Tell a Veteran to Miss a Payment to Qualify for a Short Sale and You May be Up Against the CFPB
I came across this post by Charles Dailey while looking for a good lender for possible referral in Minnesota.
Charles does an outstanding job of setting for the problems that some servicemembers run into while trying to follow PCS orders, and then sets out warnings to servicers who might try to play fast and loose with the rules of mortgage modification/short sale. Though there are some concerns that the CFPB may have too much power, this is one area in which they seem to be using their authority appropriately.
Statistically, over half of the Consumer Finance Protection Bureau (CFPB) complaints to the Office of Servicemember Affairs (OSA) have to do with mortgages. Of these, 58 percent of them had to do with loan modification, mortgage collection practices or foreclosure . . . and yes . . . short sales would fall under this category. While this is a broad range of complaints, I’d like to focus on servicemembers with Permanent Change of Station (PCS) orders and how they relate to short sales.
For Realtors processing short sales on behalf of servicemembers, they’ll want to know that the CFPB is particularly interested in loan servicers:
- Failing to provide servicemembers with PCS orders who notify their servicers of such orders with accurate, clear, and readily understandable information about available assistance options for which the homeowner may qualify based on the information known to the mortgage servicer;
- Asking servicemembers with PCS orders to waive their legal rights under the Servicemembers Civil Relief Act or any other law as a prerequisite to the mortgage servicer either providing information about available options or evaluating the servicemember’s eligibility for assistance;
- Advising homeowners with PCS orders who are current on their loans and able to make the monthly payment to intentionally skip making payments in order to create the appearance they are having financial difficulties in order to obtain assistance for which they would not otherwise qualify;
- Failing to provide a reasonable means for servicemembers to find out information about the status of their request for assistance;
- Failing to timely communicate the servicer’s decision regarding requests for assistance from homeowners with PCS orders and failing to include and explanation for the denial, where required.
*Source: Consumer Financial Protection Bureau and prudential regulators issue joint guidance to address mortgage servicer practices that impact servicemembers
While all 5 of these bullet points are useful in applying pressure to loan servicers who deserve it, it’s bullet point 3 that is of particular interest. This is because while most loan servicers can’t force someone to be late in order to qualify for a short sale due to the Imminent Danger of Default rule, some persist in doing so and their internal policies now run afoul of the CFPB. When this happens, giving up is no longer a suitable option. You now have a friend in Holly Petraeus (yes, that Petraeus) at the CFBP.
To engage the OSA and CFPB in this type of a problem simply submit the complaint and it will follow this process:
I can attest from personal experience that they are very fast and get results quickly (just ask the office of the president of B of A). J Ensuring that things work out this way for servicemembers is essential for them because their PCS orders are binding and enforceable under short timeframes. Ensuring that their short sale happens without them having a late payment on their mortgage is critical because, if it happens that way, they can buy immediately in their new location using VA or FHA financing and they sure deserve to be able to!
Charles Dailey - Branch Manager, Loan Officer, Certified Military Housing Specialist - iLoan - NMLS ID# 79048 - CA DOC, MN DOC & WI DFI - 612.234.7283
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