Foreclosure Protections & the Military: When a Servicemember Gets a Mortgage Before or After Going on Active Duty

The Servicemembers Civil Relief Act (SCRA) provides legal relief to military personnel who are in danger of foreclosure.

By , Attorney · University of Denver Sturm College of Law

The 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 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 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 out before going 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 prohibits default judgments except 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 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.

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