Nolotag:www.nolo.com,2021-05-18://1562024-03-28T15:19:26ZForeclosure Protections & the Military: When a Servicemember Gets a Mortgage Before or After Going on Active Duty4538832013-01-17T20:33:58Z2024-02-14T17:02:05ZAmy LoftsgordonThe federal Servicemembers Civil Relief Act (SCRA) provides legal relief to military personnel in danger of foreclosure. Servicemembers are entitled to certain protections from foreclosure for loans taken out both before and after going on active duty.
When a Servicemember Gets a Mortgage Before Active Duty
If you’re a military servicemember and took out a mortgage loan before you went on active duty, you're entitled to various protections against foreclosure under the federal SCRA. You might also be entitled to a reduced interest rate on your mortgage loan.
Protection Against Nonjudicial Foreclosure
Probably the most important protection in states where foreclosures are typically nonjudicial is that the SCRA requires a court order (or a waiver) before your house can be sold at a foreclosure sale. If the lender forecloses without a court order or a waiver, the sale is invalid if done during the period of military service or one year thereafter. (50 U.S.C. § 3953).
Even threats to foreclose without going to court are likely illegal.
SCRA Protections in a Judicial Foreclosure
Because the SCRA generally prohibits nonjudicial foreclosures in cases where the servicemember took out the mortgage before military service, the lender might choose to foreclose judicially.
Judicial foreclosures are much more expensive and typically take much longer than nonjudicial foreclosures, so you might have a better chance of working something out with your lender. And even if the lender starts a judicial foreclosure, you get protections. For example, the lender can't get a default judgment, and you can get a delay (the legal term is “stay”) of the foreclosure.
Protection against a default judgment. Judicial foreclosures go through the state court system. The lender begins the process by filing acomplaint (a lawsuit) and serving it to the borrower and other defendants, along with a summons to appear in court. Typically, a default judgment occurs if the borrower fails to respond to the suit.
The SCRA generally protects servicemembers against default judgments. A court may, however, enter a foreclosure judgment against an absent servicemember in certain circumstances. Under the SCRA, a plaintiff (the party that brings a lawsuit) who seeks a judgment must inform the court if the defendant is in military service. If so, and neither the servicemember—nor an attorney on the servicemember's behalf—appears in the action,the court can't enter a judgment until after the court appoints an attorney to represent the servicemember. (50 U.S.C. § 3931).
But if an attorney appointed to represent a servicemember can't locate the servicemember, the attorney's actions in the case won't waive any defense the servicemember has or otherwise bind the servicemember. (50 U.S.C. § 3931).
Delay of proceedings. Once a court appoints an attorney to represent the servicemember, that attorney will often seek a delay of proceedings. If requested by the attorney (or upon the court's own motion), a court will grant a stay of proceedings for a minimum of 90 days if:
there might be a defense, and the defense can't be presented without the servicemember’s presence or
after due diligence, the servicemember’s attorney hasn't been able to contact the servicemember or otherwise determine if a meritorious defense exists. (50 U.S.C. § 3931).
Also, you can request a 90-day stay of foreclosure proceedings yourself in any civil action or proceeding. To apply for a stay of foreclosure, your application to the court must include:
a letter or other communication explaining why the servicemember’s current military duty requirements materially affects the servicemember’s ability to appear in court, as well as give a date when the servicemember is available to appear, and
a letter or other communication from the servicemember’s commanding officer stating that the servicemember’s current military duty prevents a court appearance and that military leave is not authorized for the servicemember at the time of the letter.(50 U.S.C. § 3932).
Default judgments can be reopened. If a court enters a default judgment against you while you’re on active duty (or within 60 days after your active duty ends), you may ask the court to reopen the judgment. The court will reopen the judgment so you can defend yourself if it appears to the court that:
your military service materially affected your ability to make a defense to the action, and
you have a meritorious or legal defense to the foreclosure or some part of it.
You must take action to reopen the judgment within 90 days after your release from active duty. (50 U.S.C. § 3931).
A Court Can Adjust Your Mortgage
During a foreclosure, the court might provide “equitable” relief as appropriate if your ability to pay or meet the other mortgage obligations is materially affected by your military service. (50 U.S.C. § 3953.) The court may make an adjustment on its own or in response to your request.
In addition, even if a foreclosure hasn’t yet started, you can ask a court for mortgage relief, such as a payment reduction or an expanded repayment period if you’re behind. Again, you must have taken out the mortgage before going on active duty, and you must apply for the relief during your military service or within 180 days after that. You’ll eventually have to repay all of the principal and interest payments that you skipped. (50 U.S.C. § 4021.)
Interest Rates Can Be Reduced
The interest rate on a mortgage incurred before you entered active duty must be reduced to 6% while you’re on active duty and for one year after that. (You can get the reduction for other types of other obligations, too—for example, car loans and credit cards—but only for the duration of the period of military service.)
Past payments of interest over 6% while you were on active duty must be forgiven, and the mortgage payment must be reduced to reflect the lower interest rate while it is in force. (50 U.S.C. § 3937).
To get the interest rate reduction, you must notify the creditor in writing about your duty status and include a copy of the military orders requiring active duty status. You must send this notice no later than 180 days after your active duty status ends. It can be retroactive to the day your active duty started.
Example. Susan is a National Guard member. She and her spouse sign a mortgage to buy a house at a subprime interest rate of 8%. Their payments are $1,900 a month. Six months later, Susan is called to active duty and deployed overseas. Her spouse continues paying the mortgage at the required rate while Susan serves abroad for 15 months. When she returns home and is released from active duty, she learns that she was entitled to have the mortgage payments reduced while she was on active duty. She promptly sends a notice to the lender about her right to a 6% interest rate, with a copy of her deployment orders, and demands that retroactive adjustments be made. She receives a check for $6,000. That’s 15 months times $400, which is the amount her payment would have been lowered had the interest rate reduction been made when she went on active duty.
Be aware that you might not get the reduction if a court determines that you can afford the higher rate. (50 U.S.C. § 3937.)
When a Servicemember Gets a Mortgage After Going on Active Duty
Again, not only are servicemembers entitled to certain protections from foreclosure for loans taken outbeforegoing on active duty, but the SCRA can also protect those who took out their loans after going on active duty.
Just like if you took out the mortgage before going on active duty, the SCRA prohibitsdefault judgmentsexcept under specific circumstances and provides an opportunity to get a 90-day foreclosure delay. (But you don't get protection against a nonjudicial foreclosure process.)
SCRA Protection Against Default Judgments
The SCRA protects servicemembers against default judgments, whether they took out a mortgage before or after active duty. (50 U.S.C. § 3931). So, for mortgages taken out after going on active duty, a court can't enter a default judgment against a servicemember who doesn't appear in the action unless it follows the specific procedure described above, which includes appointing a lawyer to represent the absent servicemember.
However, a default judgment isn't an issue in a nonjudicial foreclosure because the lender doesn't have to go through court. Instead, the lender uses the out-of-court procedures that state law sets out. So, you might lose your home to a nonjudicial foreclosure (if that procedure is allowed in your state) if you took out your mortgage after going on active duty.
But, as noted earlier in this article, if you took out your mortgage loan before going on active duty, the SCRA says the foreclosure must go through court unless you waive this right.
90-Day Delay
Again, in a judicial foreclosure, once a court appoints an attorney to represent an absent servicemember, that attorney will often seek a stay of proceedings (a delay). If requested by the attorney or upon the court's motion, a court will grant a stay of proceedings for a minimum of 90 days if:
the servicemember might have a defense, and the defense can't be presented without the servicemember’s presence or
after due diligence, the servicemember’s attorney hasn't been able to contact the servicemember or otherwise determine if a meritorious defense exists. (50 U.S.C. § 3931).
Also, don't forget that the SCRA allows servicemembers themselves to stay a judicial foreclosure procedure for a period of not less than 90 days, so long as they meet certain criteria and request it from the court in writing. (50 U.S.C. § 3932).
What If a Court Enters a Default Judgment Against You?
Keep in mind that, as noted above, if a court enters a default judgment against you during your period of military service or within 60 days after termination of or release from such military service, you might be able to reopen the case later. You must demonstrate that:
your military service substantially affected your ability to defend yourself in the case and
you have a defense to the action.
A request to reopen a judgment must be filed no later than 90 days after the date of the termination of or release from military service. (50 U.S.C. § 3931).
Getting Help
Many protections under the SCRA aren’t automatic, which means a servicemember must request the protection. The manner in which you must invoke a protection, how long you get to invoke that protection, and what you must do to demonstrate that you qualify for a particular protection under the SCRA varies.
To get help invoking your rights under the SCRA, consider talking to aHUD-approved foreclosure counselor, military defense counsel (a military attorney independent from the standard chain of command specially designated to represent servicemembers confidentially), or a civilian attorney with extensive experience in military law.
Because financial difficulties can sometimes impact a military servicemember’s security clearance or result in disciplinary or adverse administrative action, servicemembers should generally avoid initially contacting their base legal office. Military defense counsel or a civilian attorney can provide confidentiality that can be critically important to maintaining a servicemember's career.
Also, if you're facing foreclosure during or after active military duty, consider contacting yourmortgage servicer(the company you make your payments to) immediately and ask about foreclosure avoidance options. Most lenders offer various options to borrowers who can't make their mortgage payments, likemortgage modifications, forbearance agreements, and repayment plans.
]]>Legal Protections for America's Military: The Servicemembers Civil Relief Act4583352011-10-10T22:19:34Z2024-01-04T17:58:36ZAmy LoftsgordonA federal law called the "Servicemembers Civil Relief Act" (SCRA) (50 U.S.C. § 3901 and following) helps military servicemembers handle their legal affairs and reduce financial obligations while on active duty. The law aims to allow those in the military to serve without suffering financial or legal repercussions at home.
Below we discuss the following benefits provided by this law:
reduced interest rates on existing debts
special treatment for tenants regarding lease cancellations and evictions, and
protection from court actions, including foreclosures and repossessions.
Who Does the SCRA Cover?
The SCRA applies to all full-time active duty members of the five military branches (Army, Navy, Air Force, Marine Corps and Coast Guard), reservists on federal active duty, members of the National Guard on federal orders for a period of more than 30 days, and commissioned officers of the Public Health Service or the National Oceanic and Atmospheric Administration (NOAA).
Servicemembers are also covered when absent from duty because of sickness, wounds, leave, or another lawful cause. In some situations, dependents of servicemembers are also entitled to protections under the SCRA.
However, the SCRA doesn't apply to Reserve or National Guard members who aren't on active duty, retired military personnel, or National Guard troops called to duty under state orders. But some states provide protections similar to the SCRA for National Guard members and reservists called up to active duty under state orders.
Reduced Interest Rates on Existing Debts
Under the SCRA, many active-duty personnel are entitled to a 6% interest rate cap on debts or financial obligations of any kind (except federal student loans that originated before August 14, 2008) during the period of military service. For mortgage loans, the coverage is the same period, plus one year. Interest over 6% per year is forgiven.
To be eligible for the reduced rate, you must have taken out the loan before you began active duty.
Special Treatment for Tenants
Many active duty servicemembers might also be able to terminate lease obligations and avoid eviction.
Cancellation of Residential or Commercial Leases
Tenants who enter active military service after signing a lease or rental agreement have a right to terminate their rental obligations. Both residential and commercial (business) leases are covered under the SCRA.
You must hand deliver, send via private carrier, mail, or electronically send a written notice of your intent to terminate your tenancy, along with a copy of your orders, to the landlord or manager.
Month-to-month rental agreements. Once the notice is mailed or delivered to the landlord or manager, the tenancy will terminate 30 days after the day that rent is next due. This rule takes precedence over any longer notice periods specified in your rental agreement or by state law. If state law or your agreement provides for shorter notice periods, the shorter notice periods will control.
Leases. Once the notice is mailed or delivered, the tenancy will terminate on the last day of the month following the month in which the notice is delivered.
Delaying Eviction for Nonpayment of Rent
A landlord may not evict a servicemember, or the servicemember's dependents, from a residential home during a period of military service without first getting a court order. Also, the SCRA requires courts to postpone (stay) some residential evictions for nonpayment of rent for up to 90 days or longer.
Which tenants are affected? The SCRA applies if your spouse, children, or other dependents occupy the rental unit during a period of military service. (A dependent is someone you've supported in the past 180 days, paying more than half of that person's living expenses.)
Rental amount. The Act's protections apply when the rent is $9,106.46(2023) monthly or less. The figure is adjusted yearly to account for inflation or cost of living increases.
The effect on an eviction lawsuit. The SCRA doesn't prevent a landlord from serving a termination notice for the nonpayment of rent. But a landlord who has filed suit must tell the court that the tenant is an active service person—so be sure to notify your landlord when you are activated. The judge will decide whether the service person's status in the military materially affects the ability to pay the rent. If the judge determines that it does, the judge may stay (postpone) the eviction. If the judge decides otherwise, the lawsuit will continue and could result in an eviction.
Court Judgments and Repossessions
The SCRA also protects active duty servicemembers from some court judgments and repossessions.
Delay of Civil Court Actions
The SCRA allows active service persons to ask for a stay of many kinds of civil actions in which the service person is a defendant. In addition, when calculating the statute of limitations (the time during when a person must bring a lawsuit, or lose the right to do so), the time that the person has been in the military isn't counted.
If you've received notice of a civil proceeding, you can usually delay the action for some time, not less than 90 days, so long as you meet specific criteria and if you request it from the court in writing.
Nonjudicial Foreclosure Prohibition
A lender may not foreclose on, seize, or sell the homes of military personnel during active duty or up to one year thereafter unless the foreclosure is pursuant to a court order or a waiver by the servicemember. To be eligible for this protection against foreclosure, you must have taken the mortgage out before you began active duty.
In a judicial foreclosure, you can usually delay the action for a period of time as justice and equity require if you meet specific criteria and if you ask the court for the stay in writing.
Default Judgments
A "default judgment" occurs when you're sued and fail to respond to the suit, and the judge rules against you.
Plaintiff must notify the judge that you're on active duty. Under the SCRA, a plaintiff (the person that brings a lawsuit) who seeks a default judgment against an absent active duty servicemember must notify the court that the service person is on active duty. If neither the servicemember nor the servicemember's attorney appears in court, the court may not enter a judgment until after the court appoints an attorney to represent the defendant. If an attorney appointed to represent a servicemember can't locate the servicemember, the actions by the attorney in the case don't waive any defense of the servicemember or otherwise bind the servicemember.
Once a court appoints an attorney to represent the servicemember, that attorney will often seek a stay of proceedings. If requested by the attorney (or upon the court's own motion), a court will grant a stay of proceedings for a minimum of 90 days if there might be a defense and the defense can't be presented without the servicemember’s presence, or after due diligence, the servicemember’s attorney hasn't been able to contact the servicemember or otherwise determine if a meritorious defense exists.
You might be able to reopen the case later. If a court enters a default judgment against a servicemember during the servicemember’s period of military service (or within 60 days after termination of or release from such military service), the court entering the judgment must, upon application by or on behalf of the servicemember, reopen the judgment for the purpose of allowing the servicemember to defend the action if it appears that the servicemember:
was materially affected by reason of that military service in making a defense to the action, and
has a meritorious or legal defense to the action or some part of it.
Repossessions
The SCRA prohibits repossessions performed without a court order, such as those done by merchants or "repo" specialists, of goods purchased by installment contract, like consumer items or cars, as long as the purchase was made before active duty began.
If you're on active duty, the merchant must get a court order before it can repossess an item. Once in court, an active-duty servicemember may apply for a stay of repossession proceedings. The judge will grant the stay if the service person's ability to pay the debt has been materially affected by entering active service, in the judge's view.
More State Protections
In addition to federal law, many states have their own statutes that provide protections for servicemembers in certain legal situations.
Getting Help
Many protections under the SCRA aren’t automatic, which means a servicemember must request the protection. How you must invoke a protection, how long you get to invoke that protection, and what you must do to demonstrate that you qualify for a particular protection under the SCRA varies.
If you're having financial difficulties and need help invoking your rights under the SCRA, consider talking to a HUD-approved foreclosure counselor (if facing foreclosure), military defense counsel (a military attorney independent from the standard chain of command specially designated to represent servicemembers confidentially), or a civilian attorney with extensive experience in military law.
Because financial difficulties can sometimes impact a military servicemember’s security clearance or result in disciplinary or adverse administrative action, servicemembers should generally avoid initially contacting their base legal office. Military defense counsel or a civilian attorney can provide confidentiality that can be critically important to maintaining a servicemember's career.
Also, if you're facing foreclosure during or after active military duty, consider contacting your mortgage servicer (the company you make your payments to) immediately and ask about foreclosure avoidance options. Most lenders offer various options to borrowers who can't make their mortgage payments, like mortgage modifications, forbearance agreements, and repayment plans.