If you're a military servicemember and took out a mortgage loan before you went on active duty, you're entitled to protections against foreclosure under federal law. 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.
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 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.
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:
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:
You must take action to reopen the judgment within 90 days after your release from active duty. (50 U.S.C. § 3931).
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.
In addition to federal law, many 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.
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.
To get help invoking your rights under the SCRA, consider talking to a HUD-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 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.