Although the foreclosure problem in the United States has receded from the crisis levels it reached during the recession, thousands of homes across the county still are foreclosed every year. At times, the many changes and income fluctuations involved in a military lifestyle can endanger service members’ ability to pay their mortgages. Fortunately, the government, loan providers, and the military have worked together to create protections from foreclosure especially intended for those who serve. One such protection is folded into the SCRA, or Servicemembers Civil Relief Act.
What is the SCRA?
The SCRA actually protects service members in a variety of situations. Its purpose is to help those on active duty who may have a hard time meeting financial or legal obligations due to absence or changes in income. In addition to protecting against foreclosure, the SCRA also can lock in low interest rates, delay court judgments, and allow service members a penalty-free exit from loans and contracts, such as a lease or cell phone plan. Service members’ dependents may also be eligible for protections under the SCRA.
What are the Options if a Service Member is Behind on House Payments?
The options in this situation may be affected by the service member’s location. In general, however, this part of the SCRA may be able to delay foreclosure proceedings while members are on active duty and immediately afterwards. Some protections apply whether the service member took out the loan before or after going on active duty. (Note: the SCRA also applies to those who are absent from active duty due to injury or leave.) However, the protections for these two categories are somewhat different, with more offered for those who took out the loan pre-service.
If the service member bought the home before starting active duty
Under the terms of the SCRA, if a service member acquired the mortgage before beginning active duty, the home cannot be foreclosed or seized during active duty or one year after duty completes. The exceptions are if a court issues an order for the foreclosure (a judicial foreclosure) or the lender obtains a waiver from the service member permitting the foreclosure. It’s important to know that as of Jan 1, 2018, the one-year period is scheduled to be reduced to 90 days. However, Congress might alter this, so stay tuned.
Also, be aware that a lender can still ask to foreclose if the bank can prove that the service member’s financial status or ability to come to a court date has not been negatively affected by active duty (for instance, in the case of a reservist whose pay has not been affected by service).
If the service member bought the home after starting active duty
This situation is a little more complicated, but service members are often still protected against a default judgment (one ordered because of failure to appear or take action) being ordered against them, and can contest one if it is entered. The exact protection will depend on the state of residence and whether it has judicial (in court) or nonjudicial (out of court) foreclosures.
SCRA protections are not automatic and must be requested. To be protected, the service member must demonstrate that service had a “material effect” on their ability to pay or attend proceedings. Usually, protection must be requested during active duty or soon afterwards.
To use the protections of the SCRA, members first need to contact the nearest Armed Forces Legal Assistance Program office. To find this office, visit this link.
If a service member is having difficulty paying his or her mortgage, there are many options, such as loan modification (changing the terms of the loan), forbearance (short-term suspension of mortgage payments), refinancing, or a repayment plan. Look for a future post on these options soon.
Carol Church will be writing blog posts for the Personal Finance concentration area, focusing on financial topics of interest to service members and personal finance managers and educators working with service members. Ms. Church is the supervising writer and editor for Family Album, a University of Florida blog. She has been working as a science writer and editor for more than ten years, and has received numerous awards and honors for her work. She was previously employed as an editor in the University of Florida’s Department of Family, Youth and Community Sciences, where she worked with UF’s EDIS publication system to create user-friendly electronic documents on a wide variety of family-related subjects. Ms. Church lives in Gainesville, Florida with her husband and their two children, ages seven and eleven.