Federal financial regulators on Thursday moved to tighten oversight of how mortgage companies handle loans for service members who are underwater and forced to transfer to new bases.
In new guidance, they announced several practices they would consider unfair, deceptive or abusive. These include failing to notify service members of assistance programs or requiring them to waive their rights to special protections for military before offering help.
Regulators claimed that they would also crack down on mortgage servicers who advise military homeowners to stop paying their mortgages in order to qualify for financial assistance programs. They also are checking to ensure timely communication by the mortgage company.
The Mortgage Bankers Association, an industry trade group, said servicers take consumer protection and their obligations to the military seriously. CFPB officials counted numerous cases of service members facing foreclosure because they were assigned to a new base and could not sell their homes or find renters to cover the mortgage. In other instances, service members left their families in the old homes while they moved to the new base. In addition to the guidance, the Federal Housing Finance Agency announced that members of the military who face transfer and are underwater — meaning that they owe more than the market value of their home — will automatically be approved for short sales.