Foreclosure - Help for Servicemembers under SCRA
Note: This summary is based primarily on information posted by HUD but updated to reflect recent legislative changes. It explains protections you may have under the Servicemembers Civil Relief Act [SCRA, or "the Act"].
Who Is Eligible?
The SCRA protections apply to active duty military personnel who had a mortgage obligation prior to enlistment or prior to being ordered to active duty. This includes:
- members of the Army, Navy, Marine Corps, Air Force, Coast Guard;
- commissioned officers of the Public Health Service and the National Oceanic and Atmospheric Administration who are engaged in active service;
- reservists ordered to report for military service;
- persons ordered to report for induction under the Military Selective Service Act; and
- guardsmen called to active service for more than 30 consecutive days.
In limited situations, dependents of servicemembers are also entitled to protections.
Am I Entitled to Debt Payment Relief?
The Act limits the interest that may be charged on mortgages incurred by a servicemember (including debts incurred jointly with a spouse) before he or she entered into active military service. Mortgage lenders must, at your request, reduce the interest rate to no more than six percent per year during the period of active military service and recalculate your payments to reflect the lower rate. This provision applies to both conventional and government-insured mortgages.
Additionally, in a mortgage foreclosure proceeding, the SCRA generally provides the servicemember with three types of relief:
- a stay of the proceedings, or an extension of the maturity date, along with diminished monthly payments;
- where foreclosure judgment has already been ordered, a reopening or setting aside fo the judgment in order to assert a defense; and
- where a sale has taken place under a judgment of foreclosure, the statutory redemption period may be extended by a period equal to the servicemember’s period of military service. This means the time during which you can reclaim your home by paying back the full amount of the mortgage loan, plus legal costs and fees.
Is the Interest Rate Limitation Automatic?
No. To request this temporary interest rate reduction, you must submit a written request to your mortgage lender and include a copy of your military orders. The request may be submitted as soon as the orders are issued but must be provided to a mortgage lender no later than 180 days after the date of your release from active duty military service. View or draft a sample letter here.
Note that the interest rate reduction is effective not on the date of notice, but retroactive to the servicemember’s date of entry on active duty. So, for example, if a servicemember learns after three years of military service that he or she is entitled to the six percent interest cap, the lender must recalculate the amount due from the member’s date of entry on active duty and credit the servicemember with any interest overpayments for the preceding three years.
Am I Eligible Even if I Can Afford to Pay My Mortgage at a Higher Interest Rate?
If a mortgage lender believes that military service has not affected your ability to repay your mortgage, they have the right to ask a court to grant relief from the interest rate reduction. This is not very common.
What if I Can't Afford to Pay My Mortgage Even at the Lower Rate?
Your mortgage lender may allow you to stop paying the principal amount due on your loan during the period of active duty service. Lenders are not required to do this but they generally try to work with servicemembers to keep them in their homes. You will still owe this amount but will not have to repay it until after you complete your active duty service.
Additionally, most lenders have other programs to assist borrowers who cannot make their mortgage payments. If you or your spouse find yourself in this position at any time before or after active duty service, contact your lender immediately and ask about "loss mitigation options."
Borrowers with FHA insured loans who are having difficulty making mortgage payments may also be eligible for special forbearance and other loss mitigation options. More information about help for homeowners who are unable to make payments on a mortgage is available on the HUD website.
Also, more and more loan servicers are participating in the federal Making Home Affordable Program. The goal is to help eligible homeowners achieve an affordable monthly payment, in order to avoid foreclosure. Go here for details.
Finally, the SCRA allows a servicemember to petition a court for “anticipatory relief” to stay enforcement of a real estate contract during the servicemember’s period of military service and to seek other terms as the court deems equitable. A servicemember may also seek “anticipatory relief” to request that a court restructure or stay the enforcement of other contracts, liability, tax or assessments.
What Information Do I Need to Provide to my Lender?
When you or your representative contact your mortgage lender, you should provide the following information:
- Notice that you have been called to active duty;
- A copy of the orders from the military notifying you of your activation;
- Your FHA case number; and
- Evidence that the debt precedes your activation date.
HUD has reminded FHA lenders of their obligation to follow the Act. If notified that a borrower is on active military duty, the FHA lender must:
- advise the borrower or representative of the adjusted amount due,
- provide adjusted coupons or billings, and
- ensure that the adjusted payments are not returned as insufficient payments.
Will my Payments Change Later? Will I Need to Pay Back the Difference at a Later Date?
The change in interest rate is not a subsidy. Interest in excess of 6 percent per year that would otherwise have been charged on a mortgage is forgiven. However, the reduction in the interest rate and monthly payment amount applies only during the period of active duty plus one year following release from active duty. Once the period of active military service ends, the interest rate will revert back to the original interest rate, and the payment will be recalculated accordingly.
How about Benefits Other than Interest Rate Reductions? Does the Period Begin and End with my Tour of Duty?
Other benefits, such as postponement of monthly principal payments on the loan and restrictions on foreclosure may begin immediately upon assignment to active military service and end on the third month following the term of active duty assignment
Am I protected against foreclosure during active duty, or after I come back from active duty?
Yes. Until December 31, 2016, mortgage lenders may not foreclose, or seize property for a failure to pay a mortgage debt, while a servicemember is on active duty or within 9 months after the period of military service unless they have the approval of a court. This is true even in States that do not require Court action for other kinds of foreclosure proceedings. In a court proceeding, the lender would be required to show that the servicemember's ability to repay the debt was not affected by his or her military service.
The Court has discretion to stay a foreclosure proceeding “for a period of time as justice and equity requires” or to “adjust the obligation to preserve the interests of all parties.”
What Happens if my House is Sold or Foreclosured upon Without my Agreement Under the SCRA prior to December 31, 2016?
Under the" Honoring America’s Veterans and Caring for Camp Lejeune Families Act of 2012," the sale, foreclosure, or seizure of property shall not be valid if it was made during, or within one year after the period of the servicemember's military service, except upon a court order granted before such sale, foreclosure, or seizure.
You have important legal rights if your home is taken without your agreement through sale, foreclosure or seizure before the law expires. The law provides you with the right to seek money damages and to ask that the person who violated the law be imprisoned or fined.
If this happens to you, seek legal help immediately. A new law gives you a "private right of action" to enforce SCRA protections, which means that your attorney may be able to recover fees from the opposing side without needing you to pay for their legal work. For more information about that provision, click here.
Oct. 17, 1940, ch 888, Title III, § 303, as added Dec. 19, 2003, P.L. 108-189, § 1, 117 Stat. 2847; July 30, 2008, P.L. 110-289, Div B, Title II, § 2203(a), 122 Stat. 2849; also 50 USC App and §591 §§521, 526 & 591 and §527 (2008 amendment); also PL 111-275, 124 Stat 2864. Extension of foreclosure protections: PL 111-346, 124 Stat.3622.
On August 6, 2012, the Honoring America’s Veterans and Caring for Camp Lejeune Families Act of 2012 was signed into law, Pub. L. 112-154, 126 Stat. 1165 (2012). Section 710 of the act amended section 303 of the Servicemembers Civil Relief Act (SCRA), 50 USC app. 533. The Foreclosure Relief and Extension for Servicemembers Act of 2015 (Pub. L. 114-142) amended this language to extend the protections by one year until December 31, 2016.
Updated April 2016