Protecting Military Personnel Against Wrongful Foreclosures

WORD ON THE STREET: The U.S. housing crisis has hit every community in this nation, and it has hit military families especially hard. These families are often backed into financial corners by the realities of military life and a decade of constant deployment.

While the Servicemembers Civil Relief Act (SCRA) and the older statutes from which it developed have provided important protection to servicemembers and their families in some form since the Civil War, those various incarnations of the law reflect its need to evolve. Our enforcement must evolve along with it.

I know that the need to expand the SCRA, as well as strongly enforce its current provisions, is well understood. You have heard the stories about countless servicemembers who have had to contend with the frustration and uncertainty of mishandled mortgages and other SCRA infractions while also carrying out the duties of service. Servicemembers should not have to worry about these issues while they are deployed. They must be able to focus on the mission without distraction.

We tried to address some of the most prevalent and pressing issues they face in the national mortgage servicing settlement, including complications associated with Permanent Change of Station (PCS) orders, mortgages taken out after beginning military service and ways to mitigate losses often incurred as a result of the demands of military life. Specifically, the settlement does the following:

  • Establishes that PCS orders must now be considered when banks and servicers are making hardship determinations about short sales, deeds in lieu and loan modifications. Additional protections guard against inaccurate reporting of servicemembers to credit reporting agencies for using loss mitigation options in these circumstances.
  • Increases servicemember access to loss mitigation options, including mandating that information and contact with SCRA-trained employees is readily available, and that servicers go beyond the requirements of the SCRA to ensure that more borrowers who are entitled to assistance before foreclosure receive it.
  • States that homes of active-duty servicemembers deployed in combat areas cannot be foreclosed on in most instances, even if the debt was incurred after they entered military service. This was a significant expansion beyond the terms of the SCRA, which only provides this protection for debt incurred by servicemembers before they entered the armed forces.

In addition, Assistant Attorney General Tom Perez and his staff at the U.S. Department of Justice Civil Rights Division negotiated provisions that direct payments to servicemembers who experienced wrongful foreclosures and who were charged interest in excess of the 6% allowed by the SCRA. These payments will come from funds secured on top of the $25 billion settlement amount. We were able to achieve a great deal with this bipartisan settlement, but as is evident from the servicing guidelines issued by the Consumer Financial Protection Bureau, we must work to make such changes permanent.

My fellow attorneys general and I stand together across state and party lines in our commitment to vigilant enforcement. This settlement was an important step in the right direction, but a great deal of work remains to be done.

While I believe that every state attorney general in this nation agrees that military families deserve protections that help them meet their unique challenges, there are several leading the charge. They include Tom Miller in Iowa, without whom the multistate settlement would not have happened; Lisa Madigan in Illinois, whose consistent advocacy on behalf of servicemembers has been integrated into her consumer protection mandate; Eric Schneiderman in New York, who continues to press the banks on their SCRA compliance; Martha Coakley in Massachusetts, who is committed to ensuring that servicemembers will have access to the relief provided by the multistate servicer settlement; and Jack Conway in Kentucky, who has focused on the G.I. Bill and for-profit school matters.

These leaders and I recently were joined by 16 of our colleagues to voice our united support for requiring that the G.I. Bill and Veterans' Assistance educational benefits be subject to the 90/10 rule. We believe that funds intended to help veterans provide for their families and strengthen our nation's workforce must not be exploited by unscrupulous educational institutions.

That conviction is shared by the Obama administration, which earlier this year issued an executive order calling for the establishment of ‘principles of excellence’ for schools serving veterans and members of the military – two groups of Americans who surely deserve no less. I look forward to the changes that will come as a result of this order and hope that the state attorneys general will be part of the process.

Beau Biden is attorney general of Delaware. This article was adapted and edited from testimony delivered before the Senate Banking Committee. The full text is available online.


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