July 19, 2012 – The Government Accountability Office has urged NCUA, FDIC, the Federal Reserve Board and Office of the Comptroller of the Currency to beef up their methods for checking compliance with Servicemembers Civil Relief Act protections as they relate to mortgage foreclosures.
SCRA protections apply only to servicemembers who obtained mortgages prior to entering into active duty, the GAO said, but federal investigations and financial institutions have identified at least 15,000 instances of institutions failing to properly reduce their mortgage interest rates and more than 300 improper foreclosures in recent years.
In its report, GAO said regulators have generally agreed with its recommendations and cited actions taken in response to them. NCUA, in its own letter responding to the GAO’s findings, called the conclusions “reasonable and consistent with your findings.”
In its study, the GAO found that, overall, the agencies reviewed only 48 percent of banks and credit unions from 2007 to 2011 for SCRA compliance. Of those institutions, only about half received examinations that involved testing of compliance by reviewing loan files. Moreover, examiners only reviewed loans the institutions identified as involving servicemembers.
The GAO also found fault with the lack of information sharing among the prudential regulators and other federal departments and agencies charged with SCRA compliance oversight. It said the Department of Justice has explicit SCRA enforcement authority and has brought three cases against mortgage servicers for violations since 2007. The Department of Veterans Affairs, Federal Housing Administration and Federal Housing Finance Agency all receive information about SCRA compliance by servicers, but they and the prudential regulators do not sare that information among themselves, it said.
“Collaboration among these agencies could lead to more effective supervision and improve their awareness of potential problems,” GAO wrote.