OCC charters and supervises national banks and federal thrifts. However, research  shows that servicemembers are generally less likely to own their own  homes. First, some SCRA mortgage protections only apply to  servicemembers who took out their mortgage before being placed on  active duty. Federal Regulators’ Oversight of SCRA Compliance Has Been Limited

		Prudential Regulators Examine for SCRA Compliance Based on Risk Factors

Prudential regulators—FDIC, Federal Reserve, NCUA, and OCC—are  responsible for supervising depository institutions’ compliance with  various federal consumer laws including SCRA. Based on our review, we estimate that from 2007 through 2011,  prudential regulators reviewed SCRA compliance in at least one  examination for 48 percent of all the institutions they oversaw that  serviced mortgages. Specifically, of these 83 institutions, we found that
6 institutions had examinations during this period that relied on  interviews of depository institution staff to assess SCRA compliance  as their highest category of examination procedure,
36 institutions had examinations in which the highest category of  examination procedure used to assess SCRA compliance was to  review the institution’s compliance management system, and
41 institutions had examinations that involved testing of loan files as  the highest category of examination procedure—the examination  procedure category that provides a greater level of assurance for  SCRA compliance than the previous two categories. In May 2011, DOJ took enforcement actions  against both mortgage servicers for wrongfully foreclosing upon active  duty servicemembers without obtaining court orders. They also explained that while their procedures for  conducting these reviews do not address reviewing for compliance with  SCRA mortgage protections, VA loan technicians encourage borrowers to  review their SCRA mortgage protections with military attorneys. VA officials explained that they rely on  federal regulators to investigate and enforce statutory requirements, such  as SCRA. 15, 2007). Although FHA, VA, and  the enterprises that FHFA oversees have identified limited instances of  SCRA violations in recent years, the sharing of information related to  SCRA trends, emerging risks, or types of weaknesses found in mortgage  servicers’ policies among all agencies that play a role in SCRA  compliance oversight could increase awareness of potential problems  and improve their ability to identify SCRA violations. As part of their  responsibilities, they inform servicemembers about their rights and  benefits under SCRA. Additionally, CFPB has held meetings in which  representatives from DOD and DHS and other federal agencies, financial  institutions, and trade associations discussed issues related to SCRA  compliance. DHS officials also told  us they have not evaluated the effectiveness of their SCRA education  methods to members of the Coast Guard and Coast Guard Reserve. Because the agency’s  entire mission is dedicated to benefiting individuals who have served the  country through military service, expanding its procedures to review for  SCRA compliance at mortgage servicers that participate in its mortgage  program could help the agency achieve its mission and better ensure that  servicemembers are receiving all benefits to which they are entitled. Because multiple federal agencies’ play a role in ensuring that mortgage  servicers provide SCRA protections to eligible servicemembers, sharing  information on SCRA compliance could benefit these agencies’  respective SCRA oversight efforts. We have previously found  that collaboration among supervisory agencies can lead to more effective  supervision and that such collaboration does occur for certain consumer  compliance laws. Without such an assessment, such as by using focus groups of  servicemembers or testing to reinforce retention of SCRA information, DOD  and DHS may not be able to ensure they are reaching servicemembers in  the most effective manner. Recommendations for Executive Action

To better ensure SCRA compliance oversight, we recommend that the  Comptroller of the Currency, the Chairman of the Board of Governors of  the Federal Reserve System, the Chairman of the Federal Deposit  Insurance Corporation, and Chairman of the National Credit Union  Administration take steps to increase the frequency with which examiners  (1) conduct testing of foreclosure files and as applicable, other mortgage  loan files; and (2) employ testing methods that provide greater assurance  that mortgage servicers are complying with SCRA. DHS concurred and DOD partially concurred with our recommendation  that they assess the effectiveness of their efforts to educate  servicemembers on SCRA to determine better ways for making  servicemembers aware of their SCRA rights and benefits, including  improving the ways in which members of the reserve components obtain  such information. Appendix I: Objectives, Scope, and Methodology

Our objectives were to examine (1) what is known about Servicemembers  Civil Relief Act (SCRA) eligibility, the number of violations that have  occurred, and practices financial institutions use to comply with SCRA; (2)  what oversight financial regulators and other federal agencies have taken  to help ensure depository institutions’ compliance with the act; and (3)  actions the Department of Defense (DOD), Department of Homeland  Security (DHS), Department of Veterans Affairs (VA), and others have  taken to ensure that servicemembers and others are informed of  protections provided under the act. We then used these data to select a  stratified random sample from the population of depository institutions  that service mortgages. Testing loan files for SCRA compliance. These  agencies include the Federal Housing Administration (FHA), the Federal  Housing Finance Agency (FHFA), and VA. We also reviewed the SCRA  compliance monitoring efforts of two government-sponsored  enterprises—Fannie Mae and Freddie Mac.
Why GAO Did This Study

SCRA protects servicemembers whose active duty military service prevents them from meeting financial obligations, by allowing interest rates on certain debts to be reduced and requiring a court order before certain foreclosures on their homes can occur. With foreclosures rising, reports surfaced of instances in which financial institutions failed to comply with SCRA. GAO examined the (1) eligibility for SCRA protections and extent of SCRA mortgage-related violations by depository institutions, (2) SCRA compliance oversight by prudential regulators and other federal agencies, and (3) the military services efforts to educate servicemembers on SCRA. GAO collected data on populations eligible for SCRA from DOD and SCRA violations from banking and law enforcement agencies and reviewed a stratified random sample of prudential regulators examinations of banks and credit unions. GAO also interviewed regulators, law enforcement and military officials, and military service organizations.

What GAO Found

Certain protections under the Servicemembers Civil Relief Act (SCRA) only apply to those servicemembers who obtained mortgages prior to becoming active duty, but at least 15,000 instances of financial institutions failing to properly reduce servicemembers mortgage interest rates and over 300 improper foreclosures have been identified by federal investigations and financial institutions in recent years. Additional independent reviews of financial institutions compliance are under way, and staff from some of these institutions told GAO that they have implemented improved practicessuch as creating single points of contact familiar with military issues for borrowersto better comply with SCRA.
Federal regulators oversight of SCRA compliance has been limited. GAO estimates that from 2007 through 2011 prudential depository institution regulatorsthe Federal Deposit Insurance Corporation, Federal Reserve Board, National Credit Union Administration, and Office of the Comptroller of the Currencyreviewed 48 percent of all banks and credit unions for SCRA compliance. Of these institutions that were reviewed for SCRA compliance, only about half received examinations that involved testing of compliance by reviewing loan files. Further, GAO found that examiners had only reviewed loans identified by the institution as involving servicemembers and had not independently selected a statistical sample of loan files, which would have provided greater assurance of SCRA compliance. Without more testing, which examination and auditing guidance suggest provides increased verification, regulators are less likely to detect SCRA violations. Various other federal agencies are involved in SCRA compliance oversight. The Department of Justice has explicit SCRA enforcement authority and since 2007 has brought three cases against mortgage servicers for violations. The Department of Veterans Affairs (VA), Federal Housing Administration, and Federal Housing Finance Agencywhich regulates the government-sponsored enterprisesall obtain information about SCRA compliance at the servicers that participate in the mortgage programs they administer or regulate, but the agencies and the prudential regulators do not share such information among themselves. Collaboration among these agencies could lead to more effective supervision and improve their awareness of potential problems with SCRA compliance. Further, VA oversight of mortgage servicers does not specifically review for SCRA compliance. By increasing its SCRA compliance monitoring efforts, VA could better ensure that servicemembers with VA loans are better protected.
SCRA requires that the Department of Defense (DOD) and Department of Homeland Security (DHS)which oversees the Coast Guardinform servicemembers of their SCRA rights. The military services provide this information in various forms, such as briefings and websites. However, some military officials said that servicemembersparticularly members of the National Guard and reserveoften receive SCRA information as part of briefings with numerous other topics prior to deployment and do not always retain the necessary awareness when they need it later. DOD and DHS do not assess the effectiveness of their SCRA education methods, such as by using focus groups of servicemembers or testing to reinforce retention of SCRA information. Without such assessment, they may not be able to ensure that they are informing servicemembers of their rights in the most effective manner.

What GAO Recommends

Prudential regulators should conduct more extensive loan file testing for SCRA compliance. Regulators and other agencies that oversee mortgage activities should also explore opportunities for information sharing on SCRA compliance oversight, and VA should expand its SCRA compliance monitoring efforts. Finally, DOD and DHS should assess the effectiveness of their efforts to provide SCRA information to servicemembers. The agencies generally agreed and noted actions responsive to GAOs recommendations.