Questions & Answers for Lenders Regarding the Servicemembers Civil Relief Act of 2003
See 50 USC 501 et seq. and Mortgagee Letter 2006-28.
HUD does not have jurisdiction over interpretation or enforcement of the SCRA (formerly known as the Soldiers' and Sailors' Civil Relief Act of 1940). As such, lenders are instructed to contact their legal counsel for more information about their legal obligations with respect to compliance with the Act. Official HUD policy with respect to servicing of FHA-insured mortgages in relation to the SCRA is found in HUD handbooks and FHA Mortgagee Letters. The following is therefore provided solely for informational purposes.
Are There SCRA Notification Requirements?
Yes, refer to Mortgagee Letter 2006-28 and see 50 USCA 527 for detailed instructions.
Who Is Eligible?
The provisions of the SCRA apply to active duty military personnel - 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; guardsmen called to active service for more than 30 consecutive days - who had a mortgage obligation prior to enlistment or induction for an initial tour of duty or prior to recall after a break in service when subsequently ordered to active duty. In limited situations, dependents of servicemembers are also entitled to protections.
Are Servicemembers Entitled to Debt Payment Relief?
The SCRA states that a debt incurred by a servicemember, or servicemember and spouse jointly, prior to entering military service shall not bear interest at a rate above 6 % during the period of military service and one year thereafter, in the case of an obligation or liability consisting of a mortgage, trust deed, or other security in the nature of a mortgage, or during the period of military service in the case of any other obligation or liability.
Is the Homeowner Protected Against Foreclosure?
The SCRA states that in a legal action to enforce a debt against real estate that is filed during, or within one year after the servicemember’s military service, a court may stop the proceedings for a period of time, or adjust the debt. In addition, the sale, foreclosure, or seizure of real estate shall not be valid if it occurs during or within one year after the servicemember’s military service unless the creditor has obtained a valid court order approving the sale, foreclosure, or seizure of the real estate. The one year after military service legal protection period is effective through December 31, 2015 under provisions of “The Foreclosure Relief and Extension for Servicemembers Act of 2014” enacted on December 18, 2014 (Public Law 113-286). If this SCRA provision is not amended or revised, the legal protection period will revert to 90 days after military service effective January 1, 2016.
Is This Relief Only Available for Borrowers with FHA-insured Mortgages?
No, the provisions of the SCRA apply to both conventional and government-insured mortgages.
Who Pays for This Relief?
It depends on how the mortgage was financed. In recent years, the majority of FHA-insured mortgages have been financed using Ginnie Mae mortgage-backed securities or state government issued bonds.
If the mortgage is in a Ginnie Mae pool, Ginnie Mae will reimburse the issuer for interest in excess of six percent for payments that are collected on eligible loans. Other security issuers and government bond issuers may have different policies. Mortgagees should seek advice from their legal counsel. Since the maximum allowable interest is six percent, a document other than the mortgage or note will be the determining factor.
HUD regulations authorize mortgagees to postpone or suspend foreclosure proceedings on FHA-insured mortgages to borrowers in active duty military service as defined in the SCRA. Under 24 CFR 203.346, the period during which the mortgagor is in military service shall be excluded in computing the period during which the mortgagee shall commence foreclosure or acquire the property by other means. Further, postponement or delay in prosecuting foreclosure proceedings during the period the mortgagor is in military service shall not be construed as a failure to exercise reasonable diligence. Thus, the mortgagee should not experience an interest curtailment due to foreclosure delay if an insurance claim is eventually filed with the Department. The reimbursed interest would be at the debenture rate.
What Must an Eligible Servicemember Do to Take Advantage of the Act?
In order to request interest rate relief on loans with interest rates above 6%, a servicemember or spouse must provide a written request to the lender, together with a copy of the servicemenber’s military orders. There is no requirement under the SCRA for a servicemember to provide a written notice or a copy of a servicemember’s military orders to the lender in connection with a foreclosure or other debt enforcement action against real estate. Lenders should inquire about the military status of a person by submitting an Active Duty Status request on the Department of Defense’s Defense Manpower Data Center’s website at www.dmdc.osd.mil/appj/scra/, contacting the servicemember, and examining their files for indicia of military service. See the top of this page for a link to Mortgagee Letter 2006-28.
Does the Act Apply to All Those on Active Duty?
Yes, all personnel on active military duty are eligible for interest rate relief on debt incurred by a servicemember, or servicemember and spouse jointly, prior to entering military service and legal protections against action to enforce a debt against real estate.
Does This Apply to Reservists and Guardsmen in the Process of Buying Homes?
The SCRA applies if the closing on the house occurs before the reservist or guardsman enters into active duty.
Are There Any Mortgage Considerations in the Event that an Eligible Servicemember is Killed?
The Act does not address this matter. For FHA-insured loans, however, lenders are required to work with the surviving family members to consider all applicable loss mitigation options to save the family home through a special forbearance plan, loan modification or partial claim, or avoid foreclosure through a Pre-foreclosure sale or deed-in-lieu of foreclosure.
How Can I Verify Whether a Borrower is in Active Military Service?
Lenders should submit an Active Duty Status request on the Department of Defense’s Defense Manpower Data Center’s website at www.dmdc.osd.mil/appj/scra/.
Where Can I Obtain Further Guidance?
HUD encourages lenders to seek advice from their legal counsel for further clarification.
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