okay, let's pull out our handy-dandy calculators and try to add that up. At least 15,000 cases of improper SCRA-related mortgage interest-rate reductions, plus over 300 improper foreclosures against military personnel and their families who are supposed to be protected by SCRA equals…three DOJ-generated lawsuits? That doesn't seem to add up, eh?
The GAO researchers are not the only folks in Washington to express concern about the DOJ's curious indifference in pursuing SCRA-related problems in the courts. Last December, a pair of North Carolina congressmen – Democrat Brad Miller and Republican Walter Jones – sent a letter to U.S. Attorney General Eric Holder that cited the Office of the Comptroller of the Currency's (OCC) requirement to review some 5,000 improper foreclosures on military personnel by 10 mortgage servicers or banks that may be in violation of the SCRA.
According to the congressmen, the OCC reviews – coupled with several civil lawsuits brought by the military personnel against the financial services institutions – suggest that many mortgage servicers were simply ignoring the SCRA when conducting foreclosures.
‘The continued failure to pursue criminal charges in the face of flagrant violations of the criminal law is destroying Americans' faith in their government and democracy,’ the congressmen wrote. ‘In a democracy, no one is too big to prosecute.’
Holder never publicly acknowledged the congressmen's concerns. Indeed, the last case that MortgageOrb reported on the DOJ's legal pursuit of SCRA violations came from May 2011, when the department announced that Bank of America would pay at least $20 million and Saxon Mortgage Services Inc. would pay $2.35 million to settle allegations that violated SCRA in foreclosing on military personnel. Neither institution was required to apologize or acknowledge wrongdoing as part of their settlements – they simply forked over what is known in layman's terms as ‘shut up money’ and went upon their merry ways.
In fairness, I should note that the DOJ is not completely indifferent to SCRA-related irregularities. The five financial institutions that signed the National Mortgage Settlement have agreed to conduct reviews overseen by the DOJ's Civil Rights Division to determine whether any servicemembers were foreclosed upon or improperly charged interest in excess of 6% on their mortgage in violation of SCRA. Whether anything comes of that remains to be seen.
In an interview with MortgageOrb published last fall, Christopher Coutu, founder and president of veterans advocacy group AmericanWarrior and a representative in the Connecticut State Legislature, stated that he did not believe financial services institutions were deliberately targeting military personnel. However, he was concerned that the enormity of the ongoing housing crisis was making a bad situation worse for the men and women serving their country.
‘It is a symbol of how much confusion there is in the whole mortgage market,’ Coutu said. ‘Loans were transferred to other companies multiple times. Financial companies are dealing with a massive amount of homes instead of looking at each individual situation. More attention needs to be given to military members and their dependents – we need to look harder and make sure SCRA is being enforced.’
Coutu is correct in urging that SCRA enforcement be made a top priority. But can we really trust Holder's DOJ to do that job correctly? According to my calculator, that theory adds up to a great big zero.
– Phil Hall, editor, MortgageOrb
(Please address all comments regarding this opinion column to hallp@mortgageorb.com.)
