If you’re on active military duty, and you took out a mortgage before you went on active duty, you are entitled to a raft of protections against foreclosure. The federal law that provides these benefits is called the Servicemembers Civil Relief Act (SCRA).
(To learn about other protections for those serving in the military, visit our topic page on Special Protections for the Military: Bankruptcy, Foreclosure & Debt Collection.)
Probably the most important protection for families in states where foreclosures are typically nonjudicial is that the SCRA requires a court order (or a waiver) before your house can be sold in foreclosure. If the lender forecloses without a court order (or a waiver), the sale is invalid if done during the period of service or one year thereafter. Though, as of January 1, 2020, the one-year post-service protection period will be reduced to 90 days. (See our Key Aspects of State Foreclosure Law: 50-State Chart to find out if foreclosures where you live are usually nonjudicial.)
Even threats to foreclose without going to court are illegal. Because judicial foreclosures are much more expensive and typically take much longer than nonjudicial foreclosures, you may have a better chance of working something out with your lender.
Also, you might be able to get a delay (the legal term is “stay”) of the foreclosure procedure if you request it from the court in writing. A HUD-approved foreclosure counselor—or someone from military legal services, if you are deployed out of the country—can help you with this. (See our article on HUD-approved housing counselors.)
If the lender starts a foreclosure lawsuit and you don’t respond to it, the court will order a default judgment against you. But you can generally reopen the judgment if it is entered while you’re on active duty or within 60 days after your active duty ends. You must take action to reopen the judgment within 90 days after your release from active duty.
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 thereafter. (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 (refunded), and the mortgage payment must be reduced to reflect the lower interest rate while it is in force.
To get the interest rate reduction, you have to notify the creditor in writing of 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 husband sign a mortgage to buy a house at a subprime interest rate of 9%. Their payments are $1,900 a month. Six months later, Susan is called to active duty and deployed to Iraq. Her husband continues paying the mortgage at the required rate while Susan serves in Iraq for 15 months. When she returns home and is released from active duty, she learns from a military counselor that she was entitled to have the mortgage payments reduced while she was on active duty.
She promptly sends a notice to the lender of her entitlement to the 6% interest rate, with a copy of her Iraq deployment orders, and demands that retroactive adjustments be made. She receives a check for $6,000. That’s 15 months times $400, the amount her payment would have been lowered had the interest rate reduction been made when she went on active duty.
Also, lenders may not negatively affect your credit rating for receiving the benefits you’re entitled to under the SCRA.
In addition to the federal law, most states have their own statutes that provide additional protections for service members. Your state’s page, if available, in our Summary of State Foreclosure Laws lists the citations for your state’s law. If your state's page isn't available online, check out Appendix A (State Information) in Nolo's The Foreclosure Survival Guide or talk to an attorney.