The Servicemembers Civil Relief Act (SCRA) is a federal law that provides a range of civil and financial protections for active duty military members. SCRA safeguards cover everything from mortgage interest rates and foreclosure to car and rental leases and income tax payment.
The SCRA is basically 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 doesn’t cover retired military members, Reserve or Guard members not on active duty or National Guard members activated under state orders.
Military homeowners have access to several key safeguards under the SCRA. Let’s take a closer look.
Two of the biggest mortgage protections cover interest rates and foreclosure.
For eligible borrowers, the SCRA caps interest rates for mortgages (along with car loans, credit cards and other debts) at 6 percent during the term of service and for one year after. Homeowners may need to show that their military service has “materially affected” their finances in order to secure this protection.
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.
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.
When it comes to mortgage protections, one of the keys is that the loan needs to predate enlistment or the period of active duty service. The service member would also need to be either the borrower or the co-borrower on the loan (or to have assumed the loan).
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, 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.