The Servicemembers Civil Relief Act (SCRA) is a federal law that provides certain legal protections to members of the military who are on active duty. The provisions of the law covering mortgages and foreclosure are often of particular interest to servicemembers.
Most of the SCRA protections regarding mortgages and foreclosure help out military servicemembers who took out mortgage loans before going on active duty. Though, military servicemembers who took out mortgage loans after starting active duty get protection as well. Read on to learn who’s covered by the SCRA and how this law might be able to help you if you're having trouble paying your mortgage or you're facing a foreclosure.
The SCRA applies to:
- active duty servicemembers (Air Force, Army, Marines, Navy, or Coast Guard), including reservists who are on active duty
- commissioned officers of the Public Health Service or the National Oceanic and Atmospheric Administration, and
- members of the National Guard under a call to active service authorized by the President or the Secretary of Defense for a period of more than 30 consecutive days for purposes of responding to a national emergency declared by the President and supported by federal funds.
A servicemember is also covered by the SCRA for any period of time when absent from duty because of sickness, wounds, leave, or another lawful cause. In some situations, dependents of servicemembers are also entitled to protections under the law.
The SCRA does not apply to Reserve or National Guard members not on active duty, retired military personnel, nor National Guard troops called to duty under state orders. Though, some states, like California, provide protections similar to the SCRA for National Guard members and reservists called up to active duty under state orders.
Lowering Your Mortgage Interest Rate
Under the SCRA, a creditor must lower the interest rate on a mortgage or other debt—like a car loan or credit card— to 6% if the servicemember incurred the debt before going on active duty. The reduction must stay in effect while the servicemember is on active duty and for one year afterwards. In addition, the creditor has to refund any amounts of interest over 6% that the servicemember previously paid while on active duty.
A creditor can fight the interest-rate reduction in court if the creditor thinks that military service hasn't materially affected the servicemember’s ability to pay the interest on the loan. (Generally, though, in order to show that you can’t afford the higher rate, you simply must show you’re making less income than before going on active duty.)
Nonjudicial Foreclosures Generally Aren’t Allowed
One significant protection for military families is that, in most cases, the SCRA requires a lender to file a lawsuit and get a court to sign off on a foreclosure before selling a servicemember's home at a foreclosure sale. Basically, lenders have to foreclose judicially, rather than nonjudicially, when it comes to active-duty servicemembers.
This protection applies to servicemembers who take out a mortgage before military service.
Under the SCRA, if a servicemember takes out a mortgage before military service and the lender forecloses nonjudicially while the servicemember is on active duty—or within one year afterwards—the sale is invalid. (However, if the servicemember signs a waiver, the foreclosure is valid.)
Delaying a Judicial Foreclosure
A servicemember can sometimes get a delay (called a “stay”) of 90 days or more in a judicial foreclosure action. The servicemember must meet certain criteria and request the stay from the court in writing. This protection applies to any civil action or proceeding, including foreclosure, and it doesn’t matter when the servicemember took out the mortgage loan being foreclosed.
To apply for a stay of foreclosure, a servicemember’s application to the court must include:
- a letter or other communication explaining why the servicemember’s current military duty requirements materially affects the servicemember’s ability to appear in court, as well as give a date when the servicemember is available to appear, and
- a letter or other communication from the servicemember’s commanding officer stating that the servicemember’s current military duty prevents a court appearance and that military leave is not authorized for the servicemember at the time of the letter.
A court will usually allow a lender to go ahead with a foreclosure when a borrower's military status hasn’t materially affected the servicemember’s ability to pay the loan or appear in court.
Example. Suppose Joe is a newly activated reservist whose income level has not dropped. He falls behind in his mortgage payments and the lender starts a judicial foreclosure. With the help of his local military legal assistance office, Joe submits an application to the court for a stay of proceedings. Because Joe is posted to a nearby city and can obtain leave to attend court, the court decides that Joe doesn’t qualify for a postponement of foreclosure.
Many protections under the SCRA—like a reduced interest rate or a stay of court proceedings—aren’t automatic, which means a servicemember must request the protection. The manner in which you must invoke a protection, how long you get to invoke that protection, and what you must do to demonstrate that you qualify for a particular protection under the SCRA varies. To get help invoking your rights under the SCRA, consider talking to a HUD-approved foreclosure counselor, a foreclosure attorney, or a military legal assistance office. (Go to the Department of Defense military installations directory to find a legal assistance office near you.)
Also, if you are facing foreclosure at any time during or after active military duty, contact your mortgage servicer (the company you make your payments to) immediately and ask about foreclosure avoidance options. Most lenders offer various options to borrowers who cannot make their mortgage payments, like mortgage modifications, forbearance agreements, and repayment plans.