Real Estate Market

Federal regulators order mortgage servicers not to violate military servicemembers' homeowner rights

(6/27/2012) - Federal regulators recently handed mortgage servicers their marching orders to halt practices that put homeownership in harm's way for members of the military.

"The Interagency Guidance on Mortgage Servicing Practices Concerning Military Homeowners with Permanent Change of Station Orders" is designed to give military members a fighting chance to hold onto their home when they receive "Permanent Change of Station (PCS)" orders.

A PCS orders a servicemember to relocate to a new post anywhere in the world - something one in three active-duty servicemembers face each year. Most active duty servicemembers move every two to four years.

Military families who own homes face a unique set of circumstances civilians never know.

The plight of military personnel homeowners

In the military, orders are orders and typically come with short timelines. Servicemembers who are sent into a combat zone leave their families behind to financially fend for themselves. Even if they aren't ordered into a combat zone, the new duty station could come with a reduced housing allowance. Outside combat zones, if the family comes along, but can't find a buyer or renter to cover costs of the home they leave behind, they could default on the mortgage.

Many stateside military bases are in states hardest hit by the housing crash - California, Nevada, and Florida. In some military towns two of three homeowners have underwater mortgages - a mortgage larger than a home is worth.

The interagency guidance puts servicers on notice that federal laws are in place to help military families with their homeownership and servicers must comply with those rules.

"Those who serve our country deserve to be given the best service by their mortgage servicer," said CFPB Director Richard Cordray.

That's the least mortgage servicers can do for men and women who put their life on the line for the nation.

Abuses by mortgage servicers have led the Consumer Financial Protection Bureau (CFPB), the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the U.S. Treasury's Office of the Comptroller of the Currency (OCC) to issue the guidance.

Guidance for mortgage servicers

Among the orders, the interagency guidance for mortgage servicers assisting military personnel with PCS orders mandates:

• Once servicemembers provide mortgage servicers with their PCS orders, servicers must quickly provide accurate, clear, and readily understandable information about available assistance options for which the homeowner may qualify.

• Mortgage servicers must not suggest servicemembers with PCS orders waive their legal rights under the Servicemembers Civil Relief Act or any other law, in exchange for information about available homeownership relief options or to be eligible for an evaluation to determine the servicemember's eligibility for assistance.

• Servicers cannot advise homeowners with PCS orders, who are current on their mortgages and able to make the monthly payment, to intentionally skip making payments in order to qualify for assistance they would not otherwise receive.

• Servicers must provide a reasonable means for servicemembers to keep abreast of the status of their request for assistance.

• Servicers also must, in a timely fashion, communicate to the servicemember, the decision about the request for assistance. They must also include a full explanation for any denial.

The guidance comes with teeth. Regulators are holding stiff enforcement actions over the heads of servicers who engage in unfair, deceptive or abusive practices or violate federal consumer financial laws.

Any consumer, including servicemembers or veterans, who are having problems with their mortgages may call the CFPB toll free: 1-855-411-2372. Homeowners may also submit mortgage-related complaints on the CFPB website at

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