Servicemembers Civil Relief Act: Information on Mortgage Protections and Related Education Efforts
Published: 2014-01-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: SCRA seeks to protect eligible active duty military personnel in the event that their military service prevents them from meeting financial obligations. Mortgage-related protections include prohibiting mortgage servicers from foreclosing on servicemembers' homes without court orders and capping fees and interest rates at 6 percent. Traditionally, servicemembers received 90 days of protection beyond their active duty service, but this period was extended to 9 months in 2008 and to 1 year in 2012. The legislation that provided the 1-year protection period also mandated that GAO report on these protections.
This report examines (1) available information on changes in the financial well-being of servicemembers who received foreclosure-prevention and mortgage-related interest rate protections under SCRA, including the extent to which they became delinquent and the impact of protection periods; and (2) DOD's partnerships with public- and private-sector entities to provide financial education and counseling about SCRA mortgage protections to servicemembers and views on the effectiveness of these partnerships. To address these objectives, GAO sought and received data from three large mortgage servicers and a large credit union covering a large portion of all mortgage loans outstanding and potentially SCRA-eligible borrowers. GAO also reviewed documentation on DOD's partnerships and relevant education efforts related to SCRA mortgage protections. GAO interviewed DOD officials and partners who provided SCRA mortgage education and counseling.
section_title: What GAO Found
paragraphs: The number of servicemembers with mortgages eligible for Servicemembers Civil Relief Act (SCRA) mortgage protections is unknown because servicers have not collected this information in a comprehensive manner. Based on the limited and nongeneralizeable information that GAO obtained from the three mortgage servicers and the credit union, a small percentage of the total loan portfolios were identified as eligible for SCRA protections. Two large servicers had loan-level data on delinquency rates. For those identified as SCRA-eligible, rates ranged from 16 to 20 percent and from 4 to 8 percent for their other military borrowers. Delinquencies at the credit union were under 1 percent. Some servicemembers appeared to have benefitted from the SCRA interest rate cap of 6 percent, but many eligible borrowers had apparently not taken advantage of this protection. For example, at one institution 82 percent of those who could benefit from the interest rate caps still had mortgage rates above 6 percent. The data also were insufficient to assess the impact of SCRA protections after servicemembers left active duty, although one institution's limited data indicated that military borrowers had a higher risk of delinquency in the first year after leaving active duty. But those with SCRA protections also were more likely to cure delinquencies during this period than the institution's other military borrowers. Given the many limitations to the data, these results should only be considered illustrative. Most of these institutions indicated that they made recent changes to better identify SCRA-eligible borrowers and improve the accuracy of the data.
The Department of Defense (DOD) has partnerships with many federal agencies and nonprofit organizations to help provide financial education to servicemembers, but limited information on the effectiveness of these partnerships exists. DOD and its partners have focused on promoting general financial fitness rather than providing information about SCRA protections. But some partners provide SCRA outreach and support to servicemembers. For example, the Bureau of Consumer Financial Protection has an Office of Servicemember Affairs that provides SCRA outreach to servicemembers and mortgage servicers responsible for complying with the act. Although stakeholders GAO interviewed generally offered favorable views of these partnerships, some said obtaining additional information about educational resources and partnership performance could improve programs. However, DOD has not undertaken any formal evaluations of the effectiveness of these partnerships. This finding is consistent with GAO's July 2012 review of SCRA education efforts, which found that DOD had not assessed the effectiveness of its educational methods and therefore could not ensure it reached servicemembers in the most effective manner. GAO recommended in July 2012 that DOD assess the effectiveness of its efforts to educate servicemembers on SCRA to determine better ways for making servicemembers (including reservists) aware of SCRA rights and benefits. In response to that recommendation, as of December 2013, DOD was reviewing the results of its recent surveys on the overall financial well-being of military families and planned to use these results to adjust training and education for SCRA, as appropriate. GAO's current finding that many servicemembers did not appear to be taking advantage of the SCRA interest rate cap appears to reaffirm that DOD's SCRA education efforts could be improved and that an assessment of the effectiveness of these efforts is still warranted.

section_title: Letter
paragraphs: The Servicemembers Civil Relief Act (SCRA) provides protections to  active duty military personnel in the event that their military service  prevents them from meeting financial obligations. The act provides  numerous mortgage-related protections to eligible servicemembers who  are on active duty or have recently completed active duty service. The  protections include prohibiting mortgage servicers—entities responsible  for administering home-mortgage loans—from foreclosing on  servicemembers’ homes without court orders and capping fees and  interest rates at 6 percent.
Several legislative changes in recent years have extended the period of  time in which eligible servicemembers receive protection from foreclosure  under SCRA. Currently, the protections last for up to a year after active  duty service. Traditionally, servicemembers received 90 days of  protection, but this period was extended to 9 months in 2008. In August  2012, Congress extended the period to 1 year. The extended protection  period remains in effect until December 31, 2014, after which the  protection period will revert to 90 days. The legislation that provided the  1-year protection period—the Honoring America’s Veterans and Caring  for Camp Lejeune Families Act of 2012—also mandates that GAO report  on the impact of the foreclosure-prevention protections and the varying  protection periods and assess the partnerships established by the  Secretary of Defense to provide servicemembers financial education and  counseling. This report examines (1) available information on changes in  the financial well-being of servicemembers who received foreclosure- prevention and mortgage-related interest rate protections under SCRA,  including the extent to which servicemembers became delinquent on their  mortgages after leaving active duty and the impact of protection periods;  and (2) the Department of Defense’s (DOD) collaborations—referred to  as partnerships in this report—with public- and private-sector entities to  provide financial education and counseling about SCRA mortgage  protections to servicemembers and views on the effectiveness of these  partnerships.
To assess changes in the financial well-being of servicemembers who  received SCRA mortgage protections, we obtained and analyzed loan- level data from three financial institutions (two large single-family  mortgage servicers and a large credit union) and summary data (not loan- level) from a fourth financial institution (a large single-family mortgage  servicer). We conducted a quantitative analysis of the loan-level data,  which included information on loan status, total fees, and the financial  outcomes of borrowers (such as whether the borrowers cured mortgage  defaults). Our analysis is not based on a representative sample of all  servicemembers eligible for SCRA mortgage protections and is not  generalizable. Also, the conclusions we could draw about the effects of  SCRA were limited because the data did not always comprehensively  identify SCRA-eligible and other military borrowers and reflected a limited  time frame. To the extent individual loan-level data were available, we  conducted quantitative analyses on the changes in financial well-being of  the servicemembers at each institution. Where appropriate, we also relied  on a summary (not loan-level) analysis that the fourth institution (a large  single-family mortgage servicer) provided of its servicemember loan  portfolio. Through interviews with financial institution officials and data  testing, we determined the mortgage data were sufficiently reliable for the  limited purpose of identifying relative changes in the financial well-being  of servicemembers identified as having received SCRA mortgage  protections for the servicers in our analysis. But, the relative delinquency  and cure rates we derived should be interpreted with caution because of  issues with identification of servicemembers and SCRA-eligible borrowers  in the data (see app. I for more information). Based on interviews with  financial institution officials, we determined our institution-specific  analyses were sufficiently reliable for the same limited purpose. We also  analyzed results from DOD’s Status of Forces (SOF) surveys, which  include data on servicemember mortgages and financial well-being.
Finally, we interviewed DOD officials (including those of individual military  services, staff responsible for the surveys, and staff that oversee a  database of active duty status of servicemembers), military associations,  and selected financial institutions to obtain available information or  reports on the impact of SCRA protections.
To examine views on the effectiveness of DOD’s partnerships, we  reviewed documentation on partnerships with public and private entities  that provide financial education and counseling to servicemembers,  including efforts related to SCRA mortgage protections. We also  interviewed DOD officials (including the individual services) and selected  DOD partners to determine how such partnerships provide SCRA  mortgage education and counseling and to gather views on and any  assessments of the effectiveness of these partnerships.
We conducted this performance audit from June 2013 to January 2014 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.
subsections: section_title: Background
paragraphs: Congress enacted SCRA in December 2003 as a modernized version of  the Soldiers’ and Sailors’ Civil Relief Act of 1940. In addition to providing  protections related to residential mortgages, the act covers other types of  loans (such as credit card and automobile) and other financial contracts,  products, and proceedings, such as rental agreements, eviction,  installment contracts, civil judicial and administrative proceedings, motor  vehicle leases, life insurance, health insurance, and income tax  payments.
SCRA provides the following mortgage-related protections to  servicemembers:  Interest rate cap. Servicemembers who obtain mortgages prior to  serving on active duty status are eligible to have their interest rate and   The servicer is to forgive interest and  any fees capped at 6 percent.fees above 6 percent per year. Servicemembers must provide written  notice to their servicer of their active duty status to avail themselves of  this provision.
Foreclosure proceedings. A servicer cannot sell, foreclose, or seize  the property of a servicemember for breach of a preservice obligation  unless a court order is issued prior to the foreclosure or unless the  servicemember executes a valid waiver. 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.
Fines and penalties. A court may reduce or waive a fine or penalty  incurred by a servicemember who fails to perform a contractual  obligation and incurs the penalty as a result if the servicemember was  in military service at the time the fine or penalty was incurred and the  servicemember’s ability to perform the obligation was materially  affected by his or her military service. Federal authorities have applied  this provision to prepayment penalties incurred by servicemembers  who relocate due to permanent change-of-station orders and  consequently sell their homes and pay off mortgages early.
Adverse credit reporting. A servicer may not report adverse credit  information to a credit reporting agency solely because  servicemembers exercise their SCRA rights, including requests to have their mortgage interest rates and fees capped at 6 percent.
Both servicemembers and servicers have responsibility for activating or  applying SCRA protections. For example, to receive the interest-rate  benefit, servicemembers must identify themselves as active duty military  and provide a copy of their military orders to their financial institution.  However, the responsibility of extending SCRA foreclosure protections to  eligible servicemembers often falls to mortgage servicers. The burden is  on the financial institution to ensure that borrowers are not active duty  military before conducting foreclosure proceedings. Eligible  servicemembers are protected even if they do not tell their financial  institution about their active duty status. 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.
Under SCRA, the Secretaries of each military service and the Secretary  of Homeland Security have the primary responsibility for ensuring that  servicemembers receive information on their SCRA rights and  protections. Typically, legal assistance attorneys on military installations provide servicemembers with information on SCRA during routine  briefings, in handouts, and during one-on-one sessions. Additionally,  DOD has established public and private partnerships to assist in the  financial education of servicemembers.
section_title: Limited Data Suggest SCRA Benefits Some Servicemembers but Impact of Protection Periods Unknown
paragraphs: The limited data we obtained from four financial institutions showed that a  small fraction of their borrowers qualified for SCRA protections. Our  analysis suggests that SCRA-protected borrowers generally had higher  rates of delinquency, although this pattern was not consistent across the  institutions in our sample and cannot be generalized. However, SCRA  protections may benefit some servicemembers. SCRA-protected  borrowers at two of the three institutions from which we had usable data  were more likely to cure their mortgage delinquencies than other military  borrowers. Some servicemembers also appeared to have benefitted from  the SCRA interest rate cap. Financial institutions we contacted could not  provide sufficient data to assess the impact of different protection periods,  but our analysis indicates that mortgage delinquencies appeared to  increase in the first year after active duty.
subsections: section_title: Actual Number of Servicemembers Eligible for SCRA Mortgage Protections Unknown
paragraphs: Based on our interviews and the data sources we reviewed, the number  of servicemembers with mortgages eligible for SCRA protections is not  known because servicers have not systematically collected this  information, although limited data are available. Federal banking  regulators do not generally require financial institutions to report  information on SCRA-eligible loans or on the number and size of loans  that they service for servicemembers. SCRA compliance requires that financial institutions check whether a borrower is an active duty  servicemember and therefore eligible for protection under SCRA before  initiating a foreclosure proceeding. However, institutions are not required  to conduct these checks on loans in the rest of their portfolio, and two told  us that they do not routinely check a borrower’s military status unless the  borrower is delinquent on the mortgage. Consequently, the number of  SCRA-eligible loans that these two institutions reported to us only  includes delinquent borrowers and those who reported their SCRA  eligibility to the financial institution. Two other institutions were able to  more comprehensively report the number of SCRA-eligible loans in their  portfolio because they routinely check their portfolio against the DMDC  database. Additionally, only one of the financial institutions we contacted  was able to produce historical data on the total number of known SCRA- eligible loans in its portfolio.
Although exact information on the total number of servicemembers  eligible for the mortgage protections under SCRA is not known, DOD data  provide some context for approximating the population of  servicemembers who are homeowners with mortgage payments and who  therefore might be eligible for SCRA protections. According to DOD  data, in 2012 there were approximately 1.4 million active duty  servicemembers and an additional 848,000 National Guard and Reserve  members, of which approximately 104,000 were deployed. While DOD  does not maintain data on the number of servicemembers who are  homeowners, DOD’s 2012 SOF survey indicated that approximately 30  percent of active duty military made mortgage payments. For reservists,  DOD’s most recent survey of homeownership in June 2009 indicated that  53 percent of reservists made mortgage payments. According to DOD  officials, industry trade group representatives, SCRA experts, and military  service organizations, the servicemembers most likely to be eligible for  SCRA mortgage protections are members of the Reserve components  because they were more likely to have had mortgages before entering  active duty service.
Although comprehensive data on the number of servicemembers eligible  for SCRA are not available, four financial institutions provided us with  some data on the servicemembers they have identified in their portfolios  in 2012. According to these data, a small percentage of the financial  institutions’ total loan portfolios were identified as being eligible for SCRA  protections. Table 1 details the number of loans held by each of the  institutions from which we obtained data, including the estimated number  of loans belonging to servicemembers and the number of loans the  institutions identified as SCRA-eligible. Collectively, we estimate that the  financial institutions from which we received useable data service  approximately 27-29 percent of the mortgages held by servicemembers.  This estimate is based on information from DOD’s SOF results on the  estimated percentage of active duty servicemembers and reservists who  make mortgage payments and the reported and estimated number of  military borrowers that each of these institutions reported in their  portfolios.
Representatives with three of the financial institutions told us they have  made changes to their data systems over the past 2 years to help better  identify whether mortgage holders were active duty military and eligible  for SCRA protections. They attributed these changes, in part, to DOD’s  April 2012 upgrade of the DMDC database to allow financial institutions to  check on the active duty status of up to 250,000 borrowers at once, as  opposed to checking one individual at a time. Since then, some of the  institutions had made changes to their systems to use the DMDC  database to routinely check the military status of borrowers, thereby  improving their available data on SCRA-eligible borrowers. Of the  financial institutions we contacted, representatives with two told us that  they now regularly check their entire loan portfolio against the DMDC  database. Representatives with the other institutions said that they only  check the military status of delinquent borrowers. To illustrate the extent  to which these changes could improve the accuracy of the data on SCRA- eligible borrowers, representatives of one financial institution told us they  used to rely on postal codes to help identify borrowers on or near military  bases to determine whether they were likely servicemembers. This  institution has since switched to a data system that allows a check of its  entire portfolio against the DMDC database so that the institution can  more accurately identify which borrowers are also servicemembers.
section_title: SCRA-Protected Borrowers Generally Had Higher Rates of Mortgage Delinquency, with Protections Appearing to Benefit Some Servicemembers
paragraphs: Our analysis of data from three financial institutions suggests that SCRA- protected borrowers were substantially more likely to experience  delinquency at any time than their non-SCRA-protected military  counterparts, with one exception. The institutions provided us data with  substantial inherent limitations that prevented us from fully analyzing the  repayment practices of their military borrowers. However, the limited data  allowed us to conduct some analyses of borrowers’ delinquency rates and  the rates at which delinquent borrowers became current on their  mortgages. At two servicers, we found that SCRA-protected borrowers  had delinquency rates from 16 to 20 percent. In contrast, non-SCRA- protected military borrowers had delinquency rates that ranged from 4 to  8 percent. These rates also varied across time within an institution.  However, delinquency rates for the large credit union we analyzed were  significantly smaller, and its SCRA-protected borrowers were less likely to  be delinquent. For example, in the fourth quarter of 2012, 0.01 percent of  SCRA-protected borrowers at this institution were delinquent on their  loans, while 0.56 percent of the remaining borrowers in its loan portfolio  were delinquent. The variation in delinquency rates among these financial  institutions indicates that factors in addition to SCRA protection likely  influence an institution’s delinquency rates, including differences among  each institution’s lending standards and policies or borrower  characteristics, such as income and marital status.
Although it should be interpreted with caution because the results were  not consistent at all three institutions for which we could conduct the  analysis, our data analysis also suggests that borrowers protected by  SCRA may have a better chance of curing their mortgage delinquency— making payments sufficient to restore their loan to current status—than  those without the protections. The summary loan data we obtained from  one institution show that its SCRA-protected military borrowers who were  90 or more days delinquent were almost twice as likely to cure their  delinquency within a year than civilian borrowers and almost five times as  likely as other military borrowers who were not SCRA-protected. Our  analysis of loan-level data from another institution also suggested that its  SCRA-protected borrowers had a higher likelihood of curing their  mortgage delinquency than military borrowers not SCRA-protected,  although their chances of curing the delinquency declined after leaving  active duty.suggested that cure rates for active duty SCRA-protected  servicemembers were substantially lower than their noneligible active  duty counterparts. Again, these differences in cure rates among the three  institutions could reflect differences in institution policies or borrower  characteristics.
However, our analysis of data provided by a third institution  Our data analysis also indicates that at least some servicemembers have  benefitted from the SCRA interest rate cap. As discussed earlier,  servicemembers must provide written notice to their servicer of their  active duty status to avail themselves of this provision. Analysis of one  institution’s data showed that approximately 32 percent of identified  SCRA-eligible borrowers had a loan with an interest rate above 6 percent  at origination. According to data provided by this institution—which  included the initial interest rate and a current interest rate for 9  consecutive months in 2013—some SCRA-eligible borrowers saw their  interest rates reduced to 6 percent or less, but almost 82 percent of the  loans for those eligible for such a reduction retained rates above 6  percent. However, SCRA-eligible borrowers with interest rates higher  than 6 percent had a larger average drop in interest rates from origination  through the first 9 months of 2013 than non-SCRA-eligible military  borrowers or SCRA-protected borrowers with initial rates below 6 percent.  We cannot determine how many rate reductions resulted from the  application of SCRA protections; other potential reasons for rate  decreases include refinancing or a rate reset on adjustable-rate loans.  Several financial institutions told us that more servicemembers could  benefit from the rate cap protection if they provided proof of their active  duty status to their mortgage servicer. For example, representatives from  one financial institution told us that they receive military documentation  (orders, commanding officer letters, etc.) on 31 percent of their SCRA- eligible borrowers—as a result, up to 69 percent may not be receiving the  full financial benefit that SCRA affords.
section_title: Available Data Are Insufficient to Assess Different Protection Periods, but Mortgage Delinquencies Appeared to Increase after Active Duty
paragraphs: The data financial institutions we contacted were able to provide were  generally not sufficient to assess the impact of the various protection  periods in effect since the enactment of SCRA: 90 days, 9 months, and 1  year. Because most of the institutions we interviewed reported that they  made enhancements to their data systems in 2012 to better identify  SCRA-eligible borrowers, they were unable to provide data for both  SCRA-eligible borrowers and a comparison group of other military  borrowers before the end of 2011, when the protection periods were  shorter. Furthermore, none of our data that included SCRA-eligible  borrowers and a comparison group of non-SCRA-eligible borrowers  covered more than a 1-year span. As a result, the data were insufficient  to evaluate the effectiveness of SCRA in enhancing the longer-term  financial well-being of the servicemember leaving active duty or over the  life of the mortgage. Finally, our measures of financial well-being— likelihood of becoming delinquent, curing a delinquency, and obtaining a  reduction in the mortgage interest rate—are not comprehensive  measures of financial well-being, but were the best measures available to  us in the data.
Our analysis of one servicer’s data suggests that all military borrowers— SCRA-protected or not—had a higher likelihood of becoming delinquent  in the first year after they left active duty than when in the military. For  example, in the loan-level data from an institution that used the DMDC  database to check the military status of its entire loan portfolio, all of its  military borrowers had a higher likelihood of becoming delinquent in the  first year after they left active duty than when in service, with that risk  declining somewhat over the course of the year for non-SCRA-protected  military borrowers. Although not generalizeable, these findings are  consistent with concerns, described below, that servicemembers may  face financial vulnerability after separating from service. Those who were  SCRA-protected had a smaller increase in delinquency rates in the first  year after leaving active duty than other military borrowers, but this may  be due to SCRA-protected borrowers having their loans become  delinquent at higher rates before leaving active duty and not to a  protective effect of SCRA.
Although we were generally unable to obtain data to analyze the impact  of the varying protection periods, data from one institution provided some  indication of a positive effect of SCRA protection for servicemembers  receiving up to a year of protection. Analyzable data from one institution  on the mortgage status of all its military borrowers for a 9-month period in  2013, including those who had left active duty service within the last year,  indicated that SCRA-protected borrowers who were within the 1-year  protection period after leaving active duty service had a higher chance of  curing their delinquencies than did the institution’s other military  borrowers who had left active duty service. We found this effect despite  this being the same institution where we found that SCRA-eligible  borrowers were less likely to cure their mortgage delinquencies when still  on active duty (compared with non-SCRA-eligible borrowers).
Overall, the findings from our data analysis on delinquencies and cure  rates were consistent with our interviews and past work showing that the  first year after servicemembers leave active duty can be a time of  financial vulnerability. We previously reported that while the overall  unemployment rate for military veterans was comparable to that of non- veterans, the unemployment rate for veterans more recently separated  from the military was higher than for civilians and other veterans.
Additionally, representatives from the National Guard and Army Reserve  said that Guard and Reserve members may return to jobs in the civilian  sector that could be lower paying or less stable than their previous  military work. Based on a June 2012 DOD SOF survey of Reserve  component members, an estimated 40 percent of reservists considered  reemployment, returning to work, or financial stability as their biggest  concern about returning from their most recent activation or deployment.
As we reported in 2012, some financial institutions extended SCRA  protections beyond those stated in the act, as a result of identified SCRA  violations and investigations in 2011.  For example, three mortgage  servicers we included in this review noted that they had reduced the  interest rate charged on servicemembers’ mortgages to 4 percent—below  the 6 percent required in SCRA. Additionally, the National Mortgage  Settlement in February 2012 required five mortgage servicers to extend  foreclosure protections to any servicemember—regardless of whether  their mortgage was obtained prior to active duty status—who receives  Hostile Fire/Imminent Danger Pay or serving at a location more than 750  miles away from his or her home.meeting these conditions may not be foreclosed upon without a court  order. Two financial institutions we interviewed extended SCRA  foreclosure protections to all active duty servicemembers. One of the  financial institutions told us that they have made SCRA foreclosure  protections available to all active duty servicemembers for the loans that   As a result, any servicemember  they own and service (thus, about 16 percent of their mortgage portfolio  receives SCRA protection). However, officials at this institution said that  they were bound by investor guidelines for the loans they service for other  investors, such as Fannie Mae, the Department of Housing and Urban  Development, and private investors. The officials said that many of the  large investors have not revised their rules to extend SCRA protections;  as a result, the institution has been unable to extend SCRA protections to  all noneligible borrowers whose loans are owned by these entities.
None of the financial institutions we interviewed advocated for a change  in the length of time that servicemembers received SCRA protection.  Officials at one institution told us that they considered a 1-year period a  reasonable amount of time for servicemembers to gain financial stability  after leaving active duty and that they implemented the 1-year protection  period before it became law. One attorney we interviewed who has a  significant SCRA-related practice supported the extension of the SCRA  foreclosure protection to 1 year because the revised timeframe matches  the mortgage interest-rate protection period, which has remained at 1  year since 2008, when mortgages were added to the SCRA provision that  limits interest rates to 6-percent. In contrast, a representative of one of the military support organizations we interviewed noted that, based on his  interactions with servicemembers, the effect of extending the foreclosure  protection from 9 months to 1 year has been negligible, although he also  said that the extension was a positive development.
section_title: DOD and Various Partners Provide Financial Education, but Limited Information on Effectiveness of Efforts Exists
paragraphs: DOD has entered into partnerships with many federal agencies and  nonprofit organizations to help provide financial education to  servicemembers, but limited information on the effectiveness of these  efforts exists. Under SCRA, the Secretaries of the individual services and  the Secretary of Homeland Security have the primary responsibility for  ensuring that servicemembers receive information on SCRA rights and  protections.  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.  DOD also has entered into partnerships with many other federal agencies  and nonprofit organizations to help provide financial education to  servicemembers. These efforts include promoting awareness of personal  finances, helping servicemembers and their families increase savings and  reduce debt, and educating them about predatory lending practices. As  shown in fig. 1, the external partners that worked with DOD have included  financial regulators and nonprofit organizations.
According to DOD officials, these external partners primarily focus on  promoting general financial fitness and well-being as part of DOD’s   For example, partners including the  Financial Readiness Campaign.Consumer Federation of America, the Better Business Bureau Military  Line, and the Financial Industry Regulatory Authority’s Investor Education  Foundation provide financial education resources free of charge to  servicemembers. DOD and the Consumer Federation of America also  conduct the Military Saves Campaign every year, a social marketing  campaign to persuade, motivate, and encourage military families to save  money every month and to convince leaders and organizations to  aggressively promote automatic savings. DOD has partnerships with the  Department of the Treasury and the Federal Trade Commission to  address consumer awareness, identity theft, and insurance scams  targeted at servicemembers and their families.
In addition, DOD officials noted that some partners provide SCRA  outreach and support to servicemembers. For example, the Bureau of  Consumer Financial Protection has an Office of Servicemember Affairs  that provides SCRA outreach to servicemembers and mortgage servicers  responsible for complying with the act. This agency also works directly  with servicemembers by collecting consumer complaints against  depository institutions and coordinating those complaints with depository  institutions to get a response from them and, if necessary, appropriate  legal assistance offices. Similarly, nonprofit partners including the  National Military Family Association, the Association of Military Banks of  America, and the National Association of Federal Credit Unions provide  information on SCRA protections to their members. But DOD officials also  noted that partners are not required by DOD to provide SCRA education,  and that such education may represent a rather small component of the  partnership efforts.
DOD established its financial education partnerships by signing  memorandums of understanding (MOU) with the federal agencies and  nonprofit organizations engaged in its Financial Readiness Campaign.  The MOUs include the organizations’ pledges to support the efforts of  military personnel responsible for providing financial education and  financial counseling to servicemembers and their families as well as  additional responsibilities of the individual partners. According to the  program manager of DOD’s Financial Readiness Program (in the Office  of Family Policy, Children and Youth, which collaborates with the  partners), there are no formal expectations that any of the partners  provide education about SCRA protections. She noted that such a  requirement would not make sense for some partners, including those  that do not interact directly with servicemembers but instead provide  educational materials about financial well-being. The manager said that it  was important that all of DOD’s partners be aware of the SCRA  protections, and she planned to remind each of them about the SCRA  protections in an upcoming partners meeting.
The program manager noted that although her office has not conducted  any formal evaluations of the partnerships to determine how effective the  partners have been in fulfilling the educational responsibilities outlined in  their MOUs, she believes that they have functioned well. According to  personal financial managers in the individual services (who work with the  personal financial advisors who provide financial education to  servicemembers at military installations) and representatives from a  military association, the education partnerships have been working well  overall. But they also told us that obtaining additional information about  the educational resources available through the partnerships and their  performance would be helpful. For example, one association noted that it  could benefit from a central website to serve as a clearinghouse for  educational information from the various financial education partners.  Staff from another organization said that DOD should regularly review all  of these partners to ensure they were fulfilling their responsibilities. DOD  officials told us they would likely discuss these suggestions at upcoming  meetings with their financial education partners.
The program manager of the Personal Financial Readiness Program also  noted that to manage the partnerships, she regularly communicates with  the partners to stay informed of their activities. In addition, she said that  the Office of Family Policy, Children and Youth has been encouraging  individual installation commanders to enter into agreements with local  nonprofit organizations. The local partners would provide education  assistance more tailored to servicemembers’ situations than the more  global information the DOD partners provided.
As we noted in our 2012 report, DOD has surveyed servicemembers on  whether they had received training on SCRA protections, but had not  assessed the effectiveness of its educational methods. To assess  servicemembers’ awareness of SCRA protections, in 2008 DOD asked in  its SOF surveys if active duty servicemembers and members of the  Reserve components had received SCRA training. Forty-seven percent of  members of the Reserve components—including those activated in  2008—reported that they had received SCRA training and 35 percent of  regular active duty servicemembers reported that they had received  training. Without an assessment of the effectiveness of its educational  methods (for example, by using focus groups of servicemembers or  results of testing to reinforce retention of SCRA information), we noted  that DOD might not be able to ensure it reached servicemembers in the  most effective manner. We recommended that DOD assess the  effectiveness of its efforts to educate servicemembers on SCRA and  determine better ways for making servicemembers aware of their SCRA  rights and benefits, including improving the ways in which reservists  obtain such information.
In response to our recommendation, as of December 2013, DOD was  reviewing the results of its recent surveys on the overall financial well- being of military families. The surveys have been administered to three  groups: servicemembers, military financial counselors, and military legal  assistance attorneys. While the surveys are not focused solely on SCRA,  they take into account all financial products, including mortgages and  student loans, covered by SCRA. DOD officials explained that they would  use the results, including any recommendations from legal assistance  attorneys, to adjust training and education on SCRA benefits, should such  issues be identified. Our findings for this report—that many  servicemembers appeared not to have taken advantage of their ability to  reduce their mortgage interest rates as entitled—appear to reaffirm that  DOD’s SCRA education efforts could be improved and that an  assessment of the effectiveness of these efforts is still warranted.
section_title: Agency Comments
paragraphs: We provided a draft of this report to the Department of Defense, the  Board of Governors of the Federal Reserve System, the Office of the  Comptroller of the Currency, and the Bureau of Consumer Financial  Protection for comment. The Department of Defense and the Office of the  Comptroller of the Currency provided technical comments that were  incorporated, as appropriate.
We are sending copies of this report to interested congressional  committees. We will also send copies to the Chairman of the Board of  Governors of the Federal Reserve System, the Secretary of Defense, the  Comptroller of the Currency, and the Director of the Consumer Financial  Protection Bureau. In addition, this report will be available at no charge on  the GAO web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or EvansL@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 key contributions to this report  are listed in appendix II.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report examines (1) available information on changes in the financial  well-being of servicemembers who received foreclosure-prevention and  mortgage-related interest rate protections under SCRA, including the  extent to which servicemembers became delinquent on their mortgages  after leaving active duty and the impact of protection periods; and (2) the  Department of Defense’s (DOD) partnerships with public- and private- sector entities to provide financial education and counseling about SCRA  mortgage protections to servicemembers and views on the effectiveness  of these partnerships.
subsections: section_title: Information on Changes in the Financial Well-Being of Servicemembers with SCRA Protections
paragraphs: To assess changes in the financial well-being of servicemembers who  receive SCRA mortgage protections, including the extent to which  servicemembers became delinquent on their mortgages after leaving  active duty and the impact of protection periods, we analyzed legislation  and reviewed our prior work on SCRA. We obtained and analyzed loan- level data, institution-specific summary data, or both, from four financial  institutions (three large single-family mortgage servicers and a large  credit union). A fifth institution (a large single-family servicer) we  contacted was unable to provide us with data for inclusion in our review.  We did not identify financial institutions to protect the privacy of individual  borrower data. Table 2 provides a summary of the data we obtained.
We conducted a quantitative analysis of the data, which included  information on (1) loan history, including loan status and total fees; (2)  loan details such as the loan-to-value ratio and principal balance; and (3)  financial outcomes of borrowers, such as initial and updated credit scores  and whether the borrowers filed for bankruptcy or cured mortgage  defaults. After controlling for loan and demographic characteristics and  other factors to the extent that such data were available, we developed  logistic regression models to estimate the probability of different  populations becoming delinquent on their mortgage and curing their  mortgage delinquency (by bringing their payments current). The  estimates from these models may contain some degree of bias because  we could not control for economic or military operations changes, such as  changes in housing prices or force deployment that might affect a  servicemember’s ability to repay a mortgage.
Our analysis is not based on a representative sample of all  servicemembers eligible to receive SCRA mortgage protections and  therefore is not generalizable to the larger population. Moreover, we  identified a number of limitations in the data of the four financial  institutions. For example, the various servicer datasets identify SCRA  status imperfectly and capture activity over different time periods with  different periodicities. We also cannot rule out missing observations or  other inaccuracies. Other issues include conflicting data on SCRA  eligibility, data reliability issues related to the DOD database used to  identify servicemembers (which is operated by the Defense Manpower  Data Center, or DMDC), data quality differences across time within a  given servicer’s portfolio, and data artifacts that may skew the  delinquency statistics for at least one institution. Lastly, as servicer  systems vary across institutions, none of the servicers from which we  requested data provided us with every data field we requested for our  loan-level analysis. Due to the differences in the data provided by each  institution, we conducted a separate quantitative analysis of the data from  each institution that provided loan-level data. To the extent that data were  available, we also calculated summary statistics for each institution on the  changes in financial well-being of the servicemembers, which allowed for  some basis of comparison across institutions in levels of delinquency and  cure rates. To conduct as reliable analyses as the data allowed, we also  corrected apparent data errors, addressed inconsistencies, and  corroborated results with past work where possible. Through these  actions, and interviews with knowledgeable financial institution officials,  we determined that the mortgage data and our data analysis were  sufficiently reliable for the limited purposes of this report. However,  because some servicer practices related to SCRA have made it difficult to  distinguish SCRA-protected servicemembers from other military  personnel, the relative delinquency and cure rates we derived from these  data represent approximations, are not definitive, and should be  interpreted with caution.
Furthermore, we analyzed data from DOD’s Status of Forces (SOF)  surveys from 2007 to 2012, which are administered to a sample of active  duty servicemembers and reservists on a regular basis and cover topics  such as readiness and financial well-being. We determined the survey  data we used were sufficiently reliable for our purposes. We also  analyzed DOD data on the size of the active duty military population and  DOD survey data to estimate the percentage of servicemembers who  make payments on a mortgage and may be eligible for SCRA protections,  and the percentage of military borrowers that our sample of borrowers  from selected financial institutions covers.
Lastly, we also interviewed two lawyers with knowledge of SCRA, five  selected financial institutions, DOD officials (including those responsible  for individual military services, the Status of Forces Surveys, and a  database of active duty status of servicemembers), and representatives  of military associations and selected financial institutions to obtain  available information or reports on the impact of SCRA protections on the  long-term financial well-being of servicemembers and their families.
section_title: Information on DOD Partnerships
paragraphs: To examine the effectiveness of DOD’s partnerships, we analyzed  documentation on DOD’s partnerships with public and private entities that  provide financial education and counseling to servicemembers. For  example, we reviewed memorandums of understanding DOD signed with  the federal agencies and nonprofit organizations engaged in its Financial  Readiness Campaign. We reviewed the nature of such partnerships,  including information or efforts related to SCRA mortgage protections.
We also conducted interviews with DOD officials, including the program  manager of DOD’s Personal Financial Readiness Program and personal  financial managers in each of the individual military services; selected  DOD partners that provide SCRA-related education to servicemembers; a  military support association; and two lawyers with knowledge of SCRA.  We asked about how such partnerships provide SCRA mortgage  education and counseling and gathered views on and any assessments  of the partnerships’ effectiveness.
We conducted this performance audit from June 2013 to January 2014 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.
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Cody Goebel, Assistant Director;  James Ashley; Bethany Benitez; Kathleen Boggs; Abigail Brown; Rudy  Chatlos; Grant Mallie; Deena Richart; Barbara Roesmann; and Jena  Sinkfield made key contributions to this report.