The Servicemembers Civil Relief Act (SCRA) is a federal law that provides a range of civil and financial protections for active duty military members. The SCRA provides mortgage rate protections that apply as long as the loan predates enlistment or the period of active duty service.
The SCRA is a new-and-improved version of the original Soldiers and Sailors Civil Relief Act passed in 1940. The 2003 update greatly expanded the original law, and Congress continues to make changes as needed.
Generally, SCRA protections cover both regular active duty military members and Guard and Reserve members who’ve been activated under federal orders. The SCRA's mortgage rate protections apply as long as the loan predates enlistment or the period of active duty service.
The SCRA does not cover retired military members, Reserve or Guard members, not on active duty, or National Guard members activated under state orders.
Two of the biggest mortgage protections cover interest rates and foreclosure. There are also lease and eviction safeguards.
The SCRA caps interest rates for mortgages (along with car loans, credit cards and other debts) at 6% for eligible service members and their spouses during the term of service and for one year after. Homeowners may need to show that their military service has "materially affected" their finances to secure this protection.
A key requirement for the 6% rate cap is that the loan needs to predate enlistment or the period of active duty service. The service member would need to be the borrower or the co-borrower on the loan or have assumed the loan.
The SCRA also prevents lenders and servicers from foreclosing on a military member's home during their period of service and for 12 months following their separation from the military. The 12-month grace period stems from an SCRA update that expires at the end of 2017. That window of protection will close after just 90 days unless Congress revises or amends the provision before the deadline.
The SCRA prevents service members and their families from being evicted because of failure to pay rent, so long as the monthly rent doesn't exceed $2,932.21. The property must be considered the residential home of the member and dependents as opposed to an extra property.
If an eviction notice is issued, spouses can submit an SCRA request to the court. Petitioners must show that the inability to pay is because of the service member's military duties. If approved, the court can postpone the eviction for three months. Service members can also terminate a lease if they receive deployment orders within 30 days of signing.
Service members deployed to a combat zone or a qualified hazardous zone can take advantage of a Special Deposit Program that allows a 10% interest rate on any money deposited while deployed.
With a power of attorney, a spouse can start allotment payments up to $10,000 and receive a rate that is one to 10 times higher than banks and credit unions. The money will remain in the high-interest account until the deployment ends but can be withdrawn if hard times arise.
Active duty borrowers who miss a mortgage payment or are otherwise behind on payments should contact their lender/servicer as soon as possible. Your next call can go directly to the VA loan program to ask them for help. That number is 1-877-827-3702.
Homeowners typically need to request mortgage relief from their lender or servicer under the SCRA. It's important to note that raising your hand to invoke your SCRA rights cannot negatively impact your credit score.
Generally, lenders and servicers can accept a range of documents to verify military orders and secure your SCRA benefits, including:
Contact your nearest military legal assistance office to learn more about SCRA eligibility and all the available civil and financial protections. A legal assistance office can also help explain how to best ask for any SCRA safeguards to which you might be entitled.
It's important to note that lenders and creditors don't always grant SCRA protections automatically. You may have to ask for them in writing in some cases, and it's important to know what protections might be out there.
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