Mortgages Blog

Finance Blogs » Mortgages Blog » More illegal foreclosures for military

More illegal foreclosures for military

By Polyana da Costa ·
Thursday, July 19, 2012
Posted: 12 pm ET

More than 300 members of the armed forces had their homes illegally foreclosed on in recent years, says a report that was released this week by the Government Accountability Office, or GAO.

And in at least 15,000 instances, lenders failed to follow federal guidelines designed to protect members of the armed forced who took out mortgage prior to going on active duty.

Here is a short version of some of the protections military members are entitled to under the Servicemembers Civil Relief Act, or SCRA:

  • Interest rate reduction/cap: A service member cannot be charged more than 6 percent in interest on a mortgage loan if the borrower is on active duty and requests a lower interest rate. The rate is capped for 12 months after the member returns from active duty.
  • Foreclosure: The act prohibits foreclosures without a court approval.
  • Notice: When filing a foreclosure lawsuit, mortgage servicers are required to notify the court if the homeowner in on active duty.

Often, the mortgage servicers fail to note on their files that the the borrower is a service member, the report says. And even when they do, the guidelines aren't always followed.

Last month, federal regulators in a joint effort with the Consumer Financial Protection Bureau, or CFPB, issued additional guidelines to protect homeowners who are serving in the military.

The CFPB says many servicemembers face foreclosure when they are assigned to a new base and can't sell their homes. Often, they owe more than what their homes are worth. The Federal Housing Finance Agency says that under the new guidelines, homeowners who are transferred to a new base will automatically be approved for a short sale if the home was purchased before June 30 and the loan is owned by Fannie Mae or Freddie Mac.

The GAO report says many military members aren't aware of these guidelines.

If you know someone in the military, please  spread the word!

But before you do that, follow me on Twitter @Polyanad

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
1 Comment