Servicemembers Civil Relief Act SCRA Common Questions
Below is a MRR and PLR article in category Finance -> subcategory Mortgage.
Servicemembers Civil Relief Act (SCRA) Explained: Common Questions
Overview:
The Servicemembers Civil Relief Act (SCRA) provides vital protections and benefits to active military personnel, reservists, guardsmen, and their dependents. It covers areas like mortgage relief and protection from foreclosure, ensuring financial security during active service. Here's a concise guide to common questions about SCRA.
Who is Eligible for SCRA?
The SCRA applies to those on active duty who had mortgage obligations before enlistment or have been ordered to active service. Eligible members include:
- Army, Navy, Marine Corps, Air Force, Coast Guard
- Commissioned officers of the Public Health Service and NOAA
- Reservists and inductees under the Military Selective Service Act
- Guardsmen on active service for over 30 days
Dependents may also receive protections in specific situations.
Debt Payment Relief:
Under SCRA, the interest on pre-service mortgage debts is capped at 6% during active duty. Both conventional and government-insured mortgages qualify. To access this benefit, a written request with military orders must be submitted to the lender within 180 days of release from active duty.
Is the Interest Rate Cap Automatic?
No, you must actively request the reduction by providing your lender with a written request and your military orders.
What if I Can’t Afford My Mortgage?
If you are struggling even at the reduced rate, lenders may allow you to defer principal payments until after active duty, though this isn't mandatory. They often work with servicemembers to keep them in their homes. For those with FHA loans, special forbearance and loss mitigation options may be available.
Foreclosure Protection:
Lenders are prohibited from foreclosing during active duty and for 90 days post-service without court approval. They must prove in court that military service hasn’t impacted your ability to repay.
Required Information for Lenders:
When contacting your lender, provide:
- Notice of active duty
- Military activation orders
- FHA case number (if applicable)
- Proof that the debt predates activation
FHA lenders are reminded to comply with SCRA and notify borrowers of adjusted payment amounts.
Will My Payments Change Later?
The interest reduction is not a subsidy?"it's forgiveness of interest over 6%. Once active duty ends, the rate returns to normal, and payments are adjusted accordingly.
Duration of Benefits:
Interest rate reductions apply only during active duty. Other benefits, like postponed payments and foreclosure restrictions, begin immediately with active duty assignment and extend three months after it ends.
More Information:
For additional information on SCRA protections or assistance, servicemembers can contact their unit judge advocate or installation legal assistance officer. Dependents can also visit local military legal assistance offices. Find more resources at [Legal Assistance Locator](https://www.legalassistance.law.af.mil/content/locator.php).
You can find the original non-AI version of this article here: Servicemembers Civil Relief Act SCRA Common Questions.
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