Director of the Consumer Financial Protection Bureau
Military Permanent Change of Station (PCS) Guidance for Mortgage Servicers
June 21, 2012
Thank you all for coming.
Today the Consumer Financial Protection Bureau, together with other federal regulators, is issuing joint supervisory guidance to address mortgage servicer practices that pose risks to military homeowners. We want to make sure that mortgage servicers comply with the laws that prohibit unfair, deceptive, or abusive practices when it comes to a servicemember’s Permanent Change of Station orders, known as “PCS orders.”
With Holly Petraeus at the helm of the Bureau’s Office of Servicemember Affairs, we have already been working hard to help servicemembers with their PCS orders. Holly, for example, has worked with the Department of Treasury to expand military eligibility for the Home Affordable Modification Program. So this is an issue we care deeply about.
For those of you who do not know, PCS orders occur when the military gives the command to a servicemember to move to a different installation. These are a frequent and common part of active-duty military life. About a third of the military population experiences a PCS move each year. These orders send our servicemembers to live across the country, sometimes around the world. But they are non-negotiable and they operate under short, strict timelines.
They can also pose unique challenges to members of our military who live off base and own a home. This is particularly true now in our still-recovering housing market. Indeed, PCS orders can complicate a servicemember’s home-ownership decisions in ways that civilians may never experience. When servicemembers receive orders to move, they cannot wait for the market to get better to sell their homes. They have to move, even if that means taking a financial hit or leaving their families behind to pay the bills. In the worst-case scenario, if the home’s value has fallen significantly, it might mean foreclosure and financial failure.
For every military homeowner who is subject to a PCS order, these are very real concerns. Financial problems triggered by a move can lead to loss of a security clearance, which can threaten the servicemember’s ability to remain in the military.
Members of the military, just like other homeowners, navigate their housing issues through their mortgage servicers, who are responsible for collecting payments from homeowners on behalf of mortgage holders. They also typically handle escrow accounts, loan modifications, and foreclosures. Since the financial crisis, the mortgage servicing market, worth trillions of dollars, has been bogged down with widespread reports of compliance problems, as our fellow federal regulators have documented in great detail.
Many servicers have failed to keep up with the high volume of mortgage delinquencies and foreclosures. Some have failed to answer calls, making it difficult for customers to reach them. Many have lost paperwork, repeatedly. And, because of widespread delays in processing, some homeowners who qualify for loan modifications have not gotten them in time to stop foreclosure. This can be highly damaging to servicemembers who do not have the luxury of time when responding to PCS orders.
Our examiners are already looking at mortgage servicing practices when they conduct their routine examinations on behalf of consumers. We are taking a close and measured view to ensure that servicers are in compliance with the federal consumer financial laws. We are pleased to say that we are cooperating closely with our fellow federal and state regulators in this work.
But this supervisory guidance provides specific notice to mortgage servicers, reinforcing the fact that this country has substantial laws in place to help servicemembers. Mortgage servicers should provide clear, timely, and accurate information to those who receive PCS orders. We want to make sure our military are treated fairly. And, when they are not, we will take appropriate action.
Let me make this very clear: Servicemembers deserve to be treated with the greatest respect. If you risk your life in Iraq or Afghanistan or anywhere else to protect the rest of us, you should not have to endure the stress of losing your home because a mortgage servicer gives you the runaround and does not tell you about help that is available to you. This should not be the case − not if the federal government can help it.
My final thought on this subject is a personal anecdote about a servicemember who is a genuine American hero. A few years ago, I was traveling in rural Ohio with John Glenn, and we were talking about the foreclosure problem. Out of the blue, a memory hit him and he told me about being a little boy growing up during the Depression. One night he was at the top of the stairs and he heard his parents talking below in hushed tones, his father expressing his anxiety that they might lose their house. They never did lose their house, and he never knew why. Perhaps a New Deal program helped, perhaps a bank granted some forbearance, perhaps some money happened to materialize when they needed it most. But 75 years later, this courageous American hero suddenly could still remember a haunting childhood fear that he and his family would lose their home for reasons he could not understand.
That fear has materialized for many Americans, and poor work by mortgage servicers has helped widen the misery all over this country. For current servicemembers, who are our true American heroes, we must do all we can to minimize their anxieties and fears about losing their homes.