Can I Foreclose on a Servicemember?

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.

What is the Servicemembers Civil Relief Act?

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:

• Interest rate limitation to a maximum of 6 percent. The interest rate on any loan or incurred debt, such as a mortgage loan or credit card debt, will be reduced to a maximum of 6 percent annually. This protection applies during the service member’s active duty period until an additional year after the end of active duty service.
• Protection against default judgments in civil cases. Suppose a military member on active duty is sued in a civil case. In that case, the court may not enter a default judgment until it appoints an attorney for that person rendering military service. The court must also permit a delay of proceedings for at least 90 days if certain conditions are met.
• Protection against foreclosure proceedings. If a military service member took out a mortgage loan before active service, they can’t be foreclosed without a court order. This protection applies while that person is on active duty until a year after the active duty period is finished.
• Protection against property repossession. The SCRA stipulates that creditors are prohibited from repossessing an active duty member’s property without a court order.
• Termination of lease without penalty. Active duty members are allowed to terminate their resident lease without paying a penalty. This is granted that the service member received deployment orders of at least 90 days.

SCRA Foreclosure Rules

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.

Who is eligible for SCRA protections?

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.

How Can An Active Duty Member Activate SCRA Foreclosure Protection?

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:

1. Gather all necessary documents. You need a copy of active duty orders from the military branch, which a service member can obtain from their military base.
2. Write a letter to the affected institution. The service member should prepare a written notice for the person or institution required to honor that person’s rights. A verbal notice isn’t enough for the SCRA right to be activated.
3. Provide proof of active duty status. In addition to the letter stating which SCRA benefits they’d like activated, the service member must present evidence that they’re on active duty. This can be easily obtained from one’s military branch. However, they can also request a letter from their commanding officer as a substitute.

How Can Businesses Remain Compliant With SCRA?

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:

1. Determine if a person is on active duty. The SCRA covers service members who are on active duty. A creditor or lender must ensure the person they’re dealing with is eligible for SCRA protections. We can help verify one’s military status. Click here to verify a service member’s status.
2. Confirm the SCRA benefit. Not all businesses are familiar with the SCRA, but non-compliance can be expensive. Fortunately, legitimate information on laws like the SCRA is accessible online.
3. Grant the request. The business is mandated to follow the SCRA.
4. Routinely check a person’s active duty status. SCRA protections don’t last forever, so from time to time, they should check if that person is still eligible for SCRA benefits.

Punishments for Non-Compliance with 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.

Military Affidavits and SCRA Foreclosures

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.

FAQs

What does SCRA mean in a mortgage?

The SCRA mandates that a person rendering military service can reduce their mortgage payments’ interest rate to a maximum of 6 percent annually.

What is the SCRA in banking?

The SCRA requires banks or other lenders to reduce a service member’s interest rate to a maximum of 6 percent.

Can you foreclose on active military?

You can only foreclose on active military if you have a court order or if that person waives their SCRA rights.

How long does SCRA protect service members from foreclosure?

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.

What happens to your mortgage when you join the military?

Your mortgage interest rate will be reduced to 6 percent once you’re on active duty.

SCRA provides foreclosure protection for how long?

SCRA foreclosure protections last until a year after one’s active duty period ends.

What is the SCRA mortgage interest rate?

The SCRA mandates that active-duty personnel are entitled to a reduction of up to a 6% interest rate.

Until when can you request a mortgage reduction?

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.