Americans respect our men and women in uniform and appreciate their many sacrifices. More than 6,200 American service members have died in Iraq and Afghanistan; many more have suffered life-altering injuries, and all missed important family moments while deployed.
Yet when our troops return home from Iraq and Afghanistan, they are more vulnerable than other consumers to abusive financial practices.
Service members have often been targeted for predatory mortgages and face financial hardship through declining home values. Service members who owe more on their mortgage than their home is worth are stuck when they receive Permanent Change of Station orders. Since their house is underwater, they can't sell it and pay off the mortgage. They often can't rent their home for enough to cover its inflated mortgage payments. But they also can't refinance at a lower rate, because the home is no longer their principal residence.
More than 20,000 service members lost their homes to foreclosure in 2010. They're told that they don't qualify for a loan modification or even a short sale unless they're delinquent on their mortgage payments. But if they are delinquent, there's no guarantee that the bank will modify their mortgage rather than foreclose.
Service members' second biggest source of stress is their personal finances, according to a Defense Department survey, behind only career concerns. They worry more about their finances than about being deployed to combat zones. Financial strains have forced many to lose their security clearance -- destroying their military careers.
Fortunately, the law protects our service members' legal rights while in harm's way. The Servicemembers Civil Relief Act exists so that service members can devote all their attention to their military service, rather than worry about losing their homes while taking enemy fire.
This law requires that service members receive actual notice of a foreclosure proceeding and have the chance to defend themselves -- rather than come home from Iraq or Afghanistan to learn that they've lost their homes.
Yet the biggest banks appear to have routinely ignored the law. The Office of the Comptroller of the Currency, the regulator for the biggest banks, last year ordered "independent" reviews of foreclosures by 10 major banks. Though it let the banks pick their own reviewers.
The reviews found almost 5,000 foreclosures on active-duty service members in possible violation of the SCRA. Critics think the continuing reviews are too lenient -- and that the banks foreclosed on many more of our troops, in violation of the act.
Bank spokesmen regularly assert that if any service member can show that he or she was harmed by a foreclosure, the financial institutions might consider some compensation. But most of these service members would have been foreclosed on anyway, the banks argue, so proper legal procedures -- like postponing the process until they were no longer in a war zone -- wouldn't have helped them. No harm, no foul.
Our service members deserve better.
The recent mortgage foreclosure settlement includes compensation for any service member wrongfully foreclosed on; relief for redeployed service members with underwater mortgages on homes near their former post and some protections for service members facing foreclosure that expand on the protections of SCRA.
That's a start, but it's not enough. The new Consumer Financial Protection Bureau should adopt tough rules to protect vulnerable military men and women from predatory lending practices and aggressively enforce those rules.
Meanwhile, bank regulators should not be eager to settle future claims for SCRA violations for modest fines, artificial expressions of contrition and promises to sin no more. Regulators -- and prosecutors -- should vigorously investigate SCRA violations and seek penalties that can provide a strong deterrent to violating our service members' rights in the future.
No service member answering the call to duty should have to return home to find his or her home irrevocably gone with no way to recover it. That's scarcely a thank-you for your service -- but showing real respect for their legal rights is a start.