Article Excerpt
Which US Service members are eligible for mortgage payment protections while deployed? What are you protected from? Learn about these important provisions.
The United States has the third-largest military in the world in terms of active-duty personnel. About 1.33 million people were serving on active duty as of 2021, including officers and enlisted personnel. When you add reservists and National Guard members, the total increases to more than 2.57 million people.
Military service members may be entitled to protections under federal law against foreclosure and other actions while they are away on deployment. Read on to learn more about how military service and mortgages work together.
» READ MORE: VA Loan’s Benefits and Eligibility Rules
Who’s eligible for deployment protections?
You shouldn’t have to worry about losing your home when on deployment. The Servicemembers Civil Relief Act (SCRA) is a federal statute that protects you from various legal actions during deployments. It applies to a wide range of uniformed servicemembers:
Active-duty members of the six main branches of the Armed Forces (Air Force, Army, Coast Guard, Marine Corps, Navy, and Space Force)
Reserve members while serving on active duty
National Guard members during federally-ordered mobilizations lasting at least 30 consecutive days
Commissioned officers on active duty in the Public Health Service (PHS) or the National Oceanic and Atmospheric Administration (NOAA)
Some protections offered by the SCRA take effect automatically. In some cases, though, you must request benefits under the law.
A word of caution is in order here about the SCRA. Several SCRA provisions apply to mortgages, but they have limits. The statute says that it covers mortgages that “originated before the period of the servicemesmber’s military service.” At least one court has held that the SCRA’s protections are not available for mortgages that begin after someone joins the military. Check with your mortgage lender and they should guide you to find answers.
4 Kinds of Mortgage Payment Protection while Deployed
Foreclosure Protection
When a person fails to respond to a lawsuit that names them as a defendant, a court may enter a default judgment against them. This judgment may order them to pay damages or grant other relief to the plaintiff. The SCRA prohibits courts from entering default judgments against service members who are away on deployment.
Similarly, the SCRA limits lenders’ ability to foreclose on property owned by a deployed service member. Many mortgages allow lenders to foreclose without first getting a court order. This process is known as non-judicial foreclosure. The SCRA prohibits non-judicial foreclosure. A lender may still be able to foreclose judicially, but it would be subject to the SCRA’s ban on default judgments.
Suppose you are deployed somewhere away from home, and you fall behind on your mortgage payments. The lender would have to file a lawsuit against you in order to foreclose on your home. The court proceeding could not happen without your involvement.
Deferral of Payments
The VLB allows payment deferrals during deployment. Some VLB programs allow you to defer interest payments, meaning that you would still have to make payments toward the principal and escrow. Other programs may let you defer both principal and interest payments until you get home. You must apply to the VLB to take advantage of this benefit.
Reduced Interest Rate
The SCRA caps interest rates on some loans at 6% for active-duty servicemembers. This may include a mortgage that you took out before joining the military.
You must notify your lender of your eligibility for the interest rate cap. The lender may be required to refund any interest that it charged you over 6% after your military service began. They may not resume the original interest rate until one year after the last day you are on active duty.
Resources from Fannie Mae
You may be eligible for other types of mortgage assistance. Fannie Mae, for example, offers options for service members who are experiencing financial hardship.
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Protect yourself from mortgage fraud aimed at service members.
Unfortunately, the complexity of the rules surrounding mortgages for military service members has led to numerous types of fraud. These often involve false or misleading claims about SCRA protections. The VA and the Consumer Financial Protection Bureau (CFPB) offer tips for how to identify and avoid scams. Potential red flags include:
Offers that require payment of upfront fees
Instructions to redirect mortgage payments to someone other than your current loan servicer
Claims that someone can help you avoid loan payments entirely
Claims that someone is contacting you directly from the VA
You may report suspected mortgage fraud to the CFPB or the Department of Justice (DOJ). The CFPB enforces various financial regulations that may involve military mortgage fraud. The DOJ may investigate fraud involving violations of the SCRA.
The Wood Group of Fairway is honored to serve our military!
As you read more about mortgage options for veterans and active service members, you may become increasingly confused. Our military mortgage specialists have been in your boots and understand the ins and outs of your loan options. We’ll work with you and your realtor to ensure the homebuying experience progresses as smoothly as possible.
Find out what you qualify for as we guide you through the process. It’s much easier than you think. Get started by answering a few easy questions online today!
