RE: "Mortgage and Foreclosure Rights of Servicemembers Under the
Servicemembers Civil Relief Act". The mortgagee letter was posted 11/20/06 and requires a new disclosure to be sent on "all mortgage loans, including conventional mortgages and mortgages insured by HUD" when the homeowner is in default [30-45 days]on a residential mortgage. From what I read, that is the extent of the instructions, so will someone please clarify the following for me:

#1 - this covers only the consumer's principal residence?
#2 - applies to First and subordinate liens?
#3 - definitely for a consumer purpose, but would it also cover a commercial purpose?

BOL has a webinar on Jan 12th covering the new John Warner servicemen legislation which I plan to attend, but I have just seen this new disclosure and would like to put it into effect before then. Thanks for your assistance.

"The notice must: Be sent to all homeowners who are in default on a residential mortgage." It seems to me that those instructions indicate

1. doesn't have to be principal residence; just has to be a 1-4 family dwelling
2. lien position is not addressed; could be first, second, etc.
3. purpose of loan is not at issue; if the mortgage is a residential mortgage, notification must be given

Thank you, Steve. It just seems odd that we have to send this to ALL homeowners when the notice itself provides information only for servicemembers and their dependants. But, now I can move on and get this installed........

I thought it was a bit of regulatory overkill myself. However, I guess the thinking was that lenders may not know who is affected by this, so send the notice to everyone.

Do you have all your accounts identified whether they are servicemembers or a servicemember's dependent? If not then how do you know the person you're sending the letter to is not a servicemember or a dependent that may have not notified you under the SCRA, or may not know their rights as a dependent?

in fact, dan, much of the burden under SCRA is on the affected parties. the obligations of the FI are to provide notice and to follow the rules if the consumer seeks protection under the act. in other words, it may be difficult to have anything in place to even be able to have such a database/identification procedure.

My point exactly. Therefore the person the notice is sent to could very well be a servicemember or a dependent and the bank would have no knowledge of it.

Following your theory to send it to all mortgage customers because we don't know if they are covered - Does this mean we should lower the rate on all loans, because we don't know whether the customer is in the service? I think common sense would tell you that it applies only to those in the service. If it is easier to send to everyone, fine.

I wanted to bring an issue back up that I just noticed regarding the original HUD notice -

In a BOL article "Homeownership Counseling Requirement Revived", it states that the type of loan covered is as follows:
"The requirement pertains to a home loan secured by property that is the principal residence of the homeowner...."

In an OCC Bulletin (2003-29) "Homeownership Counseling Examination Procedures", it states the following:
"A homeowner must be given homeownership counsleing notification if:
The home loan is secured by the homeowner's principal residence....."

However, after a second look of the Code (12USC1701x), I believe ANY loan secured by a mortgage or lien on residential property applies, not just those that are "primary residence". And this would be the same for the new SCRA requirements.

Has anyone else noticed this?

The notice advises the recipient that, if he or she is a servicemember on active duty or active service, or the dependent thereof, he or she may request relief under SCRA. Only if a mortgagor requests relief, and gives proof of eligibility, would the lender reduce the rate.

i am not 100% positive BUT, i think the protections of SCRA are "activated" when the consumer seeks relief.

The bank has no obligation to lower the rate until the servicemember notifies the bank they want to exercise their rights under the SCRA. So that theory has nothing to do with sending the notice.

I thought by reading the HUD letter, the notice of servicemember rights letter is required for "FHA or HUD mortgages".

I don't think all of our mortgage loans are insured by HUD. I might be wrong...

In the mortgagee letter, in the first paragraph under the heading "Servicemembers Civil Relief Act Notice", you will find this sentence: All mortgage loans, including conventional mortgages and mortgages insured by HUD are subject to the notification requirement that became effective June 5, 2006. [italics mine]

SHOPGIRL mentions the "Homeownership Counseling Requirement" and I now have a question regarding that. Mortgagee Letter 2006-28 also states that the content of this notice was AMENDED on January 6, 2006. Can someone supply me with this NEW WORDING? Did it drop 'principal residence' so it would be in line with the new disclosure?

I totally missed the amended Notification and also any broadcast about this new disclosure. How can I PREVENT THIS in the future? I review FDIC's (my reg agency) and FTC's websites each morning and never saw either mentioned. If it wasn't for BOL, I'd still be in the dark. I am a community bank and we don't do HUD-back loans. Any suggested website will be appreciated.

RE: Shopgirl's question:

The Code [12 U.S.C. 1701x(c)] has been updated to INCLUDE the new SCRA notice requirement, see "(IV)", so any reference to 'principal' residence appears to have been eliminated because it no longer applies. That's the way I see it. So it seems that the counseling and now the new notice go to the same customers - residential mortgages (1-4 units, any lien position, consumer and commercial)

That's what I focused my reading on - insured by HUD. (I added the color for emphasis)

BLPage.....I have the code section that I had printed for this requirement back in 2002. I do not see any reference in the code at that time to require the notice for only principal residences......so I don't think that it is a change with the new SCRA requirements. I think that the Code has always been that way (Maybe I'm wrong about that). That is exactly why I was questioning the fact that a BOL ariticle and the OCC Bulletin had the notice being required for principal residence only.

Any others have any input here?

I am locking this thread and diverting discussion to another on the same topic, here in the SCRA forum.