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From Banking and Finance Law Daily, August 27, 2014

White House, mortgage servicers allied in fight for servicemember protections

By Lisa M. Goolik, J.D.

In connection with 19 new executive actions intended to better serve the military community, President Obama has announced a new voluntary partnership between the Administration and Wells Fargo Bank, N.A., CitiMortgage, Inc., Bank of America, N.A., Ocwen Loan Servicing, LLC, and Quicken Loans that will help deliver financial and home loan-related protections to the military community. According to the White House announcement, the partnership should streamline access to benefits provided by the Servicemembers Civil Relief Act (SCRA) for eligible active duty military personnel.

“Congress passed the Service members Civil Relief Act (SCRA) in 2003 to provide protections for military members as they enter active duty. Our Service women and men have earned important financial protections under the law, but too many do not exercise these important rights. But when business and government work together we can make a difference,” said the White House.

SCRA protections. The SCRA provides that active-duty servicemembers are eligible to have interest rates on home mortgages and fees for debts they incurred prior to military service capped at 6 percent. However, banks and financial institutions are only required to provide this cap to servicemembers who proactively provide written notice to their financial institution of their eligibility and provide proper documentation.

Further, a January 2014 report from the Government Accountability Office (GAO) found that many eligible servicemembers are not requesting the financial benefits available to them for residential real estate loans. The GAO report recommended that additional efforts be made to educate servicemembers and to encourage them to take advantage of their SCRA benefits (for more details, see the Banking and Finance Law DailyJan. 29, 2014).

“Given the demands on our men and women of the military, many of whom have moved or deployed abroad multiple times, it should come as no surprise that a recent study by the Government Accountability Office found that that many servicemembers are not even aware of these rights or haven’t been able to take advantage of them. As a result, there are servicemembers paying more than they should at the same time they and their families are giving so much to our country,”blogged Jeffrey Zients, Director of the National Economic Council and Assistant to the President for Economic Policy.

Proactive identification and outreach. Under the partnership, participating servicers will proactively identify active duty personnel at least once a quarter by searching the Defense Manpower Data Center (DMDC), a database of individuals who were or are on active duty status, against their loan portfolio and proactively reach out to individuals that have been identified as being eligible for benefits under the SCRA to notify them of their benefits. Servicers will leverage multiple marketing and communication tactics including telephone, mail, email, or other reasonable forms of communication.

In addition, the servicers will work together to ease the burden of enrollment and satisfaction of the SCRA written notice requirement.

“We are honored to serve the financial needs of military members, and we are committed to making all of our active-duty servicemember customers aware of the residential real estate mortgage protections available to them,” said Michael DeVito, head of servicing for Wells Fargo Home Mortgage. “These initiatives enhance our ability to inform active-duty servicemembers about SCRA and provide them the benefits they deserve.”

Student debt relief. In addition, the Department of Education has directed its federal student loan servicers to match their student borrower portfolios against the DMDC to identify active-duty servicemembers who are eligible for the 6 percent interest rates cap on student loans and to reduce those interest rates automatically for those eligible without the need for additional paperwork.

Efforts applauded. In a statement following the White House announcement, Rep. Denny Heck (D-Wash) praised the partnership, commenting, “I am particularly happy that this solution cuts red tape instead of increasing it, and reduces the burden of proof on the active duty servicemember. I applaud this voluntary action by the industry and the President to not only provide protections, but to actively engage the military community so they become aware of their options.”

In February 2013, Heck introduced the Servicemembers Opportunity Act, which would allow servicemembers without formal military orders to prove their eligibility for SCRA protections through other means, including a letter from their commanding officer or a certificate from the DOD’s website that documents their active duty status.

The Financial Services Roundtable, which counts the five participating mortgage servicers among its members, also released a statement indicating its support for the partnership. “The financial services industry remains deeply dedicated to the brave men and women serving our nation,” said FSR’s Housing Policy Council President and 70th Secretary of the Navy John Dalton. “We are proud that the voluntary commitments made in partnership with the White House today reinforce the industry’s overall mission to give back to those who sacrifice the most for this country.” FSR also released a reporthighlighting the efforts of financial services companies to refurbish, revitalize, and donate homes to veterans and their families.

Companies: Bank of America, N.A.; CitiMortgage, Inc.; Financial Services Roundtable; Ocwen Loan Servicing, LLC; Quicken Loans; Wells Fargo Bank, N.A.; Wells Fargo Home Mortgage

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