Many lenders are concerned about SCRA foreclosures, and rightly so. A mistake in this realm could cost hundreds of thousands of dollars in fines and restitution.
When does the SCRA allow foreclosure, and when does it not?
An excellent law article addresses common misconceptions about the Servicemembers Civil Relief Act and the reporting of the DMDC.
SCRA foreclosures against servicemembers on active military duty are not always prohibited. Creditors must obtain a court order to move forward with a foreclosure on a servicemember who undertook the obligation before going on active duty (this article does not address requirements under the Military Lending Act, which may govern loans taken out after a servicemember enters active duty).
What are the SCRA foreclosure protection provisions? We’ll discuss what a landlord or business owner can do if they need to foreclose on an active-duty service member.
The Servicemembers Civil Relief Act (SCRA) is a federal law that provides financial and legal protections to military personnel and select members of the military community who render active duty military service. The SCRA was created to help active-duty military personnel focus on their duty to serve the nation.
The SCRA grants military personnel several protections, including the following:
When a person enters military service, it can affect the kind of SCRA protections they’re granted. Suppose a service member took out a mortgage before entering the military. In that case, they generally can’t be foreclosed on without a valid court order while on active duty and for an additional 12 months after leaving active duty. This protection applies whether or not that person told the mortgage lender or servicer about their active duty status.
The SCRA is unclear whether it is the servicemember’s job to inform creditors of their active-duty status or if the onus is on the creditor to determine military status.
However, the ambiguity of this law will not protect creditors in court. Many settlements between lenders and the Department of Justice shift the duty to the lenders to determine military status. Those lenders often engage the Servicemembers Civil Relief Act Centralized Verification Service to do single or SCRA batch verifications of borrowers in the lender’s database.
National Guardsmen and reservists, as well as cases involving dependents and family members of service members, are subject to a separate set of guidelines.
Creditors should review the particular SCRA state statute, its proscriptions, and permitted acts rather than assuming that active-duty service prevents all enforcement action automatically.
Servicemembers, on the other hand, should note that certain rights depend upon the servicemember invoking them and the timing of when a debt or obligation was incurred (before or after the active-duty start date). The SCRA does not cover certain obligations (e.g., those servicemembers undertook before active duty). Thus, a judicial foreclosure may proceed under certain circumstances when a non-judicial foreclosure might otherwise be barred.
While the SCRA may seem to imply that it only protects Armed Forces service members, the scope of SCRA protections extends beyond soldiers. Among the people eligible for SCRA protections include those from the Air Force, Army, Marine Corps, Navy, Coast Guard, Space Force, National Guard, and Reserve components, as well as commissioned officers of the Public Health Service and the National Oceanic and Atmospheric Administration.
The SCRA also covers dependents of active duty service members. Dependents cover military spouses and children of military members who are on active duty.
Unfortunately, no single form informs all creditors or relevant institutions of SCRA protections, including protection against foreclosure judgment. For a service member to activate their SCRA benefits, they must obtain the necessary documentation and present it to the affected creditor or institution.
Here’s a short guide for service members who intend to activate their SCRA foreclosure protection benefit:
What should a business owner do upon receiving an SCRA notice? Here are steps they can talk to ensure they remain compliant with the SCRA:
People or companies that don’t respect SCRA protections are subject to costly penalties. The Department of Justice can take action against those who don’t follow this law.
The first violation of the SCRA can cost an entity $55,000, while repeat violations will cost them $110,000.
Regardless, an SCRA foreclosure undergoes an added degree of judicial scrutiny. The military affidavit will have to be clear and persuasive. The court will require strict proof of compliance with the SCRA.
Depend on the SCRACVS for all your military status verifications. Our service is fast, accurate, and cost-effective, and it is essential when creditors don’t know the borrower’s Social Security number. In these instances, DMDC verifications come with a disclaimer saying the information in the certificate may not be relied upon.
We are also an excellent source of invaluable information for those doing business with military members. For instance, it’s important to stay aware of how long the prohibition of foreclosure lasts after termination of active duty. The allotted time has gone back and forth over the years, but it is currently one year. Trust SCRACVS to provide the most updated information to help you comply with the SCRA.
To verify an individual’s military status, log in to your account. If you haven’t registered, you can register to obtain your military status verification here.
The SCRA mandates that a person rendering military service can reduce their mortgage payments’ interest rate to a maximum of 6 percent annually.
The SCRA requires banks or other lenders to reduce a service member’s interest rate to a maximum of 6 percent.
You can only foreclose on active military if you have a court order or if that person waives their SCRA rights.
The SCRA protects service members from foreclosure while they’re on active duty. This period extends to a year after the active duty period ends.
Your mortgage interest rate will be reduced to 6 percent once you’re on active duty.
SCRA foreclosure protections last until a year after one’s active duty period ends.
The SCRA mandates that active-duty personnel are entitled to a reduction of up to a 6% interest rate.
A service member can send a request as soon as they receive deployment orders. However, the request must submitted to a mortgage lender no later than 180 days after the date of their release from active duty military service.
Attorney Roy Kaufmann serves as the Director of the Servicemembers Civil Relief Act Centralized Verification Service, located in Washington, D.C. As a recognized authority on the Servicemembers Civil Relief Act, Mr. Kaufmann has published hundreds of articles and hosted many webinars. His teachings help law firms and businesses to remain compliant with the SCRA rules and regulations so as to avoid costly fines.