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

Letter

Background

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.

Limited Data Suggest SCRA Benefits Some Servicemembers but Impact of Protection Periods Unknown

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.

Actual Number of Servicemembers Eligible for SCRA Mortgage Protections Unknown

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.

SCRA-Protected Borrowers Generally Had Higher Rates of Mortgage Delinquency, with Protections Appearing to Benefit Some Servicemembers

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.

Available Data Are Insufficient to Assess Different Protection Periods, but Mortgage Delinquencies Appeared to Increase after Active Duty

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.

DOD and Various Partners Provide Financial Education, but Limited Information on Effectiveness of Efforts Exists

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.

Agency Comments

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.

Appendix I: Objectives, Scope, and Methodology

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.

Information on Changes in the Financial Well-Being of Servicemembers with SCRA Protections

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.

Information on DOD Partnerships

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.

Appendix II: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

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.