Foreclosure Protections & the Military: When a Servicemember Gets a Mortgage Before Active Duty

The Servicemembers Civil Relief Act (SCRA) provides legal protections to members of the military who're facing foreclosure.

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If you're a military servicemember, and you took out a mortgage loan before you went on active duty, you're entitled to protections against foreclosure. The federal law that provides these benefits is called the "Servicemembers Civil Relief Act" (SCRA).

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. (See our Key Aspects of State Foreclosure Law: 50-State Chart to find out if foreclosures in your state are usually nonjudicial.)

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 some more protections. For example, the lender can't get a default judgment, and you might be able to get a delay (the legal term is "stay") of the foreclosure. You might also be entitled to a reduced interest rate on your mortgage loan.

SCRA Protections in Judicial Foreclosures

Again, because the SCRA prohibits nonjudicial foreclosures in cases where the servicemember took out the mortgage before military service, the lender might choose to foreclose judicially. Judicial foreclosures go through the state court system. The lender begins the process by filing a complaint (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 his or her behalf—appears in the action, the court can't enter a judgment until after the court appoints an attorney to represent the servicemember. 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).

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.

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).

Interest Rates Must 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 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, 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 have to 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.

More State Protections

In addition to federal law, most states have statutes that provide additional protections for servicemembers. For more information, check out Appendix A (State Information) in Nolo's The Foreclosure Survival Guide or talk to an attorney.

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