REQUIRED READING: Last December, thousands of military families received the best holiday gift they could have: the news that their loved ones serving in Iraq were returning home. Unfortunately, many family members of those serving in Iraq, Afghanistan and other parts of the world also face severe financial hardships while they make a great sacrifice for their country.
For this reason, the Servicemembers Civil Relief Act of 2003 (SCRA) suspends certain obligations for service members to free them from financial concerns and allow them to focus on their military duties. Among other provisions, SCRA offers protections for active-duty military personnel and their dependents against the loss of their homes, either through foreclosure or eviction.
However, many military families are not aware of their rights under SCRA. As a result, when active-duty military families default on their loans, they may not know to inform their mortgage company about their status. If they live in properties they do not own that go into default, they may not know to inform their landlords. In addition, landlords of defaulted properties either may not be aware of their tenants' military status or of the protections afforded under SCRA.
SCRA requires that a mortgage company attempt to identify properties occupied by active-duty military families, and prevents the company from certain actions to remove family members from their homes while service members are on active duty. Servicers are required to maintain documentation of their attempts. Most make great efforts to identify service members through a variety of online databases, as well as public records searches, and even inquiries directly to each branch of the military, although the military inquiries may take many months to process.
Complicating search attempts are the ‘gray areas’ in which a military family may occupy a defaulted property that is not in title to the active-duty service member. It may be titled to a spouse or other family member. The active-duty servicemember may be a tenant in a defaulted property.
There have even been instances in which a military family lives in a mobile home and either the land or the mobile home is in title to someone other than the military member. Even under these types of scenarios, it is important for mortgage companies to attempt to identify properties where active-duty military personnel may live.Â Â Â
The challenge for mortgage companies is finding effective ways to identify defaulted properties that are occupied by military families so that the proper steps can be taken to help them remain in their homes and halt any foreclosure proceedings, as well as provide assistance with loan modifications, financial counseling referrals or other services.Â
To help with this effort, mortgage servicers have begun to engage their field-service partners to conduct borrower outreach after properties go into default. During their default inspections, field-service inspectors will leave door hangers encouraging borrowers to contact their mortgage company to discuss alternatives to help keep the borrowers in their home. In a similar way, field-service companies can help mortgage companies reach out to help identify and verify the military status of defaulted borrowers or occupants of defaulted properties.Â
Dealing with delinquencies
Routinely, when loans are delinquent for more than 45 days, mortgage companies will provide a list of those properties to their field-service company to begin monthly inspections to verify occupancy. If the property is found to be vacant – which, on average, happens for about 15% to 20% of all defaulted properties – that information is reported to the mortgage company.
Inspectors determine whether a property is vacant in many ways, including its general appearance and apparent lack of maintenance, whether utilities have been turned off, or whether neighbors have seen activity at the house. Under normal circumstances, if a property is determined to be vacant, field-service companies will send a contractor to secure the property and proceed with monthly inspections and routine property-preservation services on behalf of the mortgage company.
This is done not only to protect the integrity and value of properties when homeowners abandon them, but also to ensure that abandoned properties do not become a nuisance to the neighborhood and impact surrounding property values.
In instances where a defaulted home is owned by a military member on active duty, what appears to be an abandoned property may not be so. It may be that the spouse has left for an extended period to stay with other family members, or that the service member simply has left the property unattended while on deployment. For this reason, mortgage companies must take extra precautions.Â Â Â
To check on military status, it is vital to include an extra step in the inspections and property-preservation process. Before any actions are taken to secure any properties found to be vacant, the mortgage company should check the entire list of properties identified as vacant and search various database sources to attempt to identify any that may be owned by active-duty military personnel.Â
If it is determined that an active-duty military member owns the property, then the residence will not be secured. Instead, the servicer will attempt to make contact with the owner to offer loan modification assistance, counseling referrals or other help. Prior to securing any property found to be vacant, an inspector will leave a notification, called a ‘vacancy letter’ or ‘eight-day letter.’ This letter informs the occupant that the property is believed to be vacant and that it will be secured in eight days if no contact is made with the servicer. A paragraph may be added to the letter alerting occupants that active-duty military personnel have certain rights under SCRA and asking them to notify the servicer immediately if an occupant has active-duty military status.
Under SCRA, active-duty military personnel and their families may be protected from eviction from a foreclosed property, whether or not the property is owned by the service member. To identify properties where this may be the case, a field-service contractor or inspector will leave three documents discreetly at the door of the property.
These documents explain that the property has either been foreclosed upon or a deed has been accepted in lieu of foreclosure. They describe the assistance that may be available to help the occupant remain in the property or relocate by choice, and clarify that these documents are not a notice to vacate the property. The documents also include forms to identify occupants who may have active-duty military status and notifies them of their rights under SCRA to protect against eviction.Â Â Â Â
On behalf of the mortgage company, contractors or inspectors should make at least five attempts over a 10-day period in order to make personal contact with an occupant to assist in filling out the forms. If attempts to reach an occupant fail, contractors and inspectors may also make inquiries of neighbors to learn if an active-duty military member is occupying the property. All communication attempts are carefully detailed in written reports and supported with photo documentation and submitted to the mortgage company prior to conveying the property or taking any further action with occupants.
While mortgage companies need documentation to demonstrate their good-faith efforts to comply with SCRA, many go beyond the requirements of the law to identify active-duty military personnel and ensure that the servicemembers receive the protections to which they are entitled. The goal isn't simply to comply with the law, but to ensure that military personnel can return home after they have bravely served their country.
Alan Jaffa is CEO of Safeguard Properties, based in Valley View, Ohio. He can be reached at (800) 852-8306.