CFPB, DOJ Issue Joint Letters on Servicemember/Veterans’ Rights

The Consumer Financial Protection Bureau and the Department of Justice on Monday issued two joint letters Monday on legal housing protections for military families.

The first letter went to landlords and other housing providers regarding protections for military tenants. The second letter went to mortgage servicers regarding military borrowers who have already exited or will be exiting COVID-19 mortgage forbearance programs in the coming weeks and months.

The letter to landlords and other housing providers reminds property owners of housing protections for military tenants, some of whom may have had to relocate or make other changes to their housing arrangements in response to the crisis. While military families enjoy the same legal protections and privileges afforded to all other homeowners and tenants, they also have additional housing protections under the Servicemembers Civil Relief Act, which is enforceable by the DOJ and servicemembers themselves.

The letter to mortgage servicers comes in response to complaints from military families and veterans on a range of potential mortgage servicing violations, including inaccurate credit reporting, misleading communications to borrowers,and required lump sum payments for reinstating their mortgage loans. These complaints are being reviewed for compliance by the CFPB with the Coronavirus Aid, Relief and Economic Security (CARES) Act and other applicable requirements.

“The illegal foreclosures of military families in the last crisis was one of the financial industry’s worst failures,” said CFPB Director Rohit Chopra. “The CFPB will be closely watching mortgage servicers and will hold them accountable for illegal tactics perpetrated against military families.”

“The Department of Justice takes seriously its responsibility to safeguard the rights of servicemembers and veterans,” said Assistant Attorney General Kristen Clarke. “While servicemembers carry the great burdens of this nation, they should not have to worry that their sacrifices will result in economic harm to their families. Mortgage servicers and landlords must ensure that they are in full compliance with federal laws intended to protect servicemembers and their families during military service.”

During the COVID-19 pandemic, 7.6 million homeowners entered forbearance. While the majority have resumed their regular mortgage payments, many borrowers—the CFPB says 1.25 million; latest data from the Mortgage Bankers Association says 835,000 borrowers—remain in forbearance programs that will expire at the end of the year.

The joint letter said ensuring that mortgage servicers comply with their legal obligations is crucial, citing anecdotal data from ore than a decade ago in which several financial institutions illegally seized the homes of military families. The letter said these violations were a “result of breakdowns in the mortgage servicing industry that were severe and widespread.” DOJ reported a number of settlements with regulators, including a $186 million settlement between DOJ and some of the country’s largest mortgage servicers. 

The letters note servicemembers have several legal protections under the SCRA that are designed to enable them to devote their entire energy to the national defense. These include, for example, a prohibition on foreclosing on certain servicemembers’ mortgages without court orders, the ability for military families to terminate residential leases early, and without penalty, upon receipt of military orders and a prohibition on evicting military families from their homes without court orders.  In addition, under the CARES Act and Regulation X, servicemembers and veterans have the same protections available to all mortgage borrowers. These include streamlined COVID hardship forbearance options, requirements that mortgages receiving a COVID-19 hardship forbearance be reported as “current” to credit reporting agencies if the loan was current before entering forbearance under the CARES Act and requirements in the Bureau’s Regulations X and Z for treatment of delinquent borrowers and borrowers who have applied for loss mitigation.