MORTGAGE 

FORECLOSURES

Regulatory Oversight 

of Compliance with 

Servicemembers Civil 

Relief Act Has Been 

Limited

Report to Congressional Requesters

July 2012

GAO-12-700

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-700, a report to 

congressional requesters 

July 2012 

MORTGAGE FORECLOSURES 

Regulatory Oversight of Compliance with 

Servicemembers Civil Relief Act Has Been Limited

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 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 GAO’s

recommendations.

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 practices—such as creating single points of contact 

familiar with military issues for borrowers—to better comply with SCRA. 

Federal regulators’ oversight of SCRA compliance has been limited. GAO 

estimates that from 2007 through 2011 prudential depository institution 

regulators—the Federal Deposit Insurance Corporation, Federal Reserve Board, 

National Credit Union Administration, and Office of the Comptroller of the 

Currency—reviewed 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 

Agency—which regulates the government-sponsored enterprises—all 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 Guard—inform 

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 servicemembers—particularly members of the National 

Guard and reserve—often 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.

View GAO-12-700. For more information, 

contact Mathew Scirè at (202) 512-8678 or 

sciremj@gao.gov. 
Page i GAO-12-700 Mortgage Foreclosures

Letter 1 

Background 4

SCRA Eligibility, Violations, and Compliance 13

Federal Regulators’ Oversight of SCRA Compliance Has Been 

Limited 20

Challenges in Ensuring Servicemembers’ Awareness of SCRA 

Protections 37

Conclusions 43

Recommendations for Executive Action 46

Agency Comments and Our Evaluation 46

Appendix I Objectives, Scope, and Methodology 54

Appendix II Oversight of Mortgage Servicers’ Servicemembers Civil Relief Act 

Compliance 62

Appendix III Comments from the Department of Homeland Security 68

Appendix IV Comments from the Department of Defense 70

Appendix V Comments from the Federal Deposit Insurance Corporation 73

Appendix VI Comments from the Board of Governors of the Federal 

Reserve System 75

Appendix VII Comments from the Federal Housing Finance Agency 77

Appendix VIII Comments from the Department of Housing and Urban Development 79

Contents
Page ii GAO-12-700 Mortgage Foreclosures

Appendix IX Comments from the National Credit Union Administration 81

Appendix X Comments from the Office of the Comptroller of the Currency 83

Appendix XI Comments from the Department of Veterans Affairs 85

Appendix XII GAO Contact and Staff Acknowledgments 88

Tables

Table 1: Violations of SCRA Mortgage Protections Identified 

through Various Reviews 16

Table 2: Number of Depository Institutions in Sample 56

Table 3: Examination Activities Identified by GAO for SCRA 

Compliance Reviews 59

Table 4: Summary of Ongoing and Completed Federal Agency 

Reviews of Mortgage Servicers’ SCRA Compliance 66

Figures

Figure 1: U.S. Military Population, 2010 8

Figure 2: Estimated Percentage of Depository Institutions That 

Serviced Mortgages That Were Examined for SCRA 

Compliance by Year, 2007 through 2011 24

Figure 3: Estimated Percentage of Depository Institutions That 

Serviced Mortgages That Were Examined for SCRA 

Compliance by Regulator, 2007 through 2011 26
Page iii GAO-12-700 Mortgage Foreclosures

Abbreviations

ABA American Bar Association 

CFPB Consumer Financial Protection Bureau

DCI Data collection instrument

DMDC Defense Manpower Data Center

DOD Department of Defense

DHS Department of Homeland Security

HUD Department of Housing and Urban Development

DOJ Department of Justice

VA Department of Veterans Affairs

FDIC Federal Deposit Insurance Corporation

FFIEC Federal Financial Institutions Examination Council

FHA Federal Housing Administration

FHFA Federal Housing Finance Agency

NCUA National Credit Union Administration

OCC Office of the Comptroller of the Currency

OTS Office of Thrift Supervision

SCRA Servicemembers Civil Relief Act

This is a work of the U.S. government and is not subject to copyright protection in the 

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Page 1 GAO-12-700 Mortgage Foreclosures

United States Government Accountability Office 

Washington, DC 20548

July 17, 2012

Congressional Requesters

The Servicemembers Civil Relief Act (SCRA) is intended to provide 

protections to servicemembers in the event that their military service 

prevents them from meeting financial obligations.1 The intent of the act is 

to allow servicemembers to focus on their duties without having to 

experience difficulties in their financial affairs as a result of their service. 

The act provides numerous protections to servicemembers serving on 

active duty,2

In addition to landmark civil cases against mortgage servicers by 

servicemembers, record numbers of foreclosures and allegations that 

mortgage servicers did not ensure that all foreclosure documents were 

properly signed or notarized in recent years caused federal agencies to 

pay increased attention to servicing activities.

including prohibiting mortgage servicers—entities 

responsible for administering home-mortgage loans—from foreclosing on 

their homes without court orders, capping the interest rate and fees on 

their mortgages at 6 percent, and prohibiting adverse credit reporting for 

servicemembers who invoke their SCRA rights. In order to be eligible for 

some of these protections, servicemembers must have incurred their 

mortgage prior to their active duty service.

3

 

1

50 U.S.C. §§ 501 – 597b.

At the end of 2010, federal 

bank regulators conducted reviews of foreclosure processing at 14 

federally regulated mortgage servicers. These reviews identified 

instances in which servicemembers who were protected by SCRA had 

been foreclosed upon and led to numerous additional inquiries to 

determine the extent to which servicemembers’ SCRA rights had been 

violated. For example, in 2011, some of the nation’s largest mortgage 

2

Active duty for armed services is defined in 10 U.S.C. §101(d)(1) as “full-time duty in the 

active military service of the United States.” Such terms include “full-time training duty, 

annual training duty, and attendance, while in the active military service, at a school 

designated as a service school by law or by the Secretary of the military department 

concerned.” The act entitles servicemembers to foreclosure protection for a period of 9 

months after their active duty service and to interest rate caps for up to 1 year after active 

duty service. 

3

See e.g. Hurley v. Deutsche Bank Trust Company Americas, No. 1:08-CV-361, 2009 WL

701006 (W.D. Mich. March 13, 2009).

 
 

Page 2 GAO-12-700 Mortgage Foreclosures

servicers—Chase Home Finance, LLC; BAC Home Loans Servicing, LP; 

and Saxon Mortgage Services Inc.—settled lawsuits for millions of dollars 

for faulty mortgage servicing and foreclosure practices that included 

allegedly foreclosing on and charging excess interest and fees to 

servicemembers in violation of SCRA.

In response to these identified instances of SCRA violations, 

congressional requesters asked us to examine various aspects of federal 

oversight of SCRA compliance. This report discusses (1) what is known 

about 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 financial 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. As agreed with your staff, the scope of our review 

includes primarily SCRA protections related to servicemembers’ 

residential mortgages.

To describe what is known about the practices financial institutions use to 

comply with SCRA, we interviewed representatives, from a nongeneralizable sample of 4 of the 10 largest mortgage servicers based on 

unpaid principal balance of mortgages serviced, about their SCRA 

compliance practices and challenges and reviewed relevant policies and 

procedures. We also interviewed representatives of financial industry 

associations, including those that represent the mortgage industry and 

financial institutions with a large military customer base. We reviewed 

letters from 10 mortgage servicers on their SCRA compliance history and 

activities, which were written in response to an investigation by the U.S. 

House of Representatives Committee on Oversight and Government 

Reform. We also reviewed data on SCRA violations found during bank 

and credit union examinations conducted between 2007 and 2011 by the 

prudential depository institution regulators—the Board of Governors of the 

Federal Reserve System (Federal Reserve), the Federal Deposit 

Insurance Corporation (FDIC), the National Credit Union Administration 

(NCUA), and the Office of the Comptroller of the Currency (OCC)—as 

well as data from Department of Justice (DOJ) enforcement actions and a 

recent class action settlement against a large mortgage servicer.

To assess the oversight financial regulators have taken to help ensure 

financial institutions’ compliance with SCRA, we reviewed prudential 

regulators’ examination policies and procedures and interviewed officials
 

Page 3 GAO-12-700 Mortgage Foreclosures

from these agencies. To assess the extent to which prudential regulators 

examined banks and credit unions for SCRA compliance, we selected a 

stratified random sample of 160 depository institutions (40 from each of 

the four prudential regulators) and reviewed the workpapers for each of 

the examinations from 2007 through 2011 for 152 of these institutions.4

Our sample included only institutions that hold mortgages in their loan 

portfolios and service those loans themselves or institutions that service 

mortgages for other institutions. We analyzed the examination 

workpapers to estimate the percentage of institutions for which prudential 

regulators conducted SCRA compliance reviews and determine the 

frequencies with which different examination procedures were used for 

these reviews.5

To determine what actions DOD, DHS, VA, and others have taken to 

ensure servicemembers are informed of their SCRA rights, we reviewed 

the act to determine what it requires agencies to do and interviewed two 

SCRA experts. We also reviewed DOD and DHS policies and procedures 

and interviewed officials from DOD’s Office of Legal Policy, DHS, and the 

National Guard Bureau. To determine what actions other agencies, 

including VA, Consumer Financial Protection Bureau (CFPB), and FHA, 

were taking to inform servicemembers and others of SCRA protections, 

we reviewed notifications they provide to mortgage servicers on SCRA 

compliance and interviewed officials at these agencies. To determine how 

servicemembers learn about their SCRA protections and what challenges 

To describe the SCRA oversight activities of other federal 

agencies, we reviewed SCRA oversight policies and procedures for DOJ, 

the Federal Housing Administration (FHA), government-sponsored 

enterprises (the enterprises)—Fannie Mae and Freddie Mac—and VA. 

We reviewed SCRA cases DOJ settled from 2007 through 2011 and 

SCRA compliance oversight policies and procedures of FHA, Fannie 

Mae, Freddie Mac, and VA, and we interviewed officials from these 

agencies.

 

4

Eight of the selected institutions were excluded from our analysis. Three institutions 

regulated by the Federal Reserve were excluded because they were recently chartered 

and therefore had not had an examination. We also excluded five credit unions because 

they were state chartered, meaning that state supervisory authorities and not NCUA 

served as the primary regulator for these institutions. See appendix I for additional 

information about our sample. 

5

Estimates based on this workpaper review are subject to sampling error. All estimates 

used in this report are presented along with their 95 percent confidence intervals. See 

appendix I for additional information about our sample.
 

Page 4 GAO-12-700 Mortgage Foreclosures

they face asserting those protections, we selected six military installation 

legal assistance offices (one for the Army, Navy, Marine Corps, and 

Coast Guard and two for the Air Force) based on a geographic 

distribution of states with high numbers of foreclosures and large active 

duty and reservist populations, and interviewed the legal assistance 

attorneys who work directly with servicemembers who visit these offices. 

We reviewed examples of SCRA training and outreach that these offices 

develop and distribute to servicemembers. We also interviewed two legal 

assistance attorneys from the reserve components who were 

recommended during our interviews with legal assistance attorneys, as 

well as representatives from seven military servicemember groups that 

were selected based on their broad representation of servicemembers. 

See appendix I for more information on our objectives, scope, and 

methodology.

We conducted this performance audit from August 2011 to July 2012 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Congress passed the Soldiers’ and Sailors’ Civil Relief Act in 1940 to 

provide servicemembers protections to help them meet the unique 

circumstances they face when serving their country.6

 

6

A prior version of the law was enacted in 1918.

In response to the 

increased use of Reserve and National Guard military units in the Global 

War on Terrorism, Congress enacted SCRA in December 2003 as a 

modernized version of the Soldiers’ and Sailors’ Civil Relief Act. In 

addition to providing protections related to residential mortgages, the act 

covers other types of loans, such as credit card and automobile and a 

variety of other issues, such as rental agreements, eviction, installment 

Background
 

Page 5 GAO-12-700 Mortgage Foreclosures

contracts, civil judicial and administrative proceedings, motor vehicle 

leases, life insurance, health insurance, and income tax payments.7

SCRA provides the following mortgage-related protections to 

servicemembers:8

• Interest Rate Cap. Servicemembers who obtain mortgages prior to 

serving on active duty status are eligible to have their interest rate 

capped at 6 percent for the duration of their active duty status and for 

12 months after returning from active duty service.9

• Foreclosure Proceedings. A servicer cannot sell, foreclose, or seize 

the property of a servicemember for breach of a pre-service obligation 

unless a court order is issued prior to the foreclosure on the

Interest above 6 

percent is to be forgiven by the servicer. Servicemembers are 

required to inform their servicer of their active duty status in order to 

avail themselves of this provision.

 

7

A servicemember may waive many of the rights and protections provided by SCRA 

provided the waiver meets certain criteria, including that it is in writing and is in a document 

separate from the obligation or liability to which it applies. 50 U.S.C. § 517. The waiver 

provision “is designed to induce servicemembers and their creditors to adjust their respective 

rights privately and to make it clear that no restrictions have been placed upon the usual 

right of the parties to re-negotiate an obligation.” The Judge Advocate General's Legal 

Center & School, U.S. Army, JA 260, Servicemembers Civil Relief Act, 2-8 (March 2006).

8

SCRA defines servicemembers as members of the uniformed services found in 10 

U.S.C. §101(a)(5) which includes the commissioned corps of the National Oceanic and 

Atmospheric Administration and the Public Health Service. Active duty is defined in 10 

U.S.C. §101(d)(1). We did not collect any specific information related to SCRA protections 

for officials from the National Oceanic and Atmospheric Administration and the Public

Health Service for this report. 

9

50 U.S.C. app. §527. The act defines interest to include service charges, renewal 

charges, fees, or any other charges (except bona fide insurance). A servicer has the right 

to challenge the reduction in interest in court, if it believes that the servicemember’s ability 

to pay interest above 6 percent is “not materially affected by reason of the 

servicemember’s military service.” 50 U.S.C. § 527(c). 
 

Page 6 GAO-12-700 Mortgage Foreclosures

property.10 This protection is effective until 9 months after the term of 

active duty service ends.11

• Mortgage prepayment penalties. A court may decide that 

servicemembers who have mortgages that impose penalties for 

paying off the balance early are not subject to these penalties if the 

servicemember incurs such fees due to military service and the ability 

of the servicemember to pay the fees is materially affected by military 

service.

If the servicer files an action in court to 

enforce the terms of the mortgage, the court may stay any 

proceedings or adjust the obligation to preserve the interests of the 

parties.

12

• Adverse credit reporting protections. A servicer may not report 

adverse credit information to a credit reporting agency solely because 

a servicemember exercises his or her SCRA rights, including a 

request to have his or her mortgage interest rate and fees be capped 

at 6 percent.

For example, a servicemember who receives a permanent 

change-of-station order to relocate to another area may receive a 

court order that waives the penalty for selling his or her home and 

paying off the mortgage early.

13

 

1050 U.S.C. app. § 533(c). This provision is directed at foreclosures that are referred to as 

non-judicial. Once a mortgage servicer decides to foreclose, it follows either a judicial or 

non-judicial foreclosure method, depending on state law. In a judicial foreclosure, 

servicers initiate a formal foreclosure action by filing a lawsuit in court. The presiding 

judge, upon the conclusion of a hearing, will, in the appropriate circumstances, issue an 

order for the foreclosure to proceed. By contrast, a non-judicial foreclosure process takes 

place outside the courtroom and is typically conducted by the trustee named in the deedof-trust document. Trustees, and sometimes servicers, generally send a notice of default 

to the borrower and publish a notice of sale in area newspapers or legal publications. 

Pursuant to 50 U.S.C. § 533(c), if a lender in a non-judicial foreclosure state forecloses on 

a servicemember that took out his or her mortgage prior to active duty service without a 

court order, the foreclosure is invalid.

11In 2008, P. L. 110-289, § 2203, extended this protection for servicemembers from 90 

days after active duty service to 9 months after active duty service, effective until 

December 31, 2010. In 2010, P. L. 111-346, § 2 changed the expiration date of the 9-

month protection to December 31, 2012; on January 1, 2013, the period prohibiting 

foreclosure without a court order will revert to 90 days.

1250 U.S.C. app. §523(b).

1350 U.S.C. app §518.
 

Page 7 GAO-12-700 Mortgage Foreclosures

In addition to SCRA, the Housing and Urban Development Act of 1968 

includes a requirement applicable to institutions that service mortgages. 

This act requires that all mortgage servicers that service home loans 

provide notification of the availability of homeownership counseling 

offered by the lender to eligible homeowners who fail to pay any amount 

by the due date.14 In 2006, changes were made to the homeownership 

counseling notice requirement. Mortgage servicers are required to alert 

borrowers of SCRA protections if they are in default on their mortgage, 

and the notice instructs borrowers to notify their servicer if they believe 

they are eligible for SCRA protections.15

SCRA provides protections to active duty servicemembers in all five of 

the military services—Army, Navy, Air Force, Marine Corps, and Coast 

Guard—as well as members of each of these services’ reserve 

component.

Servicers must provide the 

notification within 45 days from the date a payment was missed by a 

borrower. The Department of Housing and Urban Development (HUD) 

developed and disseminated the format for this notice.

16 These components include the Army Reserve, Navy 

Reserve, Marine Corps Reserve, Air Force Reserve, Coast Guard 

Reserve, Army National Guard, and Air National Guard.17

 

14Section 106(c)(5) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x 

(c)(5)). (“Home loan” means a loan secured by a mortgage or lien on residential property. 

A homeowner is eligible for counseling if (1) the loan is secured by the homeowner’s 

principal residence, (2) the home loan is not assisted by the U.S. Department of 

Agriculture’s Rural Housing Service, and (3) the homeowner is, or is expected to be, 

unable to make payments, correct a home loan delinquency within a reasonable time, or 

resume full home loan payments due to a reduction in the homeowner’s income. In lieu of 

providing notification of available homeownership counseling offered by the lender, 

servicers may provide either a list of HUD-approved nonprofit homeownership counseling 

organizations or the toll-free number HUD has established through which a list of such 

organizations can be obtained.)

In 2010, active 

15Section 688 of the National Defense Authorization Act for Fiscal Year 2006 (Public Law 

109-163, enacted January 6, 2006) amended the required content of notifications of 

homeownership counseling availability under §106(c)(5)(A)(ii) of the Housing and Urban 

Development Act (12 U.S.C. 1701x(c)(5)(A)(ii)) and directed HUD to develop and 

disseminate a format for the required notice.

16DHS oversees servicemembers in the Coast Guard and the Coast Guard Reserve.

17The reserve components consist of three categories: Ready Reserve, Standby Reserve, 

and Retired Reserve. The Ready Reserve is comprised of the Selected Reserve, the 

Individual Ready Reserve, and the Inactive National Guard. Because Selected Reserve 

members train throughout the year and participate annually in active duty training 

exercises, our report discusses this category of the reserve. 
 

Page 8 GAO-12-700 Mortgage Foreclosures

duty servicemembers comprised 63 percent of the military’s force, and 

the reserve components represented the remaining 37 percent of the 

military force.18

Figure 1: U.S. Military Population, 2010

Figure 1 shows the distribution of the military population 

and shows that the Army constitutes the greatest percentage of both 

active duty servicemembers and the reserve forces.

Note: Data on the reserve components represent only the Selected Reserve within the Ready 

Reserve. 

While the Army Reserve, the Navy Reserve, the Marine Corps Reserve, 

and the Air Force Reserve are federal entities, the Army National Guard 

and the Air National Guard (known collectively as the National Guard) 

 

18The data on the reserve components represent only those of the Selected Reserve.
 

Page 9 GAO-12-700 Mortgage Foreclosures

have both federal and state missions.19 Members of the National Guard 

who are eligible for SCRA protections are those who have been called 

into federal active duty service.

20 In addition, members of the National 

Guard recalled for state duty are also eligible for SCRA protections under 

certain circumstances.21

The responsibility of extending mortgage-related SCRA protections to 

eligible servicemembers often falls to mortgage servicers. While some 

institutions that originate home mortgage loans hold the loans as assets 

on their balance sheets, institutions generally sell them to other financial 

institutions or the enterprises—Fannie Mae or Freddie Mac. The 

enterprises purchase mortgages from primary mortgage lenders. They 

hold some of the mortgages they purchase in their portfolios, but they 

package the majority into mortgage-backed securities and sell them to 

investors in the secondary mortgage market. The enterprises guarantee

these investors the timely payment of principal and interest. If a mortgage 

originator sells its loans to either an investor or to an institution that 

securitizes them, another financial institution or other entity is appointed 

as the mortgage servicer to manage payment collections and other 

activities associated with these loans. Mortgage servicers, which can be 

large mortgage finance companies, commercial banks, or small specialty 

companies unaffiliated with a larger financial institution, earn a fee for

duties they perform, such as sending borrowers monthly account 

statements, answering customer-service inquiries, collecting monthly 

mortgage payments, maintaining escrow accounts for property taxes and 

hazard insurance, and forwarding proper payments to the mortgage 

owners. Other mortgage lenders that hold the mortgages they originate 

may service the loans internally or outsource this function.

 

19The National Guard is comprised of 54 separate organizations: one for each state, and 

one each for Puerto Rico, Guam, the U.S. Virgin Islands, and the District of Columbia.

20Members of the National Guard who are called to federal active duty service are under 

Title 10 of the United States Code. When under the command of their respective 

governors, National Guard members operate under Title 32 status and may be called 

upon to carry out a number of domestic missions, such as responding to natural disasters, 

protecting state assets from terrorist attack, and training for their federal missions.

21National Guard members are eligible for SCRA protections when called to state active 

duty under 32 U.S.C. § 502(f) if the duty is because of a federal emergency, the request is 

made by the President or the Secretary of Defense, and the member is activated for 

longer than 30 days. 50 U.S.C. app. § 511(2)(A)(ii). An example of National Guard 

members fitting into this category would be those members activated by the states, at the 

request of the President, to provide airport security after the 9-11 attacks.
 

Page 10 GAO-12-700 Mortgage Foreclosures

In the event that a borrower becomes delinquent on loan payments, the 

mortgage servicer must decide whether to pursue a home retention 

workout or foreclosure alternative, such as a short sale, or proceed with 

foreclosure. If the mortgage servicer determines that foreclosure is the 

most appropriate option, it follows one of two foreclosure methods, 

depending on state law. In a judicial foreclosure, a judge presides over 

the process in a court proceeding. Mortgage servicers initiate a formal 

foreclosure action by filing a lawsuit with a court. A nonjudicial foreclosure 

process takes place outside the courtroom and is typically conducted by a 

trustee named in the deed-of-trust document that accompanied the 

mortgage. Trustees, and sometimes mortgage servicers, generally send a 

notice of default to the borrower and publish a notice of sale in area 

newspapers or legal publications.

Prudential regulators—FDIC, Federal Reserve, NCUA, and OCC—have 

the authority to conduct reviews of any aspect of banks’ activities, 

including compliance with applicable consumer protection laws, such as 

SCRA.22 OCC charters and supervises national banks and federal thrifts. 

The Federal Reserve supervises state-chartered banks that opt to be 

members of the Federal Reserve System, bank holding companies, thrift 

holding companies, and the nondepository institution subsidiaries of those 

institutions. FDIC supervises FDIC-insured state-chartered banks that are 

not members of the Federal Reserve System, as well as federally insured

state savings banks and thrifts. NCUA charters and supervises federally 

chartered credit unions and insures savings in federal and most statechartered credit unions.23

 

2212 U.S.C. §1818; 12 U.S.C. §1786.

OCC regulates the vast majority of mortgage 

servicing in the United States. For example, OCC-regulated servicers 

accounted for close to 80 percent of the unpaid principal balance on 

serviced mortgages in the third quarter of 2011. The prudential regulators 

conduct risk-based examinations of the institutions they oversee on a 

routine basis. Because examinations are risk-based and there are a 

23The Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 

124 Stat. 1376 (2010), eliminated the Office of Thrift Supervision (OTS), which chartered 

and supervised federally chartered savings institutions and savings and loan holding 

companies. Supervisory authority was transferred to OCC for federal savings 

associations, to FDIC for state savings associations, and to the Federal Reserve for 

savings and loan holding companies and their subsidiaries, other than depository 

institutions. The transfer of these powers was completed on July 21, 2011, and OTS was 

officially dissolved 90 days later.
 

Page 11 GAO-12-700 Mortgage Foreclosures

number of consumer compliance laws for which examiners assess 

compliance during an examination, SCRA compliance is not assessed 

during every examination.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank Act) established CFPB and provided it with the authority to regulate 

mortgage servicers with respect to federal consumer financial law.24

Consumer financial protection functions from seven existing federal 

agencies were transferred to the new agency.25 For mortgage servicers 

that are depository institutions with more than $10 billion in assets or their 

affiliates, CFPB will have exclusive supervisory authority and primary 

enforcement authority to ensure compliance with federal consumer 

financial law.26 Additionally, if a mortgage servicer is a nondepository 

institution, CFPB will have both supervisory and enforcement authority to 

ensure compliance with federal consumer financial law.27 Finally, CFPB 

will have rulemaking authority with respect to mortgage servicers, 

including authority that transfers from other federal agencies such as the 

Federal Reserve and the Federal Trade Commission.28

Other federal agencies are involved in the mortgage market by operating 

mortgage programs aimed at expanding homeownership for populations 

who may encounter difficulties in obtaining mortgages. For example, FHA 

SCRA, however, 

was not one of the enumerated laws for which oversight transferred to 

CFPB. The prudential regulators remain responsible for overseeing 

compliance with the law for any of the entities they supervise that are 

servicing mortgages.

 

24Federal consumer financial law is a defined term in the Dodd-Frank Act that includes 

over a dozen existing federal consumer protection laws, including the Truth in Lending 

Act, the Real Estate Settlement Procedures Act, and the Equal Credit Opportunity Act, as 

well as the provisions of title X of the Dodd-Frank Act itself. 12 U.S.C. § 5481(12), (14). 

25The seven agencies are the Federal Reserve, FDIC, Federal Trade Commission, 

NCUA, OCC, OTS, and HUD.

2612 U.S.C. § 5515. 

27CFPB’s nondepository supervision authorities specifically extend to any covered person 

that “offers or provides origination, brokerage or servicing of loans secured by real estate 

for use by consumers primarily for personal, family or household purposes, or loan 

modification or foreclosure relief services in connection with such loans.” 12 U.S.C. § 

5514(a)(1)(A). 

2812 U.S.C. § 5512. The Federal Trade Commission will retain its current enforcement 

authority. 
 

Page 12 GAO-12-700 Mortgage Foreclosures

has played a large role in assisting minority, lower-income, and first-time 

homebuyers in obtaining mortgages. FHA’s program insures private 

lenders against losses from borrower defaults on mortgages that meet 

FHA criteria for properties with one to four housing units. As of 

September 2011, almost 3,700 lending institutions were approved to 

participate in FHA’s mortgage insurance programs for single-family 

homes. FHA also offers special protections for servicemembers who have 

FHA-insured loans. For example, FHA-approved lenders are authorized 

to postpone principal payments and foreclosure proceedings for 

servicemembers on active duty who have FHA-insured mortgages.29

VA is also active in the mortgage market through its Home Loan Guaranty 

program, which provides lenders a guaranty on a portion of mortgage 

loans for eligible veterans, active duty servicemembers, surviving 

spouses, and members of the reserve components in recognition of their 

service. According to VA, the program operates by substituting the federal 

government’s guaranty for a down payment that might otherwise be 

required. VA guarantees a portion of the mortgage loan in the event that 

borrowers default, providing lenders with substantial financial protections 

against some of the losses that may be associated with extending such

mortgage loans. In 2011, VA guaranteed over 350,000 loans to veteran 

borrowers.

The Housing and Economic Recovery Act of 2008 created the Federal 

Housing Finance Agency (FHFA) and gave it responsibility for, among 

other things, the supervision and regulation of the housing-related 

enterprises: Fannie Mae, Freddie Mac, and the 12 federal home loan 

banks.30 Specifically, FHFA was assigned responsibility for ensuring that 

each of the regulated entities operates in a safe and sound manner, 

including maintenance of adequate capital and internal controls, and 

carries out its housing and community development finance mission. 

FHFA has no direct authority over mortgage servicers, but does have 

authority to ensure that the housing enterprises are being run safely and

soundly, as well as the power to impose operational, managerial, and 

internal control standards on the companies.

 

2924 CFR 203.610, 24 CFR 203.345 and 203.346.

30Pub. L. 110-289, sec. 1101.
 

Page 13 GAO-12-700 Mortgage Foreclosures

The total number of servicemembers eligible for the mortgage protections 

provided by SCRA is not known, but the size of this population is likely 

limited because the act provides protections only to servicemembers who 

meet certain eligibility requirements. The maximum number of 

servicemembers potentially eligible for mortgage protections under SCRA 

at any one time includes those servicemembers on active duty service 

and those who have recently left it.31 According to DOD, between 2007 

and 2010 about 2 million servicemembers, including those activated from 

the reserve components, were on active duty.32

According to DOD officials, representatives from industry trade groups, 

SCRA experts, and military service organizations, the servicemembers 

most likely to be eligible for SCRA mortgage protections are members of 

the reserve components. These servicemembers are more likely to have 

had mortgages prior to entering active duty service and some may 

potentially experience a decline in their incomes as they leave their 

civilian employment and begin receiving their military pay. We have 

However, the number of 

servicemembers who may actually qualify for the SCRA mortgage 

protections is a smaller portion of this population because some of the 

act’s protections only extend to servicemembers who obtained their 

mortgages prior to entering active duty service or servicemembers whose 

military service materially affects their ability to pay their mortgage. 

However, representatives from all the mortgage servicers with whom we 

spoke stated that they do not assess whether a servicemember’s ability to 

pay has been materially affected by their active duty status and that they 

provide eligible servicemembers SCRA protections regardless of whether 

their ability to pay is materially affected or not.

 

31Reserve personnel are entitled to most of SCRA’s protections on the date they receive 

active duty orders. 50 U.S.C. App. § 516(a).

32Because some members of the reserve components may have been activated more 

than once between 2007 and 2010, this estimate may represent a larger population of 

servicemembers than those that were eligible for SCRA mortgage protections during this 

period.

SCRA Eligibility, 

Violations, and 

Compliance

SCRA Requirements Limit 

Eligibility for Mortgage 

Protections
 

Page 14 GAO-12-700 Mortgage Foreclosures

previously reported, however that servicemembers belonging to the 

reserve components on average earn more income while activated.33

The maximum number of servicemembers who are eligible for SCRA 

mortgage protections is also a smaller portion of the total military 

population because many do not own homes for which they have taken 

out mortgage loans. According to the Census Bureau, the U.S. 

homeownership rate was about 67 percent in 2010. However, research 

shows that servicemembers are generally less likely to own their own 

homes.

According to DOD officials, the number of servicemembers activated from 

the reserve components from 2007 through 2010 was approximately 

576,500.

34 For example, according to DOD’s 2008 annual Status of Forces 

surveys—surveys that DOD sends annually to active duty 

servicemembers and members of the reserve components to evaluate 

various programs and policies and their impact on servicemembers—only 

34 percent of active duty servicemembers and 55 percent of reserve 

component servicemembers reported that they owned or made mortgage 

payments on a home in the previous 12 months.35

 

33GAO, Military Personnel: Reserve Component Servicemembers On Average Earn More 

Income while Activated, 

However, even those 

military families who have mortgages may not be eligible for SCRA 

protections. First, some SCRA mortgage protections only apply to 

servicemembers who took out their mortgage before being placed on 

active duty. Also, given that mortgage interest rates have been at historic 

lows in recent years, servicemembers who took out mortgage loans 

during this period before being placed on active duty may be likely to 

have loans with rates lower than the SCRA-mandated level of 6 percent.

GAO-09-688R (Washington, D.C.: June 23, 2009), p.3.

34Census computes the homeownership rate by dividing the number of owner-occupied 

housing units by the number of occupied housing units or households.

35DOD Status of Forces Survey of Active Duty Members (August 2008) and Status of 

Forces Survey of Reserve Component Members (November 2008). The margin of error 

for active duty servicemembers is plus or minus 1 percent and plus or minus 2 percent for 

reserve component members. Survey results do not include responses from members of 

the Coast Guard and Coast Guard Reserve.
 

Page 15 GAO-12-700 Mortgage Foreclosures

Although the total number of SCRA violations is not known, thousands of 

SCRA violations have been identified from a number of sources. First, 

DOJ—which is responsible for enforcing SCRA—settled investigations in 

2011 with two mortgage servicers and identified 165 instances of active 

duty servicemembers who had their homes foreclosed upon without the 

mortgage servicer seeking the proper court order as required by the act.36

Second, in July 2011, as part of its investigation into SCRA violations, the 

U.S. House of Representatives Committee on Oversight and Government 

Reform sent letters to 10 large mortgage servicers requesting them to 

identify the total number of improper foreclosures and interest-rate and 

fee violations they had committed. In their responses, 6 mortgage 

servicers reported having conducted a total of at least 148 improper 

foreclosures against servicemembers and failing to reduce interest rates 

or fees on the mortgages for over 14,000 servicemembers since 2005. 

Third, as the result of a class-action lawsuit filed by several 

servicemembers, as of January 2012, Chase Home Finance, LLC had 

issued refunds to approximately 13,500 borrowers for interest and fees 

charged in excess of SCRA protections since 2005.37 Many of the 

mortgage servicers involved in these investigations are among the largest 

in the industry and service millions of loans. Table 1 summarizes the 

various SCRA violations identified by these sources to date.

 

36United States of America v. BAC Home Loans Servicing, Civil No. 2:11-cv-04534-PAMRW (C.D. Cal. 2011) and United States of America v. Saxon Mortgage Services, Inc., 

Civil No. 3:11-cv-0111-F (N.D. Tex. 2011). BAC Home Loans Servicing, LP, was formerly 

known as Countrywide Home Loans Servicing and is a subsidiary of Bank of America 

Corporation. Saxon Mortgage Services was a subsidiary of Morgan Stanley.

37Rowles v. Chase Home Finance, Civil No. 9:10-cv-01756-MBS (D.S.C. 2011).

Thousands of MortgageRelated SCRA Violations 

Have Been Identified to 

Date
 

Page 16 GAO-12-700 Mortgage Foreclosures

Table 1: Violations of SCRA Mortgage Protections Identified through Various Reviews

Mortgage servicer Source of data Period in review

Number of 

improper SCRA 

foreclosures 

identified

Number of instances 

in which interest rates 

and fees charged 

were not reduced

BAC Home Loans Servicing DOJ Jan. 2006–May 2009 143 Not specified

Wells Fargo Self-reported Foreclosure – Jan. 2006–

June 2010

Interest rate and fees–Jan. 

2006–June 2011 

17 3,224

JPMorgan Chase Self-reported Jan. 2005–July 2011 54 10,000

Class action 

settlement

Jan. 2005–Jan 2012 Not specified 13,500

Citi Self-reported Foreclosure– Jan. 2007–

June 2011

Interest rate and fees–Jan. 

2006–June 2011

0 140

Ally Financial Self-reported Not specified 77 923

PHH Mortgage Self-reported Jan. 2006–June 2011 0 304

SunTrust Mortgage Self-reported Not specified 0 2 

Saxon Mortgage Services, Inc. DOJ Jan. 2006–Dec. 2010 22 Not specified

Source: GAO analysis of DOJ complaints and mortgage servicers’ responses to House Committee on Oversight and Government 

Reform requests.

Through their compliance examinations, prudential regulators identified 

251 instances of SCRA compliance problems at depository institutions 

between 2007 and 2011. FDIC identified the vast majority—230—of these 

issues, with Federal Reserve staff identifying 16, OCC staff identifying 4, 

and NCUA staff identifying 1 instance. However, these SCRA compliance 

issues may not specifically concern mortgages—for example, they may 

have involved non-mortgage-loan products, such as credit card loans.

A more complete picture of the extent of SCRA violations may result from 

three large-scale federal agency reviews that are ongoing. Recent 

enforcement actions taken by DOJ, Federal Reserve, and OCC require 

mortgage servicers to conduct historical reviews of their mortgage loan 

files to determine if servicemembers who were eligible for the SCRA 

mortgage protections received them, among other things. If violations are 

identified, the mortgage servicers are required to provide compensation to 

the servicemembers. Appendix II contains a detailed explanation of these 

reviews.
 

Page 17 GAO-12-700 Mortgage Foreclosures

In the wake of identified SCRA violations, some mortgage servicers have 

implemented procedures to enhance their compliance with SCRA. Some 

large mortgage servicers have instituted several military status checks 

during the foreclosure process. For example, one large mortgage servicer 

now requires its foreclosure counsel to check a customer’s military status 

prior to the initiation of foreclosure proceedings, 1 week prior to a 

foreclosure sale, and 1 day prior to the scheduled sale date. Some 

mortgage servicers have also created dedicated customer service 

support for military servicemembers, including telephone hotlines and 

websites. For example, representatives from one mortgage servicer told 

us that they had developed a dedicated team that is staffed with former 

servicemembers to assist customers with SCRA requests. These 

customer-support representatives also receive training on military 

financial issues and serve as the points of contact for any problems with 

delinquency, remediation, and foreclosure.

Finally, as a result of identified violations and SCRA investigations, some 

servicemembers will be receiving SCRA protections that go beyond those 

stated in the act. For example, three mortgage servicers that responded to 

the House Committee on Oversight and Government Reform letters noted 

that they have reduced the interest rate they charge on servicemembers’ 

mortgages to 4 percent—which is below the 6 percent required in SCRA. 

Additionally, the National Mortgage Settlement between the federal 

government, 49 state attorneys general, and five large mortgage servicers 

that occurred in February 2012 requires the five mortgage servicers to 

implement new mortgage servicing standards. These new standards 

expand protections to certain servicemember customers of these five 

mortgage servicers beyond those provided in SCRA. For example, the new 

standards extend foreclosure protections to any servicemember—

regardless of whether their mortgage was obtained prior to active duty 

status—who is receiving Hostile Fire/Imminent Danger Pay or is serving at 

a location more than 750 miles away from their home. This means that any 

servicemember meeting these conditions and living in a nonjudicial state 

who obtained a mortgage after obtaining active duty status could not be 

foreclosed upon without a court order. More information on the National 

Mortgage Settlement is contained in appendix II.
 

Page 18 GAO-12-700 Mortgage Foreclosures

Representatives from some mortgage servicers and industry associations 

cited challenges that make complying with SCRA difficult. First, mortgage 

servicers may not know at the time a mortgage is originated whether a 

borrower will be eligible for SCRA protections in the future. For example, 

a borrower would become eligible for SCRA mortgage protections after 

obtaining his or her mortgage by joining the active duty military or being 

called into active duty service while serving as a member of the reserve 

components. Therefore, mortgage servicers may not be able to flag loans 

at origination that could potentially become eligible for SCRA protections 

at a later date. Second, representatives from some mortgage servicers 

and industry associations also noted that military orders, which 

servicemembers must provide to their mortgage servicers in order to 

receive the SCRA interest rate protection, can be difficult to interpret. In 

particular, a representative from one mortgage servicer noted that the 

orders do not always clearly specify the start and end dates of active duty 

service and that the format and content of these orders can vary 

considerably across services, which may lead to mistakes by mortgage 

servicer personnel responsible for determining eligibility. Further, a DOD 

official explained that in some instances, military orders may not be 

available in a timely manner. For example, he stated that members of the 

reserve components may be alerted that their unit is being mobilized on a 

certain date; however, the servicemembers may not get the actual military 

orders until weeks later. This delay could lead to problems for both a 

servicemember and a mortgage servicer. For example, if a 

servicemember has been deployed, he or she may encounter difficulties 

sending orders to his or her mortgage servicer. Without the orders, a 

mortgage servicer may encounter difficulties verifying the 

servicemember’s active duty start date in order to appropriately adjust 

their payment amounts.

One of the primary tools mortgage servicers use to comply with SCRA is 

a website operated by DOD’s Defense Manpower Data Center (DMDC) 

that allows mortgage servicers and others to query DMDC’s database to 

determine the active duty status of a servicemember. DMDC collects, 

archives, and maintains DOD personnel data. Representatives from 

mortgage servicers indicated that they use this website to confirm if a 

borrower is an active duty servicemember and may be eligible for SCRA 

protections and that they rely on the site to confirm if a servicemember is 

on active duty status prior to conducting a foreclosure. Representatives 

from one mortgage servicer also noted that they use the website to 

confirm the period of time that borrowers are eligible for the SCRA 

interest rate protections. The website is an important compliance tool 

because servicemembers are eligible for the foreclosure protections even 

Mortgage Servicers and 

Others Cited Challenges to 

Complying with SCRA
 

Page 19 GAO-12-700 Mortgage Foreclosures

if they do not notify their mortgage servicers that they are serving on 

active duty.

However, many representatives from mortgage servicers and industry 

associations with whom we spoke cited challenges with the usability of 

the website. Moreover, confusion appears to exist in the mortgage 

servicing industry about the availability of information in the database. For 

example, prior to April 2012, the website only allowed mortgage servicers 

to inquire about borrowers’ active duty status one individual at a time. The 

inability to test large numbers of borrowers simultaneously—known as 

batch testing—made confirming borrowers’ SCRA eligibility difficult given 

the large volumes of mortgages that some institutions service. 

Representatives from some mortgage servicers also indicated that 

sometimes the personnel information available from DMDC is not 

complete or accurate and that the database may produce a false-negative 

result. That is, it will indicate that servicemembers were not on active duty 

status when in fact they were. DMDC officials explained that information 

contained in the database depends on information provided to DMDC by 

the various services. Therefore, if a service has not reported a 

servicemember to DMDC as being on active duty status, the database will 

report that the servicemember is not on active duty. Additionally, 

representatives from mortgage servicers told us that they believe some 

servicemembers are not listed in the database. For example, one 

explained that, in some instances they have received orders from 

servicemembers, but when they query the database to confirm the active 

duty status, the servicemembers are not listed as on active duty. Other 

mortgage servicer representatives believed that some servicemembers 

may not be listed in the database for national security reasons, such as 

those serving in the Special Forces. However, DMDC officials told us that 

active duty status is updated for all servicemembers, including those on 

special operations.

To help address these challenges, DOD is working with the mortgage 

servicing industry and industry associations to improve both the usability 

of the website and the readability of military orders. First, to aid mortgage 

servicers’ ability to query the database, DMDC has developed and 

implemented a way for mortgage servicers and others to conduct batch 

queries of the database from the website for up to 250,000 
 

Page 20 GAO-12-700 Mortgage Foreclosures

servicemembers at a time.38

Second, DOD has collaborated with the financial industry through the 

Financial Services Roundtable’s Housing Policy Council—a consortium of 

financial institutions that provide mortgage credit—to develop an 

alternative military order form that servicemembers can attach to or 

provide in lieu of their military orders when requesting relief under SCRA 

from their mortgage servicers. This form is intended to be easier for 

mortgage servicers to interpret as it is shorter and more standardized 

than official orders, which can vary by service. According to DOD officials, 

this alternative form was approved by DOD in December 2011 and has 

been distributed to the military services as well as to financial institutions 

and is being used by servicemembers.

DOD officials also noted that they are trying 

to develop the capability of the database to query historical information 

and also to distinguish between those active duty periods for 

servicemembers in the National Guard that provide SCRA protections 

and those that do not.

Prudential regulators—FDIC, Federal Reserve, NCUA, and OCC—are 

responsible for supervising depository institutions’ compliance with 

various federal consumer laws including SCRA. Consumer compliance 

examinations are one of the primary tools regulators use to assess this 

compliance. Prudential regulators all use a risk-based approach to 

consumer compliance examinations to determine which areas to target, 

with areas of higher risk receiving greater focus during examinations. For 

example, according to the FDIC consumer compliance examination 

 

38DMDC made changes to the website in April 2012. These changes removed the data 

field on active duty start date from search results. However, according to a representative 

of a large mortgage servicer, it used that field to determine if servicemembers obtained 

their mortgages prior to active duty status. In May 2012, DMDC announced that this field 

would again be made available from database queries.

Federal Regulators’ 

Oversight of SCRA 

Compliance Has Been 

Limited

Prudential Regulators 

Examine for SCRA 

Compliance Based on Risk 

Factors
 

Page 21 GAO-12-700 Mortgage Foreclosures

manual, riskier areas may include ones that involve regulatory changes or 

complex products. Regulatory officials also told us that because of this 

risk-based approach, SCRA may not be included or fully addressed within 

the scope of an examination. For example, officials from one regulator 

told us that when deciding to include SCRA in an examination they may 

consider, among other things, consumer complaints, internal audit results 

of the institution’s compliance management system, and problems raised 

in the media. Regulators also use the risk-based approach to determine 

the specific examination procedures they use to assess compliance. 

Areas of higher risk would be subject to more extensive review 

procedures, while areas of lower risk would receive less extensive review. 

For example, according to OCC’s examination manual, areas of greater 

risk may involve more extensive testing of loan transactions for 

compliance.

In 2009, the regulators developed interagency examination procedures 

related to SCRA through the Federal Financial Institutions Examination 

Council (FFIEC), including a specific checklist that examiners can use in 

their examinations.39

In addition to routine risk-based consumer compliance examinations, 

prudential regulators conduct targeted reviews of areas of high concern. 

The interagency SCRA procedures and checklist 

indicate that examiners should determine whether depository institutions 

applied and properly calculated interest-rate reductions, whether any 

foreclosures were conducted without a court order, and whether any 

servicemember requests for SCRA protection were inappropriately 

reported as adverse information to a credit reporting agency. Additionally, 

the interagency procedures suggest, among other things, that examiners 

(1) consider reviewing SCRA policies, procedures, and account 

documentation when assessing the adequacy of the institution’s internal 

controls and (2) review whether the depository institution’s compliance 

reviews and audit materials include transaction testing of samples 

covering relevant product types. The checklist contains a series of 

questions related to different sections of SCRA, including the ones that 

apply to residential mortgages.

 

39FFIEC is an interagency body that prescribes uniform principles, standards, and report 

forms for depository institution examinations. Its members currently include CFPB, FDIC, 

Federal Reserve, NCUA, and OCC. A representative state regulator also serves as a 

voting member of FFIEC. SCRA was not one of the enumerated laws under the DoddFrank Act for which oversight transferred to CFPB.
 

Page 22 GAO-12-700 Mortgage Foreclosures

For example, FDIC, Federal Reserve, and OCC conducted an interagency 

review of the foreclosure policies and practices of 14 mortgage servicers in 

late 2010, in response to the large number of foreclosures since 2007 and 

continued weaknesses in the mortgage market. The examiners evaluated 

the adequacy of each mortgage servicer’s operating procedures and 

controls and preparation of foreclosure documentation, among other things. 

Although the interagency review was not intended to directly assess SCRA 

compliance, during the course of this effort, two mortgage servicers 

nonetheless identified SCRA compliance problems.40 Additionally, in June 

2011, OCC issued guidance to all of its regulated institutions that required 

them to conduct self-assessments of their foreclosure management 

practices. OCC examiners will review the self-assessments in the 

subsequent examination of the institutions.41

The extent to which SCRA was reviewed varied by the size of the 

depository institution, the year in which the examination took place, and 

the regulator that conducted the examination from 2007 through 2011. 

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.

42

 

40GAO, Mortgage Foreclosures: Documentation Problems Reveal Need for Ongoing 

Regulatory Oversight, 

This estimate includes documentation of an SCRA 

review for any type of loan product (e.g., residential mortgage, credit card, 

automobile, and other types of products). Some of the reasons bank 

examiners cited for including SCRA in the scope of an examination 

GAO-11-433 (Washington, D.C.: May 2, 2011), p.28. 

41The prudential regulators and others recently took steps intended to address mortgage 

servicer practices that may pose risk to homeowners serving in the military. In June 2012, 

FDIC, Federal Reserve, OCC, NCUA, and CFPB issued joint guidance to mortgage 

servicers regarding servicemembers with permanent change-of-station orders. Because 

such physical relocations can affect servicemembers’ ability to pay their mortgages, the 

guidance states that mortgage servicers should ensure that their employees are 

adequately trained about options for homeowners undergoing such relocations and take 

steps to ensure that information on relevant assistance programs is accurate and readily 

understandable. Similarly, in June 2012, FHFA announced that Fannie Mae and Freddie 

Mac will consider a servicemember’s receipt of permanent change-of-station orders as 

making such borrowers eligible for a short-sale, even if the borrower is current on his or 

her mortgage.

42All estimates from our workpaper review are subject to sampling error. For this estimate, 

we are 95 percent confident that the actual population value is between 45 percent and 52 

percent. 

Oversight of SCRA

Compliance Varied by 

Institution, Year, and 

Regulator
 

Page 23 GAO-12-700 Mortgage Foreclosures

included the need to follow up on previous violations and deficiencies, 

changes in regulatory requirements, and identification of SCRA loans 

being serviced. To determine the extent to which SCRA compliance was 

included in examinations of depository institutions and the procedures 

examiners used to assess SCRA compliance, we reviewed workpapers 

for examinations conducted by FDIC, Federal Reserve, NCUA, and OCC. 

We reviewed the workpapers for examinations from 2007 to 2011 for a 

sample of 152 institutions that service mortgages they hold in their loan 

portfolios or service mortgages for other institutions.43

Based on our sample, we found that prudential regulators included a 

review of SCRA compliance in at least one examination for a greater 

percentage of large institutions than all other institutions. In this report, 

the 40 large institutions are comprised of the 10 largest mortgage 

servicers regulated by each of the four prudential regulators. Specifically, 

we found that about 70 percent of these large institutions were reviewed 

for SCRA compliance at least once from 2007 through 2011 compared 

with an estimated 48 percent of all other institutions for the same period.

The 152 institutions 

represented a stratified random sample of institutions based on size and 

regulator examined from 2007 through 2011. Because officials from some 

regulators told us that they may not conduct an examination for every 

institution every 12 months, and because SCRA might not be covered in 

each risk-based examination, we looked at examinations spanning a 5-

year period.

44

We also found that the extent to which examiners reviewed for SCRA 

compliance varied by year. In 2010, examinations for SCRA compliance 

Officials from one regulator indicated that one reason for this difference 

might be that the larger institutions conducted more mortgage lending 

than smaller institutions; therefore, examiners may be more likely to 

review SCRA compliance at larger institutions.

 

43We selected a sample of 160 institutions, but a total of 8 were determined to be out of 

the scope of our study for various reasons, such as being new institutions that had yet to 

have been examined. See appendix I for additional information about our sampling 

methodology.

44We reviewed examinations for all 40 of the large institutions, and therefore the 

percentage presented is the percentage of these 40 large institutions, and is not an 

estimate. For our estimates of the remaining institutions, we are 95 percent confident that 

the actual population of these institutions that were examined for SCRA is between 45 

percent and 52 percent. 
 

Page 24 GAO-12-700 Mortgage Foreclosures

occurred in an estimated 26 percent of all institutions, compared with 

2007 when about 4 percent of all institutions were reviewed for SCRA. 

Figure 2 shows the distribution in the percentage of institutions examined 

for SCRA compliance for each year from 2007 through 2011. Some of the 

regulatory officials told us that reasons for the differences by year may 

include the adoption of SCRA interagency examination procedures in 

2009 and increased attention to the impacts of the financial crisis on 

servicemembers in recent years.

Figure 2: Estimated Percentage of Depository Institutions That Serviced Mortgages 

That Were Examined for SCRA Compliance by Year, 2007 through 2011

Note: The percentage of institutions that had an examination in each year is not mutually exclusive. 

This means that one institution could have had an examination that addressed SCRA in more than 1 

year. The error bars represent 95 percent confidence intervals for each of these estimates. The 

confidence intervals represent the upper and lower bounds of our estimates. 

We also found that among just the 40 large institutions, a greater 

percentage had an SCRA compliance review in 2010 and 2011 compared 

with earlier years:

• in 2010 and also in 2011, about 40 percent of the institutions had an 

SCRA review,

• about 13 percent of these institutions were reviewed for SCRA 

compliance in 2009,

• about 23 percent of these institutions were reviewed for SCRA 

compliance in 2008, and
 

Page 25 GAO-12-700 Mortgage Foreclosures

• in 2007, 10 percent were reviewed for SCRA compliance.45

Our analysis also revealed differences by regulator in the extent to which 

SCRA was reviewed for compliance. Figure 3 shows that both FDIC and 

Federal Reserve reviewed a significantly higher percentage of institutions 

for SCRA compliance compared with NCUA and OCC. It also shows that 

OCC reviewed a greater percentage of institutions than NCUA. NCUA 

officials explained that the agency does not have a separate consumer 

compliance examination function and that consumer compliance is part of 

its overall evaluation of the safety and soundness of institutions. The 

officials said that given the recent economic crisis, the agency has placed 

more focus on the safety and soundness of credit unions than on 

compliance with consumer regulations. They said that this is part of the 

reason the percentage of credit unions that received an SCRA 

compliance review is so low. However, our prior work has found that 

mortgage servicing problems, including inadequate controls over 

foreclosure processes, have led to risks to the safety and soundness of 

depository institutions.46

 

45We reviewed examinations for all 40 of the large institutions, and therefore the 

percentages presented are the percentages of these 40 large institutions, and are not 

estimates. 

46GAO-11-433, pp. 48-52.
 

Page 26 GAO-12-700 Mortgage Foreclosures

Figure 3: Estimated Percentage of Depository Institutions That Serviced Mortgages 

That Were Examined for SCRA Compliance by Regulator, 2007 through 2011

Note: Error bars in this graph represent the 95 percent confidence intervals for estimates displayed. 

Six of the depository institutions in the sample were regulated by the Office of Thrift Supervision 

(OTS) until July 2011. The Dodd-Frank Act eliminated OTS and supervisory authority of these six 

depository institutions was transferred to OCC. We included these six institutions in our sample strata 

for large and OCC-regulated institutions because at the time we selected our sample, these six 

institutions were under OCC’s supervisory authority. OCC officials explained that OTS conducted 

most of the examinations of these institutions during the period we reviewed and that OTS’s 

examination practices related to SCRA may have differed from those of OCC. 

For the estimated 52 percent of institutions that were not examined for 

SCRA compliance from 2007 through 2011, examiners did not document 

their reasons for excluding SCRA for at least 95 percent of these 

institutions.47

Regulatory officials offered a few reasons to explain why an examiner 

may not include SCRA compliance in an examination. For example,

officials from one regulator said that some depository institutions might 

In our review, we found four examinations for which 

examiners had documented in the workpapers a reason for not including 

SCRA compliance. For three of these examinations, the reason cited was 

that examiners had recently examined for SCRA compliance and found 

no violations, deficiencies, or other concerns. The fourth examination 

reviewed the depository institutions’ progress in addressing consumer 

compliance issues identified in the previous examination and because 

SCRA compliance was not one of the issues of concern identified in the 

previous examination, it was excluded from the examination we reviewed.

 

47We are 95 percent confident that the actual population value for institutions that were 

not examined for SCRA is between 48 percent and 56 percent. We are 95 percent 

confident that the actual population value for institutions for which examiners failed to 

document their reasons for excluding SCRA is between 95 percent and 100 percent.
 

Page 27 GAO-12-700 Mortgage Foreclosures

not serve large military populations. Therefore, examiners might not 

consider compliance with SCRA mortgage protections a substantial risk 

to these institutions. Additionally, officials from one prudential regulator

indicated that examiners may choose to exclude SCRA compliance from 

an examination if the institution had received few complaints concerning 

SCRA-related issues. The regulators indicated that they had received 

very few SCRA complaints related to residential mortgages between 2007 

and 2011 compared with the number of consumer complaints they 

received overall during this period.48

As part of our review of examination workpapers for the 152 institutions in 

our sample, we collected information on the procedures examiners used 

to assess compliance with SCRA if an examination reviewed residential 

mortgage loans or if the workpapers did not specify the loan product 

being addressed. We included examinations in which the loan product 

was not specified to help ensure that we reviewed any examination 

procedures that may have addressed residential mortgages. Our review 

found a total of 83 institutions for which examiners either reviewed SCRA 

compliance for residential mortgage loans or did not specify the loan 

product being reviewed. The figures presented for this analysis are not 

generalizable to the population of institutions that service mortgages. 

After reviewing examination guidance and auditing standards, we 

grouped examiners’ documented examination procedures into three 

categories based on our professional judgment as to the extent that each 

type of procedure would provide assurance that financial institutions were 

complying with SCRA:

• Interviews with depository institution personnel. This category 

includes activities in which examiners interviewed staff at the 

depository institution for information on, among other things, their 

compliance management systems and whether the institution services 

loans to servicemembers eligible for SCRA protections.

• Assessments of depository institutions’ compliance management 

systems. This category includes instances in which examiners 

 

48In addition, our review of the regulators’ 2007 through 2011 complaint data revealed that 

collectively they had received 201 SCRA complaints from 2007 through 2011, 88 (44 

percent) of which pertained to residential mortgages. This number represents less than 1 

percent of all complaints the prudential regulators received during this period.

Examiners Generally Used 

Limited Loan Testing
 

Page 28 GAO-12-700 Mortgage Foreclosures

documented that they reviewed the quality of depository institutions’ 

compliance management systems, such as reviewing institutions’ 

SCRA policies and procedures, internal controls, and training 

programs.

• Testing loan files for SCRA compliance. This category includes 

activities such as testing a limited number of loan files the institution 

identified as SCRA-eligible or conducting more comprehensive 

testing, such as reviewing a statistical sample of loan files.

Of these categories, the first category—interviews with depository 

institution personnel—provides the least assurance of SCRA compliance 

because the examiner would be relying primarily on assertions provided 

by institution personnel rather than an independent assessment or 

verification of these assertions. The second category—assessments of 

institutions’ compliance management systems—provides greater 

assurance of SCRA compliance because these procedures require 

examiners to independently assess the quality of the depository 

institutions’ procedures and internal controls. The final category—testing 

of loan files—provides even greater assurance of SCRA compliance 

because examiners can independently verify whether the institution’s 

personnel provided all necessary SCRA protections.

Although in many examinations examiners documented that they used an 

assortment of examination procedures from different categories to assess 

compliance with SCRA, we categorized each of the 83 institutions whose 

SCRA compliance was assessed during the 5-year period of our review 

by the highest assurance level of the examination procedures that were 

used in any of the examinations done of that institution from 2007 through 

2011. Based on this analysis, we found that only about half of these 

institutions had any testing conducted during this 5-year period. 

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 
 

Page 29 GAO-12-700 Mortgage Foreclosures

procedure category that provides a greater level of assurance for 

SCRA compliance than the previous two categories.

However, at the 41 institutions at which examiners tested loan files, we 

found that the type of testing conducted was limited. Examiners can 

choose from different types of testing methods that provide differing levels 

of assurance that an institution is complying with SCRA. For example, 

within the testing category, testing a limited sample of loan files that 

depository institutions identified as SCRA-eligible provides less 

assurance of compliance because it relies on assertions by depository 

institutions of SCRA eligibility, whereas testing a statistical sample of 

loans provides greater assurance because it allows examiners to 

independently select files for testing, and the results would be 

representative of the institution’s compliance. In the examinations we 

reviewed, the examiners mostly tested a limited sample of loans that the 

depository institution had identified as SCRA-eligible and, therefore, 

provided less assurance that the institution was complying with SCRA. 

We found no instances between 2007 and 2011 in which examiners 

tested a statistical sample of either loans in foreclosure or mortgage loan 

files in general, which would have provided the greatest assurance of an 

institution’s SCRA compliance. By testing only foreclosure files or 

mortgage loan files that the depository institution had identified as SCRAeligible, examiners cannot fully determine if the institution has 

appropriately identified all eligible servicemembers. By expanding the 

scope of testing to include a larger sample of foreclosure and mortgage 

loan files, beyond just those files that the depository institution had 

identified as SCRA-eligible, examiners could better ensure that 

institutions are appropriately identifying eligible servicemembers and 

providing them all of the protections to which they are entitled. To 

minimize the burden on institutions and examiners, such reviews could be 

conducted as part of samples of loans drawn for examining compliance 

with other regulatory requirements.

In addition to the prudential regulators, other federal agencies conduct 

oversight of SCRA compliance. SCRA authorizes DOJ to commence a 

civil action against any person who engages in a pattern or practice of 

violating the act or if a violation of the act raises an issue of significant 

Coordination of SCRA 

Oversight Lacking
 

Page 30 GAO-12-700 Mortgage Foreclosures

public importance.49 DOJ staff indicated that they consider military 

attorneys to be the most likely staff to help ensure that a servicemember 

is afforded their SCRA protections. For cases in which a military attorney 

is unable to obtain voluntary compliance from a mortgage servicer or 

other person or entity doing business with a servicemember, DOJ has a 

system in place to receive referrals for these cases and to open 

investigations. DOJ officials told us and military attorneys confirmed that, 

in most cases, military attorneys are able to resolve SCRA matters 

without referring them to DOJ. DOJ also receives referrals for SCRA 

investigations from private attorneys and individual servicemembers and 

their families. When DOJ receives an SCRA referral, officials investigate 

the matter and determine if a full investigation should be opened.50

DOJ filed a total of five cases in court from 2007 through 2011 for SCRA 

violations. Two of these cases—BAC Home Loans Servicing, LP and 

Saxon Mortgage Services, Inc.—involved SCRA violations regarding 

servicemembers’ mortgages. In May 2011, DOJ took enforcement actions 

against both mortgage servicers for wrongfully foreclosing upon active 

duty servicemembers without obtaining court orders. DOJ alleged that 

both mortgage servicers did not consistently check the military status of 

borrowers on whom they foreclosed, resulting in 165 improper 

foreclosures between 2006 and December 2010 (as listed previously in 

table 1). In its enforcement actions, DOJ required each of these mortgage 

servicers to pay damages to servicemembers and conduct a variety of 

remedial actions. For example, BAC Home Loans Servicing agreed to 

pay at least $20 million to resolve the lawsuit, and Saxon Mortgage 

Services agreed to pay at least $2.35 million. The mortgage servicers 

were also required to, among other things, (1) implement revised SCRA 

policies and procedures for using the DMDC website, (2) implement a 

foreclosure monitoring program, (3) provide SCRA compliance training to 

all applicable employees, and (4) conduct reviews to identify additional 

Investigations can result in DOJ filing a civil action against the party in 

court for alleged SCRA violations, or a resolution with the party may be 

reached without filing the case in court.

 

4950 U.S.C. app. § 597. This provision was added to SCRA in October 2010. See Pub. L. 

111-275, § 303(a), 124 Stat. 2877.

50We use the term investigation to refer to a written or oral inquiry for which a DOJ official 

spends at least 2 hours investigating. DOJ uses the term matter to describe these 

instances.
 

Page 31 GAO-12-700 Mortgage Foreclosures

servicemembers who may have had their SCRA rights violated and 

compensate them. Appendix II discusses these reviews in more detail. In 

addition to the 5 SCRA cases DOJ filed in court, DOJ opened 45 

additional SCRA investigations from referrals it received between 2007 

and 2011, 9 of which involved servicemembers’ mortgages.51

Other federal agencies that operate mortgage programs also oversee 

certain aspects of SCRA compliance. For example, to participate in FHA’s 

mortgage programs, mortgage servicers must comply with the agency’s 

program requirements, which include complying with all applicable laws 

and regulations, including SCRA. FHA officials explained that they use a 

risk-based approach to monitor the institutions that service the loans the 

agency insures. Officials told us that from 2007 through 2011, FHA 

conducted about 200 mortgage servicer monitoring reviews. They 

explained that each review consists of a sample of the mortgage 

servicer’s loan files and FHA staff use a checklist to help ensure that the 

mortgage servicer is in compliance with a variety of servicing 

requirements for each loan in the sample. One of the requirements 

reviewed for each loan is the distribution of the HUD counseling notice 

that includes information on SCRA eligibility to borrowers who are at least 

45 days delinquent. Agency officials explained that a more thorough 

review of SCRA compliance is conducted if a mortgage servicer has 

identified that the borrower is an active duty servicemember. For loans 

that a mortgage servicer has marked with a code to indicate that the 

borrower is an active duty servicemember, FHA staff conduct additional 

One of 

these referrals involved a servicemember’s request to waive the 

prepayment penalty on her mortgage when she received a permanent 

change-of-station order and sold her home to move closer to the new 

base. DOJ was able to reach a resolution with the mortgage servicer 

without trying the case in court. Another investigation involved allegations 

of a mortgage servicer charging interest in excess of the SCRA maximum 

of 6 percent. DOJ officials stated that this investigation was resolved in 

favor of the servicemember. Finally, in February 2012, DOJ settled with 

five of the nation’s largest mortgage servicers for a variety of improper 

mortgage servicing procedures, including allegations of SCRA violations. 

More information on the National Mortgage Settlement is contained in 

appendix II. 

 

51Because DOJ does not document inquiries that require less than 2 hours of 

investigation, the number of investigations listed here may underestimate the number of 

SCRA referrals DOJ received.
 

Page 32 GAO-12-700 Mortgage Foreclosures

steps to better ensure that the mortgage servicer has provided the 

servicemember appropriate SCRA protections, as well as additional 

protections that FHA provides to active duty servicemembers who have 

FHA-insured loans. These steps include ensuring that the interest rate 

has been appropriately adjusted and that foreclosure was postponed. 

FHA officials stated that they rely on mortgage servicers to appropriately 

identify active duty servicemembers. Although they may review SCRA 

compliance on specific loans, FHA officials told us that their reviews are 

not intended to assess the adequacy of the mortgage servicers’ SCRA 

compliance policies and procedures or to determine whether these 

policies are functioning for all of a servicer’s activities. As a result of 

FHA’s servicer monitoring reviews, some SCRA compliance problems 

have been identified. For example, FHA officials told us that between 

2007 and 2011 the agency found two instances of SCRA noncompliance 

during its mortgage servicer monitoring reviews. One of these instances 

involved a mortgage servicer failing to send the HUD counseling notice 

that includes information on SCRA eligibility to borrowers delinquent 45 or 

more days, and the other violation involved a mortgage servicer failing to 

verify a borrower’s active duty status prior to foreclosure.

Although VA interacts with mortgage servicers as part of its Home Loan 

Guaranty Program, VA officials explained that the program currently does 

not conduct in-depth reviews of mortgage servicers’ policies and 

procedures and loan files to review overall compliance with SCRA 

mortgage protections. The officials explained that they are in the process 

of finalizing a program that will conduct on-site audits of mortgage 

servicers’ functions and that they expect the program to be implemented 

in late 2012. VA officials explained that this program will include reviews 

of servicers’ loan files and policies and procedures for monitoring and 

identifying SCRA-eligible borrowers to determine servicers’ overall 

compliance with SCRA mortgage protections. Officials explained that in 

the wake of recently identified SCRA violations, they conducted a review 

of all VA loan files that were in foreclosure from October 2009 to January 

2011 to determine if any of the borrowers were possibly eligible for SCRA 

mortgage protections. The officials said that they identified approximately 

30,000 borrowers in foreclosure during that period and that they 

conducted an in-depth review of 47 loans that were potentially eligible for 

SCRA mortgage protections. VA determined that none of these borrowers 

were improperly foreclosed upon. They have recently expanded this 

review to include a longer time period, but as of June 2012, they had not 

completed the review to determine if any borrowers were improperly 

foreclosed upon.
 

Page 33 GAO-12-700 Mortgage Foreclosures

VA officials explained that they do conduct reviews of the adequacy of 

servicing being conducted by servicers. These reviews—Adequacy of 

Servicing reviews—are conducted on all loans over 120 days delinquent 

to determine if servicers have provided adequate servicing to borrowers, 

but according to VA officials, they are intended to explore loss mitigation 

options and not to examine for SCRA compliance. The officials explained 

that during these reviews, VA reviews mortgage servicers’ notes on the 

account to determine if they have provided adequate servicing to the 

borrower. Specifically, they check to see if the mortgage servicer has 

contacted the borrower, if a reason for default has been determined, if 

loss mitigation options have been considered, and why any loss 

mitigation options that were considered were not completed. Officials 

explained that if the mortgage servicer has taken the appropriate steps, 

VA would determine that the servicing provided was adequate. If VA 

determines that the servicing being provided was not adequate, or if the 

servicer was unable to contact the borrower, it conducts supplemental 

servicing on the loan and works with the borrower directly to explore loss 

mitigation options. According to VA officials, they may learn during these 

reviews that the loan involves an active duty servicemember. However, 

the Adequacy of Servicing reviews currently do not evaluate the extent to 

which servicers have assessed whether borrowers are eligible for SCRA 

mortgage protections. 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. 

Additionally, VA officials explained that they do not have a mechanism for 

tracking if these reviews have identified SCRA-eligible borrowers. As part 

of VA’s mission to serve servicemembers, VA officials told us that they try 

to ensure that servicemembers have received every opportunity to keep 

their homes and avoid foreclosure. VA officials explained that they rely on 

federal regulators to investigate and enforce statutory requirements, such 

as SCRA. However, given that VA staff also oversee servicers’ activities, 

they do have the opportunity to review servicers’ efforts to determine 

SCRA eligibility, such as by making an inquiry with the servicer of the 

loan or consulting DOD records to determine if the borrower is an active 

duty servicemember. Without such a review, the extent to which the 

agency is ensuring servicemembers are receiving all protections to which 

they are entitled is not clear.

The enterprises—Fannie Mae and Freddie Mac—also conduct SCRA 

compliance monitoring at the mortgage servicers that service loans on 

their behalf. This monitoring focuses on enforcing contractual 

requirements between the enterprises and mortgage servicers to ensure 
 

Page 34 GAO-12-700 Mortgage Foreclosures

that mortgage servicers are following the servicing guidelines issued by 

the enterprises. The servicing guidelines outline mortgage servicers’ 

compliance obligations for several different laws and regulations, 

including SCRA. The SCRA components of the guidelines include 

information for mortgage servicers on, among other things, how SCRA 

relief is initiated and how interest rates are reduced, as well as 

foreclosure proceedings and credit reporting. Enterprise officials 

explained that SCRA compliance is not included in each review 

conducted. If it is included, Fannie Mae officials explained that examiners 

seek to understand how a mortgage servicer checks for SCRA 

compliance and conducts testing of the servicers accounting methods for 

SCRA compliance.52

Although the prudential regulators, FHA, VA, and FHFA all have a role in 

helping ensure that mortgage servicers provide appropriate SCRA 

protections to eligible servicemembers, currently none of these entities

For example, if a servicemember has an interest 

rate that is greater than 6 percent, examiners test to ensure that interest 

rate and payment amounts have been properly reduced. Freddie Mac 

officials told us they assess the mortgage servicer’s understanding of 

SCRA and the procedures in place to ensure compliance. The 

enterprises’ SCRA compliance monitoring efforts have identified some 

instances of noncompliance. For example, Fannie Mae identified 13 

instances of noncompliance with its SCRA guidelines between 2007 and 

2011, and Freddie Mac has identified 2 instances. These instances of 

noncompliance involved issues such as mortgage servicers not having 

comprehensive SCRA compliance policies and procedures and mortgage 

servicers not properly verifying the active duty status of servicemembers. 

Officials from FHFA—the enterprises’ regulator—stated that its 

supervisory focus for SCRA compliance is to confirm that the enterprises

are taking steps to ensure that the mortgage servicers with which they 

have contracts comply with the contracts’ requirements which include 

compliance with applicable laws.

 

52A Fannie Mae official told us that as of November 2011, the examiner guidance they 

used for SCRA compliance reviews only included procedures for examining for 

compliance with the interest rate provisions of SCRA, but that they were working to update 

it for 2012 to incorporate compliance with SCRA’s foreclosure provisions.
 

Page 35 GAO-12-700 Mortgage Foreclosures

share information related to SCRA compliance with one another.53

In our work on the many agencies that are involved in the federal financial 

regulatory system, we have previously stated that collaboration among 

financial regulatory agencies with common responsibilities is essential to 

ensuring consistent and effective supervisory practices.

While 

the extent of oversight conducted by these entities varies, they do review 

for some of the same SCRA provisions, such as those related to interest 

rate reductions and foreclosures. Furthermore, some of the mortgage 

servicers that participate in FHA’s and VA’s loan programs and service 

loans on behalf of the enterprises are also subject to oversight by one of 

the prudential regulators, which review for SCRA compliance during their 

examinations. Although these agencies obtain SCRA-related information 

about many of the same institutions, FHA, VA, and FHFA officials stated 

that they have not coordinated with the prudential regulators on SCRA 

compliance issues. Further, FHFA officials stated that while they 

participate in some forums with the prudential regulators to coordinate on 

various issues, they were not aware of any coordination related to SCRA 

compliance.

54 Further, we 

have previously reported that federal agencies and prudential regulators 

do coordinate on oversight of other consumer protection laws, such as 

the Fair Housing Act and Equal Credit Opportunity Act, known collectively 

as “fair lending laws.”55

 

53The prudential regulators already have an agreement to share such information with 

another financial regulator. In May 2012, the prudential regulators and the Consumer 

Financial Protection Bureau issued a Memorandum of Understanding (MOU) that clarifies 

how the agencies will coordinate their supervisory activities. Under the MOU, the agencies 

will coordinate examinations and other supervisory activities and share certain material 

supervisory information concerning compliance with federal consumer financial laws and 

certain other federal laws that regulate consumer financial products and services, 

including SCRA. 

Similar to oversight of SCRA, responsibility for 

oversight of the fair lending laws is shared among the prudential 

regulators and other federal agencies, including DOJ, HUD, and the 

Federal Trade Commission. We reported that these agencies had taken 

several steps to establish common policies and procedures and share 

54GAO, Financial Market Regulation: Agencies Engaged in Consolidated Supervision Can 

Strengthen Performance Measurement and Collaboration, GAO-07-154 (Washington, 

D.C.: Mar. 15, 2007).

55GAO, Fair Lending: Data Limitations and the Fragmented U.S. Financial Regulatory 

Structure Challenge Federal Oversight and Enforcement Efforts, GAO-09-704 

(Washington, D.C.: July 15, 2009).
 

Page 36 GAO-12-700 Mortgage Foreclosures

information about their fair lending oversight programs. For example, the 

agencies established the Interagency Fair Lending Task Force to develop 

a coordinated approach to address discrimination in lending and adopted 

a policy statement on how the various agencies were to conduct oversight 

and enforce the fair lending laws. At that time, federal officials said that 

coordinating on fair lending issues allows the agencies to exchange 

information on a range of common issues, informally discuss fair lending 

policy, and confer about current trends or challenges in fair lending 

oversight and enforcement. FHFA officials explained that the agency has 

existing memorandums of understanding with prudential regulators and 

HUD that establish the protocols they use to discuss trends, risks, and 

other emerging issues on a variety of topics with these other agencies, 

but that SCRA has not been a topic during these discussions. FHFA does 

not currently have a memorandum of understanding with VA to share 

information, but the officials explained that they have worked with the 

agency in the past on issues such as appraisals and that they have done 

so through letter arrangements that allow them to share information. 

These existing arrangements could provide a mechanism for SCRA 

information to be shared between FHFA and the prudential regulators, 

FHA, and VA. However, currently no such sharing arrangements exist 

between the prudential regulators, FHA, and VA. 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.
 

Page 37 GAO-12-700 Mortgage Foreclosures

Under SCRA, DOD services’ Secretaries and the Secretary of Homeland 

Security have the primary responsibility for ensuring that servicemembers 

receive information on their SCRA rights and protections.56

Servicemembers are informed of their SCRA rights in a variety of ways. 

For example, briefings are provided on military bases and during 

deployment activities; legal assistance attorneys provide counseling; and 

a number of outreach media, such as publications and websites, are 

aimed at informing servicemembers of their SCRA rights. According to 

DOD officials, the legal assistance attorneys are primarily responsible for 

leading the military’s SCRA education efforts. Each of the military 

services, including the Coast Guard under DHS, operates a number of 

legal assistance offices throughout the country.57 Legal assistance offices 

are operated by military and civilian legal assistance attorneys who are 

responsible for providing support to servicemembers on a variety of legal 

issues, including family law and estate planning.58

Legal assistance attorneys provide SCRA support to servicemembers 

using various methods. We spoke with legal assistance attorneys at six 

military installations across the five services. They told us that they 

As part of their 

responsibilities, they inform servicemembers about their rights and 

benefits under SCRA.

 

56Section 105, Codified at 50 U.S.C. App §515 and §690 of the National Defense 

Authorization Act of Fiscal Year 2006, P.L. 109-113, codified at 50 U.S.C. App §515a. 

57As of May 2012, there were a total of 175 legal assistance offices throughout the country 

and over 60 legal assistance offices located internationally.

5810 U.S.C 1044. All regular, active duty servicemembers and members of the reserve 

components on active duty for 30 days or more are eligible to obtain legal support from a 

legal assistance office. For members of the reserve components, this access extends for a 

period twice the length of the servicemembers’ active duty period when the 

servicemember is no longer on active duty service.

Challenges in 

Ensuring 

Servicemembers’ 

Awareness of SCRA 

Protections

DOD and DHS Education 

Efforts
 

Page 38 GAO-12-700 Mortgage Foreclosures

provide servicemembers with information on SCRA during routine

briefings on military installations, in handouts, and during one-on-one 

sessions with individual servicemembers. Two legal assistance attorneys 

told us that they alert installation staff, including unit commanders, to 

direct servicemembers to their legal assistance offices if they have a 

problem. Legal assistance attorneys also told us that they will contact 

depository institutions on behalf of servicemembers to help them receive 

their SCRA protections. Some legal assistance attorneys also told us that 

they provide templates of letters for servicemembers to send to their 

mortgage servicer to request a reduction in their mortgage interest rate. 

Additionally, legal assistance attorneys told us that they will refer 

servicemembers to the American Bar Association’s (ABA) Military Pro 

Bono Project if they are unable to resolve an SCRA matter for a 

servicemember. ABA’s program connects active duty servicemembers to 

pro bono attorneys who assist them with civil legal problems.59

SCRA requires that servicemembers be informed of the rights and 

protections available under SCRA upon entry into the military, during 

initial orientation training, and, in the cases of members of the reserve 

components, when called to active duty for a period of more than 1 

year.60

 

59Only junior-enlisted (E6 or below) servicemembers are eligible for assistance through 

the Military Pro Bono Project unless there are compelling circumstances and at the 

discretion of the pro bono attorney or firm.

 Predeployment briefings generally occur at the military installation 

that deploys the servicemember and, in addition to SCRA, cover a range 

of other legal and financial issues, such as the preparation of wills and 

powers of attorney. According to DOD officials, members of the reserve 

components may receive this briefing numerous times at their home 

station prior to deployment. Servicemembers are also provided with an 

additional opportunity to learn about their rights under SCRA upon 

returning from deployment. According to DOD officials, because some 

SCRA protections extend for a 9- or 12-month period beyond 

servicemembers’ active duty service, obtaining information at the end of 

deployment is critical for those servicemembers who will no longer be on 

active duty and will lose access to military-provided legal assistance. As a 

result, the Army reserve component—which includes the Army Reserve 

and Army National Guard and is the largest portion of the reserve 

60Section 105, Codified at 50 U.S.C. App §515 and §690 of the National Defense 

Authorization Act of Fiscal Year 2006, P.L. 109-113, codified at 50 U.S.C. App §515a. 
 

Page 39 GAO-12-700 Mortgage Foreclosures

components—requires that members receive standardized postdeployment training on SCRA.

DOD and DHS use a number of other methods to deliver SCRA 

information to servicemembers, including military training courses, 

publications, websites, and other family support services. For example, 

DHS officials told us that all Coast Guard members are informed of their 

SCRA rights during basic training. Some others may receive additional 

SCRA training during their initial officer training at the Coast Guard 

Academy or other advanced classes. DOD also publishes general articles

in newsletters and installation publications explaining servicemembers’ 

SCRA rights and more specific articles on the relationship between 

mortgage difficulties and SCRA. Additionally, several military websites 

contain information on SCRA, including websites for individual services 

and military installations and sites such as Military OneSource—a DOD 

online resource that is staffed with counselors who offer assistance to 

servicemembers on a variety of topics, including financial counseling.61

DOD also provides financial management and family support services 

through the family readiness centers located at military installations. 

These centers provide general financial management counseling on 

topics such as reducing debt and saving for college to servicemembers’ 

families during periods of deployment and also share information on 

SCRA and refer family members to the legal assistance office if they have 

an SCRA issue.

Other federal agencies also provide SCRA outreach and support to

servicemembers and financial institutions in a variety of ways, including 

oral briefings, written notifications, and websites. For example, VA 

officials told us that some servicemembers who leave active duty service 

participate in a multiday briefing conducted in partnership with VA, DOD, 

and the Department of Labor. This briefing discusses reentering civilian 

life, SCRA protections, and veterans’ benefits. Additionally, both VA and 

FHA provide SCRA-related outreach to the institutions that participate in 

their mortgage programs. For example, VA periodically sends written 

notifications to all of its loan servicers reminding them of their compliance 

responsibilities and alerts them to changes in the act when they occur. 

FHA also provides information to its mortgage servicers on SCRA. Its 

 

61See www.militaryonesource.mil. 

Other SCRA Outreach 

Efforts
 

Page 40 GAO-12-700 Mortgage Foreclosures

website contains a list of questions and answers for mortgage servicers 

on SCRA, servicemembers’ eligibility criteria, and FHA policies with 

respect to servicing FHA-insured mortgages in compliance with SCRA.

The Consumer Financial Protection Bureau (CFPB) has an Office of 

Servicemember Affairs that also plays a role in providing SCRA outreach 

to servicemembers and mortgage servicers responsible for complying 

with the act. As of May 30, 2012, CFPB officials had conducted 37 visits 

to military installations and National Guard units and met with legal 

assistance attorneys to discuss consumer protection issues 

servicemembers have been facing, including SCRA. CFPB also sent 

letters to 25 large mortgage servicers in 2011 alerting them of 

servicemembers’ rights under SCRA and their responsibilities to comply 

with the act. The letters specifically urged mortgage servicers to educate 

their employees about SCRA and review their loan files to ensure 

compliance with the law. 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. CFPB officials also held a forum in which financial institutions 

discussed activities—some that go beyond those required by SCRA—

they were undertaking to assist servicemembers’ with their mortgages. In 

July 2011, CFPB and the Judge Advocate Generals of the Army, Marine 

Corps, Navy, Air Force, and Coast Guard developed a joint statement of 

principles to provide stronger protections for servicemembers in 

connection with consumer financial products and services. Finally, 

through its consumer response function, CFPB also works directly with 

servicemembers by collecting consumer complaints against depository 

institutions and coordinating those complaints with servicemembers’ 

depository institutions and if necessary, the appropriate legal assistance 

offices. 

Finally, military servicemember groups also assist servicemembers with 

SCRA issues. Organizations such as the National Military Family 

Association, the Military Officers Association of America, the Reserve 

Officers Association, and others provide information on SCRA to their 

members in a variety of ways. A representative from one military 

servicemember group explained that its website—which contains 

background information on SCRA and legal reviews of specific SCRA 

provisions—is the group’s primary means of providing information to 

servicemembers and the public on SCRA issues. Other representatives 

with whom we spoke said that they provide information to their members 

when changes to SCRA have occurred. For example, one military 
 

Page 41 GAO-12-700 Mortgage Foreclosures

servicemember group highlights applicable legislative changes in weekly 

electronic notifications to its members.

DOD officials, legal assistance attorneys, and representatives of military 

servicemember groups with whom we spoke noted a number of 

challenges with ensuring that servicemembers are aware of their SCRA 

protections. One main challenge cited was servicemembers’ retention of 

the SCRA information they receive from DOD and DHS. Attorneys at 

each of the six legal assistance offices told us that servicemembers are 

not aware of the full extent of their SCRA rights. In addition, several 

military servicemember group representatives, a National Guard Bureau 

official, and an SCRA expert told us that despite available information on 

SCRA, servicemembers are not adequately prepared to invoke their 

rights when needed.

According to DOD officials, the bulk of the SCRA education provided to 

servicemembers occurs at military installations that focus on regular 

active duty servicemembers. However, members of the reserve 

components—those most likely to qualify for SCRA’s mortgage 

protections—may not be located at military installations and, therefore, 

have less access to these services and trainings. One DOD official told us 

that members of the reserve components may receive SCRA briefings at 

their home station. However, legal assistance attorneys at five of the six 

legal assistance offices with whom we spoke told us that members of the 

reserve components have limited access to legal assistance offices on 

military installations when they are not on active duty. Having this limited 

access to legal assistance could affect reserve components members’ 

ability to avail themselves of their SCRA protections when needed. 

Additionally, some members of the reserve components face geographic 

challenges with accessing legal assistance offices due to their distance 

from military installations. About half of the military installations in the 

United States are located in just 10 states, while members of the reserve 

components live throughout the country. For example, the Chief Legal 

Assistant for the Ninth Coast Guard District explained that the legal 

assistance office for that district is located in Cleveland, Ohio, but the 

office provides legal services to the entire Great Lakes Region.

Another challenge in ensuring that servicemembers are aware of their 

SCRA protections when needed is the effectiveness of the educational 

briefings provided by DOD and DHS. As discussed above, SCRA 

requires that servicemembers receive SCRA training upon entry into the 

military, during initial orientation training, and, for members of the reserve 

Servicemembers Face 

Challenges Asserting Their 

SCRA Protections, Raising 

Questions about Training 

Effectiveness
 

Page 42 GAO-12-700 Mortgage Foreclosures

components, when called to active duty for a period of more than 1 year. 

However, legal assistance attorneys who conduct this training and military 

servicemember groups explained that its effectiveness is diminished 

because of the volume of information presented, the timing of the training, 

and the availability of legal assistance resources. For example, four 

military officials told us that during predeployment activities and annual 

National Guard weekend training activities, servicemembers attend 

multiple, back-to-back briefings, which cover a variety of legal and 

financial issues that are focused on a number of important topics, such as 

family law and estate planning. One military attorney referred to these 

briefings as “baptism by a fire hose” when trying to illustrate the volume of 

information provided to servicemembers at these critical times. Further, 

military attorneys with whom we spoke told us that the amount of time 

legal assistance attorneys are able to spend with servicemembers during 

pre- and postdeployment activities is limited due to the volume of 

servicemembers deploying and returning from deployment. For example, 

one military attorney told us that legal assistance attorneys might assist 

250 deploying servicemembers with their legal affairs prior to deployment 

and that during deployment there is limited time available to provide legal 

assistance. Another legal assistance attorney stated that it would be 

beneficial for members of the reserve components to have more time to 

access military legal assistance resources when they return from 

deployment because of concerns that they do not retain the information 

they receive during postdeployment briefings. One legal assistance 

attorney that assists members of the reserves specifically explained that 

when he provides SCRA-related briefings to deployed servicemembers 

who should have received SCRA briefings prior to deployment; many 

seem like they are hearing the information for the first time. He suggested 

that servicemembers’ retention of information could be improved if 

deploying servicemembers receive more comprehensive briefings with 

smaller groups of servicemembers. Additionally, a National Guard Bureau 

official told us that predeployment briefings contain too much information 

for servicemembers to absorb, including the relatively small portions of 

the briefings that include information on SCRA. These methods of 

providing SCRA information to servicemembers raise concerns about 

their ability to retain the information they receive during these trainings.

Without adequate awareness, servicemembers may not take full

advantage of their protections under SCRA. As discussed above, the 

methods of SCRA training and outreach provided by DOD and DHS to 

regular active duty servicemembers and members of the reserve 

components may not be adequate to ensure that these servicemembers 

are aware of and benefiting from the full protections provided by the act. 
 

Page 43 GAO-12-700 Mortgage Foreclosures

In 2008, DOD asked in its annual Status of Forces Surveys if active duty 

servicemembers and members of the reserve components had received 

SCRA trainings. Forty-seven percent of members of the reserve 

components—including those who had been activated in 2008—reported 

in the survey that they had received SCRA training and only 35 percent of 

regular active duty servicemembers reported that they had received 

training.62 While these numbers may not reflect the number of 

servicemembers who received SCRA training, they do provide an 

indication as to the number of servicemembers who recalled receiving 

such training. DOD also surveys servicemembers on a variety of issues 

related to their benefits; however, according to DOD officials who conduct 

these surveys, servicemembers have not been surveyed on the 

effectiveness of DOD’s SCRA educational efforts. 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. In 

addition to surveying servicemembers on the effectiveness of SCRArelated education methods, DOD and DHS could use other techniques to 

assess the effectiveness of their education efforts. For example, 

servicemembers could be tested after a period of time to determine how 

much information they retained from the SCRA component of their 

predeployment briefings. Additionally, focus groups could be held with 

servicemembers to review the understandability of written materials 

provided on SCRA. Without understanding the extent to which existing 

SCRA educational efforts are effective, DOD and DHS are not able to 

determine if their methods are adequate to ensure that servicemembers 

avail themselves of the benefits to which they are entitled.

Ensuring that mortgage servicers fully comply with SCRA can protect 

servicemembers from undue financial harm. Our analysis of risk-based 

compliance examinations conducted by the four prudential regulators 

estimated that about half of all the depository institutions that serviced 

mortgages were reviewed for SCRA compliance from 2007 through 2011. 

However, during these examinations, examiners only conducted testing of 

loan files at 41 of the 83 institutions for which we reviewed the procedures 

 

62DOD Status of Forces Survey of Active Duty Members (August 2008) and Status of 

Forces Survey of Reserve Component Members (November 2008). The margin of error 

for both active duty servicemembers and reserve components members is plus or minus 2 

percent. Survey results do not include responses from members of the Coast Guard and 

Coast Guard Reserve.

Conclusions
 

Page 44 GAO-12-700 Mortgage Foreclosures

used by examiners over the 5-year period to verify that mortgage 

servicers’ SCRA compliance processes and controls were functioning 

properly. For these 41 institutions, examiners did not use the testing 

procedures most likely to detect instances of noncompliance. 

Examination guidance and auditing standards suggest that testing is a 

part of effective monitoring. Furthermore, additional testing of loan files 

using methods that provide greater assurance of compliance is warranted 

given that thousands of violations at some large mortgage servicers have 

been documented through federal agencies’ targeted reviews and 

mortgage servicers’ own internal reviews, but not through the prudential 

regulators’ routine compliance examinations. Without additional testing of 

foreclosure files and, as appropriate, other mortgage loan files not 

identified by the depository institution as SCRA-eligible, and without 

employing testing methods that provide greater assurance of compliance, 

prudential regulators may not be able to determine whether these 

institutions are extending protections to all eligible servicemembers.

Although not a direct regulator of financial institutions that service 

mortgages, VA does interact with mortgage servicers as part of its Home 

Loan Guaranty program and therefore has an interest in ensuring that 

these institutions are complying with SCRA. However, the current level of 

monitoring that VA conducts of mortgage servicers that participate in its 

program provides little assurance that eligible servicemembers with VAguaranteed loans are receiving their full SCRA mortgage protections. By 

not routinely reviewing mortgage servicers’ overall compliance with SCRA 

mortgage protections, the agency cannot be assured that mortgage 

servicers participating in its program have policies and procedures that 

function properly to provide these protections. The agency’s development 

of a new program to conduct on-site audits of mortgage servicers’ overall 

operations provides a good opportunity for the agency to expand its 

efforts related to SCRA compliance. Further, if VA determines that 

servicers’ loss mitigation efforts have either not been successful or 

adequate during its Adequacy of Servicing reviews, it provides 

supplemental servicing on loans. During its Adequacy of Servicing 

reviews and while conducting supplemental servicing, VA would have the 

opportunity to take steps to determine if servicers assessed whether 

borrowers were eligible for SCRA protections. 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.
 

Page 45 GAO-12-700 Mortgage Foreclosures

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. Most agencies responsible for SCRA 

oversight conduct risk-based reviews and therefore do not always include 

SCRA compliance in their reviews. Sharing information on SCRA 

compliance issues could alert agencies to potential problems and improve 

agencies’ ability to identify SCRA violations. 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. However, no such sharing of information related to 

SCRA compliance information currently takes place routinely between the 

prudential regulators, FHA, VA, and FHFA. Further, because these 

entities monitor SCRA compliance at many of the same institutions, the 

sharing of information could help them to more quickly identify 

compliance problems that may adversely affect servicemembers. Many of 

these agencies already have existing mechanisms for sharing information 

that could be used or expanded to periodically share information on 

SCRA compliance.

The Secretaries of the Army, Navy, Air Force, and Homeland Security are 

responsible for educating servicemembers on their SCRA rights. DOD and 

DHS provide this information through a variety of methods throughout 

servicemembers’ military careers. However, servicemembers may often be 

unaware of their SCRA rights for a variety of reasons, such as the volume 

and variety of information they must retain from educational briefings. 

Members of the reserve components in particular face unique challenges 

that can affect whether they learn of and are able to obtain assistance with 

SCRA protections because they have more limited access to military legal 

assistance locations and to SCRA-related training opportunities. 

Additionally, the recently created CFPB’s Office of Servicemember Affairs 

has been working with DOD and DHS to identify opportunities to increase 

servicemembers’ awareness of SCRA protections and its results could 

provide useful information to assist in this effort. While DOD has surveyed 

servicemembers on whether they had received SCRA training, neither 

DOD nor DHS has assessed the effectiveness of their educational methods 

to determine if better ways exist to ensure that servicemembers retain the 

information they receive on SCRA and can recall it when they need it. 

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.
 

Page 46 GAO-12-700 Mortgage Foreclosures

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.

To help ensure that VA assists servicemembers with remaining in their 

homes and avoiding foreclosure, the Secretary of Veterans Affairs should 

ensure that a review for SCRA compliance is included in the department’s 

new mortgage servicer monitoring program and that additional steps to 

assess SCRA compliance are taken by VA staff during its Adequacy of 

Servicing reviews and while conducting supplemental servicing.

Additionally, to increase agencies’ awareness of potential problems with 

SCRA compliance, 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, the Chairman of the National 

Credit Union Administration, the Acting Director of the Federal Housing 

Finance Agency, the Secretary of Housing and Urban Development, and 

the Secretary of Veterans Affairs should explore options to use existing 

mechanisms or develop new ones to share information related to SCRA 

compliance oversight.

Finally, the Secretary of Defense—through the Secretaries of the Army, 

Air Force, and Navy—and the Secretary of Homeland Security should 

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.

We requested comments on a draft of this report from CFPB, DHS, DOJ, 

DOD, FDIC, Federal Reserve, FHFA, HUD, NCUA, OCC, and VA. We 

received formal written comments from DHS, DOD, FDIC, Federal 

Reserve, FHFA, HUD, NCUA, OCC, and VA; these are presented in 

appendixes III through XI, respectively. We also received technical 

comments from CFPB, DOJ, DOD, FDIC, Federal Reserve, FHFA, OCC, 

and VA, which we incorporated as appropriate.

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
 

Page 47 GAO-12-700 Mortgage Foreclosures

Federal Reserve, NCUA, and OCC agreed to take actions in response to 

our recommendations that they increase the frequency with which their 

examiners conduct testing of mortgage and foreclosure files and employ 

testing methods that will provide greater assurance of mortgage servicers’ 

compliance with SCRA. 

• The Federal Reserve’s Director of the Division of Consumer and 

Community Affairs noted that Federal Reserve examiners apply 

interagency examination procedures to test the sufficiency of a 

depository institution’s program for ensuring its employees provide 

appropriate protections to active duty servicemembers, and that it will 

work with the other federal financial regulators to consider appropriate 

ways to update the interagency SCRA examination procedures. The 

Director’s letter notes that Federal Reserve considers interviews with 

bank staff and reviews institutions’ compliance management systems 

to be types of examiner testing. Although our report acknowledges 

that such steps can provide useful information regarding an 

institution’s SCRA compliance, we recommended that the regulators 

provide greater assurance of SCRA compliance by increasing the 

frequency of loan file testing.

• NCUA’s Executive Director agreed that additional testing of loan files 

would provide greater assurance of SCRA compliance. His letter also 

notes that NCUA has made recent changes to its examination 

process to raise the importance of consumer protection issues, noting 

that beginning with its 2011 examinations, staff separate from safety 

and soundness examiners review the lending practices of federal 

credit unions to ensure compliance with SCRA. Further, NCUA noted

that it has also incorporated reviews for SCRA compliance into its 

analysis and investigations of complaints. 

• The Comptroller of the Currency noted that OCC will update its 

examination guidelines to ensure that a review of SCRA compliance is 

conducted during each supervisory cycle for its regulated institutions, 

and that such reviews will include the testing of loan files selected 

using an appropriate methodology to assess compliance with SCRA. 

FDIC’s Director of their Division of Depositor and Consumer Protection 

did not comment on our recommendation but agreed that testing a 

representative sample of loans for compliance with SCRA is an effective 

tool to assess compliance with SCRA for large mortgage servicers. 

However, his letter also noted that having examiners interview bank 

employees also serves as an effective tool for assessing compliance with 
 

Page 48 GAO-12-700 Mortgage Foreclosures

consumer protection laws and regulations, and that such interviews are 

often used to verify that the depository institution is conducting sufficient 

employee training and is enforcing its policies and procedures. We agree 

that conducting interviews of depository institution personnel can be a 

useful procedure to examine for SCRA compliance, but supplementing 

such actions with increased testing of loan files provides an even greater 

level of assurance that an institution is complying with SCRA. 

VA concurred with our recommendation that they ensure that a review for 

SCRA compliance is included in its new mortgage servicer monitoring 

program and also indicated their staff would be taking additional steps to 

assess SCRA compliance during Adequacy of Servicing reviews and 

while conducting supplemental servicing. In a written response, VA’s 

Chief of Staff noted several activities the agency conducts to help ensure 

that veterans are aware of their SCRA protections. He stated that VA will 

revalidate and, as necessary, revise its focus and procedures to ensure 

veteran borrowers are receiving all SCRA protections to which they are 

entitled. Additionally, he noted that VA will include in its mortgage servicer 

monitoring program a review to ensure that servicers’ appropriately afford 

SCRA-eligible borrowers their mortgage protections as part of their loss 

mitigation efforts. Finally, he said that VA will incorporate additional steps 

into its Adequacy of Servicing reviews to assess whether the servicer 

appropriately provided SCRA mortgage protections to eligible borrowers. 

Federal Reserve, FHFA, HUD, NCUA, OCC, and VA agreed with our 

recommendation that the federal agencies involved in overseeing 

mortgage servicers’ SCRA compliance should explore using existing 

mechanisms or developing new ones to share information related to 

SCRA compliance oversight. 

• Federal Reserve Division of Consumer and Community Affairs 

Director noted that additional interagency collaboration related to 

SCRA compliance trends and emerging risks may be appropriate and 

useful in improving supervisory practices related to SCRA 

compliance, and she agreed to explore other opportunities to share 

information related to SCRA compliance with other federal agencies. 

She stated that their staff are currently planning an interagency 

servicemember financial protection webinar for financial industry 

participants that is to include panelists from the federal supervisory

agencies, as well as representatives from other agencies with SCRA 

oversight responsibility. 
 

Page 49 GAO-12-700 Mortgage Foreclosures

• FHFA’s Deputy Director for the Division of Enterprise Regulation also 

agreed that increased information sharing among supervisors of 

mortgage lending industry participants could assist in identifying 

potential compliance problems and in some cases could improve the 

identification of SCRA violations. He noted that FHFA’s supervision 

function will consider whether the agency’s existing memorandums of 

understanding are sufficient or should be expanded to cover more 

types of information or more agencies to broaden information sharing 

on issues of supervisory concern, including SCRA compliance. He 

also noted that the supervision function would consider whether 

compliance oversight would be improved by developing processes for 

more frequent routine communications with supervisors of other 

market participants subject to mortgage lending compliance 

requirements. 

• HUD’s Acting Assistant Secretary for Housing-Federal Housing 

Commissioner agreed that HUD should participate in agencies’ 

discussions to explore options to share information related to SCRA 

compliance, noting that HUD’s should be a participatory role rather 

than a leadership one because it does not have responsibility for 

overseeing SCRA. Her letter also notes they believe that the scope of 

such collaboration should be broadened beyond just SCRA 

compliance to include all agencies’ mutual interests in single family 

housing issues, which we agree could be useful. 

• The NCUA Executive Director’s letter notes that NCUA will use its

participation in FFIEC and other interagency working groups to share 

information regarding the supervision of financial institutions and 

compliance concerns, and that it currently shares information with 

CFPB regarding consumer compliance oversight and is working with 

federal financial regulators to develop tools to facilitate information 

sharing. 

• The Comptroller of the Currency stated in his response that OCC will 

continue to be an active member of the FFIEC Task Force on

Consumer Compliance, which is an interagency organization that 

works collectively to develop examiner guidance and examination 

procedures and to discuss emerging risks or trends regarding new 

products and services. He also noted that OCC, the other prudential 

regulators, and CFPB have signed a memorandum of understanding 

on supervisory coordination that outlines the coordination of 

examinations and the sharing of compliance oversight information, 

including information on SCRA. 
 

Page 50 GAO-12-700 Mortgage Foreclosures

• VA’s Chief of Staff noted that VA will collaborate with the agencies 

involved in SCRA compliance oversight to share information related to 

SCRA compliance. 

FDIC did not comment on this recommendation.

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. DHS’s Director of Departmental GAO-OIG Liaison 

Office noted that the Coast Guard strives to keep all its members fully 

aware of SCRA benefits and rights and that it will explore measures to 

assess the effectiveness of these efforts in the future. DOD’s Office of 

Legal Policy Director stated that the education and protection of 

servicemembers is DOD’s highest priority and that it continuously 

evaluates the effectiveness of training to servicemembers on their 

protections under SCRA and that it will continue to do so bearing our 

recommendation in mind. His letter also notes that DOD recently testified 

before Congress on efforts to conduct a survey on financial issues 

affecting servicemembers which will further inform DOD’s efforts. 
 

Page 51 GAO-12-700 Mortgage Foreclosures

We are sending copies of this report to appropriate congressional 

committees, the Chairman of the Board of Governors of the Federal 

Reserve System, the Secretary of Defense, the Chairman of the Federal 

Deposit Insurance Corporation, the Acting Director of the Federal 

Housing Finance Agency, the Secretary of Homeland Security, the 

Secretary of Housing and Urban Development, the Chairman of the 

National Credit Union Administration, the Comptroller of the Currency, the 

Secretary of Veterans Affairs, the Director of the Consumer Financial 

Protection Bureau, and the U.S. Attorney General. The report also is 

available at no charge on the GAO website at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact 

me at (202) 512-8678 or sciremj@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made major contributions to this report 

are listed in appendix XII.

Mathew Scirè

Director

Financial Markets and

Community Investment
 

Page 52 GAO-12-700 Mortgage Foreclosures

List of Requesters

The Honorable Jeff Miller

Chairman

The Honorable Bob Filner

Ranking Member

Committee on Veterans’ Affairs

House of Representatives

The Honorable Dan Benishek

House of Representatives

The Honorable Gus Bilirakis

House of Representatives

The Honorable Bruce Braley

House of Representatives

The Honorable Corrine Brown

House of Representatives

The Honorable Jeff Denham

House of Representatives

The Honorable Joe Donnelly

House of Representatives

The Honorable Bill Flores

House of Representatives

The Honorable Tim Huelskamp

House of Representatives

The Honorable Doug Lamborn

House of Representatives

The Honorable Michael Michaud

House of Representatives

The Honorable Silvestre Reyes

House of Representatives
 

Page 53 GAO-12-700 Mortgage Foreclosures

The Honorable Phil Roe

House of Representatives

The Honorable Linda Sanchez

House of Representatives

The Honorable Cliff Stearns

House of Representatives

The Honorable Marlin Stutzman

House of Representatives
Appendix I: Objectives, Scope, and 

Methodology

Page 54 GAO-12-700 Mortgage Foreclosures

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. With the exception of our regulatory 

compliance review, the scope of our review includes only SCRA 

protections related to servicemembers’ residential mortgages.

To describe what is known about the practices depository institutions use 

to comply with SCRA, we interviewed representatives from a nongeneralizable sample of four large mortgage servicers and one national 

consumer credit reporting agency about their SCRA compliance practices 

and challenges and reviewed relevant policies and procedures. We 

selected 4 mortgage servicers that were among the 10 largest based on 

data from the Consolidated Reports of Condition and Income (Call 

Reports) on the unpaid principal balance of residential mortgages 

institutions own and service, plus mortgage loans they service on behalf 

of other institutions, and mortgage servicers that had participated in either 

the prudential regulators’ interagency review of foreclosure policies and 

practices or the U.S. House of Representatives Committee on Oversight 

and Government Reform’s investigation.1

 

1

The Consolidated Reports of Condition and Income (Call Reports) are a primary source 

of financial data used for the supervision and regulation of banks. They consist of a 

balance sheet, an income statement, and supporting schedules. The Report of Condition 

schedules provide details on assets, liabilities, and capital accounts. The Report of 

Income schedules provide details on income and expenses. Every national bank, state 

member bank, and insured state nonmember bank is required to file a consolidated Call 

Report normally as of the close of business on the last calendar day of each calendar 

quarter. The specific reporting requirements depend upon the size of the bank and 

whether it has any foreign offices.

We interviewed representatives 

of financial industry trade associations, including those that represent the 

mortgage industry, depository institutions with a large military customer 

base, and the credit reporting industry. We also interviewed officials from 

DOD’s Defense Manpower Data Center, which operates the website that 

depository institutions and others use to verify the active duty status of 

servicemembers. To determine what is known about SCRA violations that 

Appendix I: Objectives, Scope, and 

Methodology 

SCRA Compliance
Appendix I: Objectives, Scope, and 

Methodology

Page 55 GAO-12-700 Mortgage Foreclosures

have occurred we reviewed letters from 10 large mortgage servicers 

written in response to a House of Representatives Committee on 

Oversight and Government Reform investigation on mortgage servicers’ 

SCRA compliance history and practices. We also reviewed data on SCRA 

violations found during bank and credit union examinations conducted 

from 2007 through 2011 by the prudential regulators—the Board of 

Governors of the Federal Reserve System (Federal Reserve), the Federal 

Deposit Insurance Corporation (FDIC), the National Credit Union 

Administration (NCUA), and the Office of the Comptroller of the Currency 

(OCC). We also reviewed available information from legal actions taken 

by the Department of Justice (DOJ) against two mortgage servicers for 

SCRA violations and a class action settlement against a large mortgage 

servicer for SCRA violations. Finally, we reviewed DOJ, Federal Reserve, 

and OCC enforcement actions against mortgage servicers for, among 

other things, foreclosure documentation problems that require the 

mortgage servicers to conduct reviews, which are currently ongoing, to 

determine historical SCRA violations.

To assess the oversight prudential regulators have taken to help ensure 

depository institutions’ compliance with SCRA, we reviewed their 

examination policies and procedures and interviewed agency officials 

about their oversight activities related to SCRA. We also reviewed 

interagency examination procedures and checklists the regulators 

developed in 2009 to aid their oversight of SCRA. To assess the extent to 

which prudential regulators examined for SCRA, we selected a stratified 

random sample of 160 institutions from the population of all depository 

institutions that serviced mortgages as of November 2011 for institutions 

regulated by FDIC, Federal Reserve, and OCC, and September 2011 for 

institutions regulated by NCUA. We developed a certainty stratum 

composed of the 10 largest institutions regulated by each of the four 

prudential regulators—FDIC, Federal Reserve, NCUA, and OCC—for a 

total of 40 institutions. The remaining 120 institutions comprised an 

additional four strata of institutions of varying sizes—one stratum per 

prudential regulator. We used the Call Reports to identify mortgage 

servicers based on data the institutions reported on the unpaid principal 

balance of residential mortgages they own and service, plus mortgage 

loans they service on behalf of other institutions.2

 

2

We included institutions from all U.S. states and territories.

We selected credit 

SCRA Compliance 

Oversight
Appendix I: Objectives, Scope, and 

Methodology

Page 56 GAO-12-700 Mortgage Foreclosures

unions that service mortgage loans using data from the SNL Financial 

Database on the unpaid principal balance of real estate loans owned and 

serviced, plus those serviced on behalf of other institutions.3

Table 2: Number of Depository Institutions in Sample

We 

confirmed our use of the relevant mortgage variables with the SNL 

Financial Database with NCUA. We excluded any depository institutions 

that did not service mortgages. We then used these data to select a 

stratified random sample from the population of depository institutions 

that service mortgages. While we initially selected a sample of 160 

institutions (40 for each regulator), we excluded 8 of the selected 

institutions from our analysis. Three institutions regulated by the Federal 

Reserve were excluded because they were recently chartered and 

therefore had not had an examination. We also excluded five credit 

unions because they were state-chartered, meaning that state 

supervisory authorities and not NCUA served as the primary regulator for 

these institutions. Table 2 provides more detail on the population, sample, 

and sample disposition by stratum.

Population

Sample 

selected

Out of

scope

In-scope 

sample

Largest 10 institutions for each 

regulator

40 40 0 40

Remaining institutions regulated by 

FDIC

4,555 30 0 30 

Remaining institutions regulated by 

Federal Reserve

807 30 3 27

Remaining institutions regulated by 

NCUA

5,280 30 5 25

Remaining institutions regulated by 

OCC

1,910 30 0 30

Total 12,592 160 8 152

Source: GAO analysis of Call Report and SNL Financial Database data.

 

3

NCUA maintains a financial reporting system for credit unions separate from the Call 

Reports FDIC maintains for depository institutions. Credit unions submit financial reports 

to NCUA credit union regulators (also referred to as Call Reports), which are then 

compiled into quarterly listings referred to as the 5300 Call Report.
Appendix I: Objectives, Scope, and 

Methodology

Page 57 GAO-12-700 Mortgage Foreclosures

To determine the extent to which prudential regulators included SCRA 

compliance within the scope of their examinations, we requested SCRArelated examination workpapers, as well as documents examiners 

prepare to determine the scope of their examinations for all consumer 

compliance examinations the prudential regulators conducted from 2007 

through 2011. We reviewed examinations conducted over a 5-year period 

because regulatory officials told us that they may not conduct an 

examination for a particular institution every 12 months, and because 

SCRA might not be covered in each risk-based examination. We relied on 

the examination documentation provided to us by the prudential 

regulators to represent the full universe of examinations that were 

conducted for each institution in our sample between 2007 and 2011. We 

did not independently verify that the examination documentation they 

provided to us represented the full universe of examinations they 

conducted over this period. We reviewed the documents we received and 

developed a data collection instrument (DCI) to capture the information 

we found in the examination documentation in a consistent manner. We 

determined that a depository institution had received an SCRA 

compliance review if examination workpapers revealed an SCRA 

compliance review for any type of loan product covered by the act (for 

example, residential mortgages, automobile loans, or credit cards loans). 

We aggregated this examination-level data to the institution level and 

used the data to produce estimates of the percentage of all institutions for 

which the prudential regulators included an SCRA compliance review 

within an examination at least once during the 5-year period.

Because we followed a probability procedure based on random 

selections, our sample of institutions is only one of a large number of 

samples that we might have drawn. Since each sample could have 

provided different estimates, we express our confidence in the precision 

of our particular sample’s results as a 95 percent confidence interval (for 

example, plus or minus 10 percentage points). This is the interval that 

would contain the actual population value for 95 percent of the samples 

we could have drawn. For estimates used in this report, we report the 95 

percent confidence intervals along with the estimates themselves. We 

also report percentages based on the 10 largest institutions per regulator. 

Since these percentages are based on the total population of such 

institutions, they have no sampling error and consequently confidence 

intervals are not reported for these percentages.

We reviewed examination workpapers and used our DCI to document the 

procedures examiners indicated they used to assess SCRA compliance. 

We only noted the examination procedures for SCRA compliance reviews 

that involved residential mortgage loans or did not specify the type of loan 
Appendix I: Objectives, Scope, and 

Methodology

Page 58 GAO-12-700 Mortgage Foreclosures

product covered. Eighty-three institutions in our sample met these criteria. 

SCRA examination procedures for exams that solely focused on other 

loan products, such as credit cards and automobile loans, were outside 

the scope of our review. We then grouped the data we collected on 

examination procedures into four categories:

• Requests for information from depository institutions. This includes 

activities such as requests for institutions’ internal audit results, 

policies and procedures, SCRA complaints, and lists of SCRA loans. 4

• Interviews with depository institution personnel. This includes 

activities in which examiners interviewed staff at the depository 

institution for information on, among other things, their compliance 

management systems and whether the institution services SCRA 

loans.

• Assessments of depository institutions’ compliance management 

systems. This category includes instances in which examiners 

documented that they reviewed the quality of depository institutions’ 

compliance management systems, such as reviewing institutions’ 

SCRA policies and procedures, internal controls, and training 

programs.

• Testing loan files for SCRA compliance. This category includes 

activities such as testing a limited or statistical sampling of loans the 

institution identified as SCRA-eligible or conducting more 

comprehensive testing, such as reviewing a statistical sample of loan 

files.

Table 3 provides additional detail on the individual examination activities 

that comprise each of these categories.

 

4

Our review did not identify any institutions that had examinations for SCRA compliance 

from 2007 through 2011 that consisted only of requests for information.
Appendix I: Objectives, Scope, and 

Methodology

Page 59 GAO-12-700 Mortgage Foreclosures

Table 3: Examination Activities Identified by GAO for SCRA Compliance Reviews 

Category of Activity Examples of examination activities documented

Requests for information from depository 

institutions

• Requests for lists of loans the depository institution self-identified as SCRA-eligible

• Requests for consumer complaints against the depository institution involving 

SCRA

• Requests for internal audit results regarding SCRA

Interviews with depository institution 

personnel

• Interviews with depository institution personnel (for example, compliance officers 

or senior managers) about whether they service any SCRA loans

• Interviews with depository institution personnel about internal controls and other 

measures they take to ensure SCRA compliance 

Assessments of depository institutions’ 

compliance management systems

• Reviews of depository institutions’ Board of Directors’ or Compliance Committee’s 

meeting minutes regarding SCRA

• Reviews of consumer complaints against a depository institution (either received 

by the institution or the relevant prudential regulator)

• Evaluations of the adequacy of depository institutions’:

• SCRA policies and procedures

• self-assessments on foreclosure management policies, particularly those 

related to SCRA

• SCRA compliance training programs

• Evaluations of the functioning of a depository institution’s internal controls related 

to SCRA

• Evaluations of the depository institution’s internal audit results regarding SCRA

• Assessments of the depository institution’s effort to address previous SCRA 

violations or deficiencies

Testing loan files for SCRA compliance • Testing either a limited or a statistical sampling of loans that the depository 

institution had self-identified as SCRA-eligible

• Testing a limited or statistical sampling of a depository institution’s entire portfolio 

of mortgage loans for SCRA compliance

Source: GAO analysis of prudential regulator examination workpapers.

We reviewed prudential regulators’ examination guidance and 

government auditing standards, which note that various activities can 

provide increasing levels of assurance that reviewed entities are following 

their stated policies and procedures and that internal controls are 

functioning. Based on this review, we grouped examiners’ documented 

examination procedures into four categories based on our professional 

judgment as to the extent to which the examination activities involved 

verification of assertions made by the depository institution regarding 

compliance with SCRA. For example, based on our categories, category 

1—requests for information from depository institutions—provides the 

least assurance of SCRA compliance because it does not involve an 

assessment of compliance, but rather the collection of information. 

Category 2—interviews with depository institution personnel—also 

provides less assurance because it relies primarily on assertions provided 
Appendix I: Objectives, Scope, and 

Methodology

Page 60 GAO-12-700 Mortgage Foreclosures

by the institution. Whereas category 4—testing of loan files—provides the 

greatest assurance of SCRA compliance within our categories because 

testing loan files allows examiners to independently verify whether an 

institution’s compliance procedures are functioning properly and whether 

SCRA protections are being appropriately extended to eligible borrowers. 

Examination guidance from three of the four prudential regulators cite the 

testing of individual loan transactions as the most extensive level of 

review for assurance that a depository institution is complying with laws 

and regulations. They also indicate that testing a larger sample of loans, 

including a statistical sample, provides a fuller assessment of compliance 

than testing a limited sample. We placed institutions in each of the four

categories based on the highest level of examination activity conducted 

from 2007 through 2011. The figures presented for this analysis are not 

generalizable to the population of institutions that service mortgages.

To describe the SCRA compliance oversight activities of other federal 

agencies, we reviewed DOJ’s policies and procedures for receiving 

SCRA referrals and investigating SCRA cases and interviewed agency 

officials. We also reviewed DOJ enforcement actions and investigations 

that DOJ was able to resolve without filing a court case related to 

servicemembers’ mortgages from 2007 through 2011. We also reviewed 

the SCRA compliance monitoring activities and policies and procedures 

of other federal agencies that play a role in the mortgage market. 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. We reviewed the guidance 

these agencies and enterprises provide to mortgage servicers 

participating in their programs and interviewed agency officials.

To determine what actions DOD, DHS, VA, and others have taken to 

ensure servicemembers are informed of their SCRA rights, we reviewed 

the act to determine what it requires agencies to do and interviewed two 

SCRA experts. To describe what actions individual agencies were taking to 

inform servicemembers of their rights, we reviewed DOD and DHS policies 

and procedures and SCRA training materials and publications, and 

interviewed representatives from these agencies, including officials from 

DOD’s Office of Legal Policy, DHS, and the National Guard Bureau. We 

also reviewed DOD’s Status of Forces surveys to active duty 

servicemembers and members of the reserve components to determine 

efforts DOD has taken to assess the effectiveness of its methods of 

educating servicemembers about SCRA benefits. We selected six military 

Servicemember Education 

and Awareness
Appendix I: Objectives, Scope, and 

Methodology

Page 61 GAO-12-700 Mortgage Foreclosures

installation legal assistance offices (one for the Army, Navy, Marine Corps, 

and Coast Guard and two for the Air Force) based on a geographic 

distribution of states with high numbers of foreclosures and large active 

duty and reservist populations and interviewed legal assistance attorneys 

who work in these offices to learn how the attorneys teach servicemembers 

about their SCRA protections and discuss the challenges servicemembers 

face asserting those protections. The six installations were: Fort Drum, 

New York; Randolph Air Force Base, San Antonio, Texas; Fort Sam 

Houston, San Antonio, Texas; Marine Corps Recruit Depot, San Diego, 

California; Coast Guard 9th District Command Center, Ohio; and Naval Air 

Station Pensacola, Florida. We reviewed examples of SCRA training and 

outreach that these offices develop and distribute to servicemembers. To 

learn about the specific challenges that members of the reserve 

components face, we also spoke with legal assistance attorneys from the 

Naval Reserves and the Ohio National Guard who were recommended to 

us by legal assistance attorneys with whom we spoke.

To determine what actions other agencies, including VA, the Consumer 

Financial Protection Bureau, and FHA were taking to inform 

servicemembers and others of SCRA protections, we reviewed 

notifications they provide to mortgage servicers on SCRA compliance and 

interviewed officials at these agencies. We also interviewed 

representatives from the American Bar Association’s Legal Assistance for 

Military Personnel program to learn how they coordinate with legal 

assistance attorneys and assist servicemembers with SCRA issues. 

Finally, we interviewed representatives from seven military 

servicemember groups whose memberships represent a broad population 

of servicemembers and their families. These groups included the Reserve 

Officers Association, National Military Family Association, Military Officers 

Association of America, Air Force Sergeants Association, National Guard 

Association of the United States, Naval Enlisted Reserve Association, 

and Retired Enlisted Association.

We conducted this performance audit from August 2011 to July 2012 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: Oversight of Mortgage Servicers’ 

Servicemembers Civil Relief Act Compliance 

Page 62 GAO-12-700 Mortgage Foreclosures

As of June 2012, three federal agency reviews were under way to 

determine if servicemembers who were eligible for SCRA mortgagerelated protections received them. A total of 14 mortgage servicers are 

involved in these reviews as a result of recent enforcement actions taken 

by the Office of the Comptroller of the Currency (OCC), the Board of 

Governors of the Federal Reserve System (Federal Reserve), and the 

Department of Justice (DOJ). While each review is separate, some 

overlap exists in the institutions and timeframes being reviewed. 

However, officials from DOJ told us they are coordinating the reviews to 

eliminate unnecessary duplication and overlap at institutions. DOJ also 

completed one review of a mortgage servicer—Saxon Mortgage 

Services—in May 2012. 

In response to deficiencies in the foreclosure process that various 

mortgage servicers publicly announced beginning in September 2010, 

OCC and the Federal Reserve conducted a coordinated (interagency) onsite review of 14 mortgage servicers to evaluate the adequacy of controls 

over their foreclosure processes and their policies and procedures for 

compliance with applicable federal and state laws.1

 

1

The 14 mortgage servicers included in the consent order are Ally Bank/GMAC Bank; 

Aurora Bank, FSB; Bank of America, N.A.; Citibank, N.A.; EverBank; HSBC Bank, USA, 

N.A.; JPMorgan Chase Bank, N.A.; MetLife Bank, N.A; OneWest Bank, FSB; PNC Bank, 

N.A.; Sovereign Bank; SunTrust Bank; U.S. Bank, N.A.; and Wells Fargo Bank, NA. 

According to OCC and Federal Reserve’s report on this interagency review, these 14 

institutions represented over two-thirds of the mortgage servicing industry as of the end of 

2010. The former Office of Thrift Supervision (OTS)—a prudential regulator—was also 

involved in the review and resulting enforcement actions. However, the Dodd-Frank Wall 

Street and Consumer Protection Act of 2010 eliminated the agency effective July 2011 

and transferred the supervisory authority for its institutions to the Federal Deposit 

Insurance Corporation (FDIC), Federal Reserve, and OCC. FDIC participated in this 

interagency review in a backup role.

This review identified 

various weaknesses and deficiencies in these mortgage servicers’ 

foreclosure operations, including violations of SCRA. As a result of these 

reviews, OCC and the Federal Reserve issued consent orders to the 14 

mortgage servicers and their affiliates in April 2011, requiring these 

institutions to make various corrective actions. One of these actions 

required each of the mortgage servicers to retain a third-party consultant 

to conduct independent reviews of foreclosure actions that were initiated, 

pending, or completed on primary residences from January 1, 2009 

through December 31, 2010, to identify borrowers who suffered financial 

injury as a result of errors, misrepresentations, or other deficiencies in 

Appendix II: Oversight of Mortgage Servicers’ 

Servicemembers Civil Relief Act Compliance

Federal Reserve and OCC 

Enforcement Actions
Appendix II: Oversight of Mortgage Servicers’ 

Servicemembers Civil Relief Act Compliance 

Page 63 GAO-12-700 Mortgage Foreclosures

foreclosure actions, and to remediate those borrowers, as appropriate. As 

part of these independent reviews, the consultants are required to review 

100 percent of the foreclosure actions during 2009 and 2010 that involved 

servicemembers who may have been protected under SCRA.

Because examiners reviewed a relatively small number of foreclosure 

files during the original interagency review, the reviews required by the 

consent orders are intended to be more comprehensive. The consent 

orders require the third-party consultants to develop detailed sampling 

methodologies for identifying foreclosure actions to include in the review.

These methodologies are subject to OCC’s and the Federal Reserve’s 

approval. OCC officials told us that, in conjunction with DOD and DOJ, 

they have worked with the third-party consultants to develop a process to 

access the Department of Defense’s Defense Manpower Data Center’s

database with custom queries in order for the third-party consultants to 

accurately identify the pool of potential SCRA-eligible borrowers. To 

supplement the independent reviews, the regulators also required 

mortgage servicers and consultants to establish an outreach process for 

borrowers, including servicemembers, who believe they were financially 

harmed by improper foreclosure practices to request a review of their 

foreclosure case. These requests for review must be submitted to the 

mortgage servicers by September 30, 2012. According to officials from 

OCC and the Federal Reserve, as of May 2012, preliminary results from 

this review on instances of SCRA noncompliance were not available.2

On May 26, 2011, DOJ settled two cases against Saxon Mortgage 

Services and BAC Home Loans Servicing for allegations of violations of 

 

2

GAO issued a report on the actions of the regulators and servicers involved in these 

reviews. See GAO, Foreclosure Review: Opportunities Exist to Further Enhance Borrower 

Outreach Efforts, GAO-12-776 (Washington, D.C.: June 29, 2012). GAO also has ongoing 

work looking at the actions of the regulators and servicers.

DOJ Enforcement Actions
Appendix II: Oversight of Mortgage Servicers’ 

Servicemembers Civil Relief Act Compliance 

Page 64 GAO-12-700 Mortgage Foreclosures

SCRA’s foreclosure provision.3

• Saxon Mortgage Services was required to review all nonjudicial 

foreclosures conducted from January 1, 2006, through December 31, 

2010, to determine compliance with SCRA. This review was 

completed in May 2012 and a total of 22 servicemembers were 

identified as having been improperly foreclosed upon. 

The consent orders for each of these 

cases dictated that damages be paid to affected servicemembers and 

remedial actions be taken by the mortgage servicers. BAC Home Loans 

Servicing agreed to pay at least $20 million to resolve the lawsuit, and 

Saxon Mortgage Services agreed to pay at least $2.35 million. The 

consent orders also required the mortgage servicers to, among other 

things, (1) implement revised SCRA policies and procedures specifically 

about querying the Department of Defense’s Defense Manpower Data 

Center database that contains information on servicemembers’ active 

duty status, (2) implement a foreclosure monitoring program, (3) provide 

SCRA compliance training to all applicable employees, and (4) conduct 

reviews to identify additional servicemembers who may have had their 

SCRA rights violated and compensate them. The reviews required by the 

consent orders included the following:

• BAC Home Loans Servicing is required to conduct reviews for both 

the foreclosure and interest-rate provisions of SCRA. Specifically, 

BAC Home Loans Servicing is to review all nonjudicial foreclosures it 

conducted from January 1, 2006, through December 31, 2010, for 

SCRA compliance. For the interest-rate review, the consent order 

required BAC Home Loans Servicing to retain an independent 

accounting firm to review a statistically valid sample of home 

mortgage files from January 1, 2008, through December 31, 2010, 

and issue a report on whether the mortgage servicer appropriately 

 

3

50 U.S.C. App. §533. United States v. Saxon Mortgage Services Inc. (Northern District of 

Texas, Dallas Division). DOJ’s complaint alleged that Saxon’s conduct violated §533(c) of 

SCRA and constituted a pattern or practice of foreclosing on servicemembers without 

court orders during a period of military service, or a period otherwise protected by SCRA. 

Saxon Mortgage Services, Inc. is a subsidiary of Morgan Stanley. United States v. BAC 

Home Loans Servicing, LP f/k/a Countrywide Home Loans Servicing, LP (Central District 

of California). DOJ’s complaint alleged that BAC Home Loans Servicing’s conduct violated 

§533(c) of SCRA and constituted a pattern or practice of foreclosing on servicemembers 

without court orders during a period of military service, or a period otherwise protected by 

SCRA. BAC Home Loans Servicing LP, formerly known as Countrywide Home Loans 

Servicing LP, is a subsidiary of Bank of America Corporation.
Appendix II: Oversight of Mortgage Servicers’ 

Servicemembers Civil Relief Act Compliance 

Page 65 GAO-12-700 Mortgage Foreclosures

applied interest rates and fees to servicemembers’ mortgages as 

required by SCRA.

DOJ officials told us that, as of June 2012, the BAC Home Loans 

Servicing review is ongoing.

In February 2012, DOJ and 49 state attorneys general settled with five of 

the largest national mortgage servicers for a variety of improper mortgage 

servicing procedures, including allegations of SCRA violations.4 The $25 

billion settlement was one of the largest financial recoveries obtained by 

the attorneys general in history and contains a number of provisions 

related to SCRA designed to protect servicemembers’ rights and to 

provide them additional benefits. To resolve allegations of liability that 

have not previously been settled, five mortgage servicers—Ally Financial 

Inc., Bank of America Corp., Citigroup Inc., JPMorgan Chase Bank, N.A., 

and Wells Fargo & Company—agreed to conduct a full review, overseen 

by DOJ’s Civil Rights Division, to determine whether any servicemembers 

were foreclosed on in violation of SCRA since January 1, 2006. 

Additionally, four of the mortgage servicers— Ally Financial Inc., Bank of 

America Corp., Citigroup Inc., and Wells Fargo & Company—agreed to 

conduct a thorough review of mortgage loans to determine whether any 

servicemember, since January 1, 2008, was charged interest in excess of 

6 percent after submitting a valid request to lower the interest rate. The 

agreement also specifies compensation above the $25 billion settlement 

amount for any SCRA foreclosure or interest-rate violations.5

 

4

The five servicers were Ally Financial Inc./GMAC, Bank of America Corp., Citigroup Inc., 

JPMorgan Chase Bank, N.A., and Wells Fargo & Company.

Compliance 

5

Under the settlement agreement, Ally Financial Inc., Bank of America, Citigroup Inc., and 

Wells Fargo & Company will be required to provide any servicemember subjected to a 

wrongful foreclosure with a payment equal to the servicemember’s lost equity, plus 

interest, and an additional $116,785 or an amount provided for the same violation under 

the review conducted by OCC or the Federal Reserve, whichever is higher. To ensure 

consistency with an earlier private settlement, JPMorgan Chase will provide any 

servicemember who was a victim of a wrongful foreclosure as a result of a violation of 

SCRA either his or her home free and clear of any debt plus compensation for additional 

harm or the cash equivalent of the full value of the home at the time of sale plus 

compensation for additional harm suffered. Ally Financial Inc., Bank of America, Citigroup 

Inc., and Wells Fargo & Company will be required to provide any servicemember who was 

wrongfully charged interest in excess of 6 percent with a payment equal to a refund, with 

interest, of any amount charged in excess of 6 percent plus triple the amount refunded or 

$500, whichever is larger. JPMorgan Chase had already compensated servicemembers 

charged excess interest through the earlier private settlement. 

National Mortgage 

Settlement
Appendix II: Oversight of Mortgage Servicers’ 

Servicemembers Civil Relief Act Compliance 

Page 66 GAO-12-700 Mortgage Foreclosures

with the SCRA provisions of the settlement will be overseen by DOJ’s 

Civil Rights Division. Table 4 summarizes these three reviews.

Table 4: Summary of Ongoing and Completed Federal Agency Reviews of Mortgage Servicers’ SCRA Compliance 

Review Description of review Mortgage servicer

SCRA provision(s) 

reviewed

Timeframes for 

mortgages 

reviewed

OCC and Federal 

Reserve Consent Orders

Under consent orders issued 

by OCC and the Federal 

Reserve, 14 mortgage 

servicers are required to 

retain third-party consultants 

to conduct independent 

reviews of foreclosure 

actions to identify borrowers 

who were financially harmed 

as a result of certain 

deficiencies.

• Ally Bank/GMAC Bank

• Aurora Bank, FSB

• Bank of America, N.A.

• Citibank, N.A.

• EverBank 

• HSBC Bank, USA, N.A.

• JPMorgan Chase, N.A.

• MetLife, N.A.

• OneWest Bank, FSB

• PNC Bank, N.A.

• Sovereign Bank

• SunTrust Bank

• U.S. Bank, N.A.

• Wells Fargo Bank, NA

Foreclosure 2009–2010

(January 1, 2009 

through December 

1, 2010)

DOJ Consent Orders 

Saxon Mortgage 

Services (Morgan 

Stanley)a 

Under the consent order, 

Saxon Mortgage Services 

was required to review 

nonjudicial foreclosures (i.e., 

foreclosures that took place 

in states that do not require a 

court order for foreclosure 

proceedings).

Saxon Mortgage Services, Inc. 

(a subsidiary of Morgan 

Stanley)

Foreclosure 2006–2010

(January 1, 2006 

through December 

31, 2010)

BAC Home Loans 

Servicing (Bank of 

America) 

Under the consent order, 

BAC Home Loans Servicing 

is required to review 

nonjudicial foreclosures (i.e., 

foreclosures that took place 

in states that do not require a 

court order for foreclosure 

proceedings).

BAC Home Loans Servicing (a 

subsidiary of Bank of America)

Foreclosure 2006–2010

(January 1, 2006 

through December 

31, 2010)
Appendix II: Oversight of Mortgage Servicers’ 

Servicemembers Civil Relief Act Compliance 

Page 67 GAO-12-700 Mortgage Foreclosures

Review Description of review Mortgage servicer

SCRA provision(s) 

reviewed

Timeframes for 

mortgages 

reviewed

Under the consent order, 

BAC Home Loans Servicing 

is required to retain an 

independent accounting firm 

to review a statistically valid 

sample of home mortgage 

files from January 1, 2008, 

and issue a report on 

whether the mortgage 

servicer appropriately 

applied interest rates and 

fees to servicemembers’ 

mortgages as required by 

SCRA.

Interest rate 2008–2010

(January 1, 2008 

through December

31, 2010)

National Mortgage 

Settlement

Five mortgage servicers 

agreed to conduct a full 

review, overseen by DOJ’s 

Civil Rights Division, to 

determine whether any 

servicemembers were 

foreclosed on in violation of 

SCRA.

• Ally Financial Inc.

• Bank of America Corp.

• Citigroup Inc.

• Wells Fargo & 

Company

• JPMorgan Chase Bank, 

N.A.

Foreclosure 2006–present

Four mortgage servicers 

agreed to conduct a 

thorough review overseen by 

DOJ’s Civil Rights Division of 

mortgage loans to determine 

whether any servicemember 

since January 1, 2008, was 

charged interest in excess of 

6 percent after submitting a 

valid request to lower the 

interest rate. 

• Ally Financial Inc.

• Bank of America Corp.

• Citigroup Inc.

• Wells Fargo & Company

Interest rate 2008–present

Source: GAO analysis of OCC, Federal Reserve, and DOJ consent orders.

a

DOJ completed the Saxon Mortgage Servicing Review in May 2012. 
Appendix III: Comments from the Department 

of Homeland Security

Page 68 GAO-12-700 Mortgage Foreclosures

Appendix III: Comments from the 

Department of Homeland Security
Appendix III: Comments from the Department 

of Homeland Security

Page 69 GAO-12-700 Mortgage Foreclosures
Appendix IV: Comments from the Department 

of Defense

Page 70 GAO-12-700 Mortgage Foreclosures

Appendix IV: Comments from the 

Department of Defense

GAO received DOD’s 

letter on July 2, 2012.
Appendix IV: Comments from the Department 

of Defense

Page 71 GAO-12-700 Mortgage Foreclosures
Appendix IV: Comments from the Department 

of Defense

Page 72 GAO-12-700 Mortgage Foreclosures
Appendix V: Comments from the Federal 

Deposit Insurance Corporation 

Page 73 GAO-12-700 Mortgage Foreclosures

Appendix V: Comments from the Federal 

Deposit Insurance Corporation
Appendix V: Comments from the Federal 

Deposit Insurance Corporation 

Page 74 GAO-12-700 Mortgage Foreclosures
Appendix VI: Comments from the Board of 

Governors of the Federal Reserve System 

Page 75 GAO-12-700 Mortgage Foreclosures

Appendix VI: Comments from the Board of 

Governors of the Federal Reserve System
Appendix VI: Comments from the Board of 

Governors of the Federal Reserve System 

Page 76 GAO-12-700 Mortgage Foreclosures
Appendix VII: Comments from the Federal 

Housing Finance Agency

Page 77 GAO-12-700 Mortgage Foreclosures

Appendix VII: Comments from the Federal 

Housing Finance Agency
Appendix VII: Comments from the Federal 

Housing Finance Agency

Page 78 GAO-12-700 Mortgage Foreclosures
Appendix VIII: Comments from the Department 

of Housing and Urban Development

Page 79 GAO-12-700 Mortgage Foreclosures

Appendix VIII: Comments from the 

Department of Housing and Urban 

Development 
Appendix VIII: Comments from the Department

of Housing and Urban Development

Page 80 GAO-12-700 Mortgage Foreclosures
Appendix IX: Comments from the National 

Credit Union Administration

Page 81 GAO-12-700 Mortgage Foreclosures

Appendix IX: Comments from the National 

Credit Union Administration
Appendix IX: Comments from the National 

Credit Union Administration

Page 82 GAO-12-700 Mortgage Foreclosures
Appendix X: Comments from the Office of the 

Comptroller of the Currency

Page 83 GAO-12-700 Mortgage Foreclosures

Appendix X: Comments from the Office of 

the Comptroller of the Currency
Appendix X: Comments from the Office of the 

Comptroller of the Currency

Page 84 GAO-12-700 Mortgage Foreclosures
Appendix XI: Comments from the Department 

of Veterans Affairs 

Page 85 GAO-12-700 Mortgage Foreclosures

Appendix XI: Comments from the 

Department of Veterans Affairs
Appendix XI: Comments from the Department 

of Veterans Affairs 

Page 86 GAO-12-700 Mortgage Foreclosures
Appendix XI: Comments from the Department 

of Veterans Affairs 

Page 87 GAO-12-700 Mortgage Foreclosures
Appendix XII: GAO Contact and Staff 

Acknowledgments

Page 88 GAO-12-700 Mortgage Foreclosures

Mathew J. Scirè, (202) 512-8678, or sciremj@gao.gov

In addition to the individual named above, Cody Goebel, Assistant 

Director; Meghana Acharya; Rachel Batkins; Rudy Chatlos; Christine 

Houle; John McGrail; Mark Ramage; and Jennifer Schwartz made key 

contributions to this report.

Appendix XII: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments

(250623)
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