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Bank of America Corp. will offer interest rate and principal reductions to military borrowers under a new mortgage modification program it announced on Thursday.
March 10 -
JPMorgan Chase, in response to embarrassing revelations that it failed to enforce a law protecting military members from foreclosure and high-cost credit, announced several changes ...
February 15 -
JPMorgan Chase, in response to embarrassing revelations that it failed to enforce a law protecting military members from foreclosure and high-cost credit, announced several changes ...
February 15 -
JPMorgan Chase & Co. put a top executive in charge of managing its home lending business two days after acknowledging to Congress that some military personnel customers faced improper foreclosures.
February 11 -
JPMorgan Chase acknowledged it had failed to properly enforce laws that protect military personnel from foreclosure, but its defense suggested the problem could be prevalent throughout the banking sector.
February 9
A new tool checks Department of Defense records to verify whether defaulted mortgage borrowers are actively serving in the military, providing a regulatory compliance check for servicers while staying within the confines of department policies.
The mortgage default management software developer Quandis Inc. said its Military Status Service Search came out of a need for servicers to maintain compliance with the Servicemembers Civil Relief Act, which offers a number of protections for active-duty members of the military, including lower interest rates during their time serving and a ban on foreclosures while the borrower is serving and up to nine months after returning from duty.
Servicers can use a Defense Department website to do an active-duty search of delinquent borrowers before foreclosure review meetings, where cases are monitored to ensure all documentation is correct, every loss-mitigation option has been exhausted and the case is ready to move forward.
In addition, servicers and their foreclosure attorneys do another check immediately before a foreclosure sale, said Scott Stoddard, the chief executive of Quandis, of Foothill Ranch, Calif.
But servicers still run afoul of the legislation. On April 21, JPMorgan Chase & Co. agreed to a $27 million out-of-court settlement for a class action filed by a group of service member mortgage borrowers who claimed the bank's mortgage unit violated provisions of the law.
In addition, JPMorgan Chase implemented new policies to prevent foreclosures prohibited by the SCRA, including rescinding the foreclosure sale and forgiving the mortgage debt of SCRA-protected borrowers who were previously foreclosed on. In future cases of improper foreclosures that should have been prohibited by the law, JPMorgan Chase will forgive the remaining mortgage debt for those borrowers as well.
Other banks have settled similar claims, including Wells Fargo & Co., which in March agreed to pay $10 million to settle SCRA-related claims.
"My best friend is an ex-Marine and his son is a Marine, so it's an issue that's pretty close to me to make sure people who are fighting for our country, that we're watching their back at home," Stoddard said. "There's just no reason with today's technology that anybody who's fighting for our country should be missed because of an error in the system."
Servicers have typically used automated technology to run checks on the DOD website. But the huge demand for the site was causing it to crash. The department implemented a number of new policies for the site, including the addition of a phrase to the online duty-check tool, requiring a human to type the distorted words appearing in a box on each check. Another rule limits the number of checks that an entity can do on the site to 1,000 per hour.
The Quandis tool is an automated search that complies with the DOD regulations, Stoddard said. Servicers upload a batch of borrower information to a secure server and the technology runs the checks.
"The Department of Defense is very protective of their information. They're making it available, but they're putting some rules around it and we're just making sure that we're following the rules," Stoddard said. "That's all they're asking for and on our end, we just want to make sure people are doing their due diligence and not foreclosing on our military personnel."
Quandis delivers the results of the check to the servicer, along with a digital document that provides the detailed information for each case that servicers can include in their loan files to prove they did the search. In addition, when the borrower's status has changed on a file that has been previously checked, the Quandis report specifically notifies the servicer.
The DOD website is free. Quandis charges servicers on a per-transaction basis. Stoddard said the service is a less expensive alternative to other methods servicers are using.
"I've heard of some big companies that will go hire 250 people at $8 an hour to sit there and type in the DOD website all day," Stoddard said. "That's an option to do it, but it's just inefficient and you add a fat finger error of 2% and all of a sudden, you run a pretty decent risk of missing somebody."
Stoddard said Quandis has discussed the online searches with the Defense Department and would like to see more access to the records to make it easier for servicers to perform the checks. Stoddard proposes creating a Web-based interface between default management platforms and the DOD database so servicers can conduct batch checks without using the submission form.
"Our preference is to set up a Web interface into them because at the end of the day, we're trying to keep service members who are fighting for our country from getting foreclosed on while they're away," he said.
