Servicemembers Civil Relief Act (SCRA) Benefits: Your Rights, Protections And How It Affects Your Mortgage
Are you serving in the U.S. Military or Reserves? Or maybe you’re in the National Guard and have been mobilized under federal orders for more than 30 days. You might even be an active-duty officer of the U.S. Public Health Service or National Oceanic and Atmospheric Administration (NOAA). If you are, you qualify for the financial benefits provided by the Servicemembers Civil Relief Act, better known as SCRA benefits.
These benefits can be extremely helpful if you are applying for a VA loan or other mortgage, auto loan or student loan; you own a home and are struggling to make your monthly mortgage payments; or you lease a residence or car. In these cases, your SCRA benefits can protect you from high interest rates, allow you to cancel leases without penalty and protect you from a foreclosure from your mortgage lender.
What Is The Servicemembers Civil Relief Act Benefits (SCRA)?
The Servicemembers Civil Relief Act Benefits (SCRA) is a law enacted by Congress in 2003 to financially protect active-duty members of the U.S. Military, National Guard or other organizations when they are serving their country.
The goal is to make sure that these service members won't have to worry about paying high interest rates, losing their homes to a quick foreclosure or facing financial penalties for ending an apartment, single-family home or auto lease prematurely if they are on active military duty.
The financial protections of the SCRA apply to active-duty members of the Army, Navy, Air Force, Marines and Coast Guard; members of the military Reserves when they are serving on active-duty; members of the National Guard when they are mobilized for 30 consecutive days or more; and active-duty officers of the Public Health Service or the NOAA.
What To Know About Your Servicemembers Civil Relief Act Benefits
If you’re a service member included in one of the organizations mentioned above, some of your SCRA benefits include:
- Lease cancellation: you can cancel all leases – including those for vehicles, apartments and single-family homes – without any financial penalty if you are being deployed for 90 days or more. This protection also applies to contracts such as those you might have entered with your telephone, Internet or cable providers. To qualify for this protection, you must have entered your lease or contract before you were called into active duty.
- Eviction protection: The law mandates that a landlord must first secure a court order to begin eviction proceedings on you, or your dependents, during your period of military service. This mandate even applies in states that normally permit evictions without court orders. Additionally, the SCRA mandates that landlords or property managers seeking a court order via a default judgment must submit an affidavit to inform the court of your military status. If you are serving in the military, the court must appoint a guardian to represent you and safeguard your interests. The court has the discretion to delay the judgment for up to 90 days if you are unreachable or if your presence is vital for mounting a defense.
- Foreclosure protection: Under the law, if you took out your mortgage before entering active-duty service, your lender can't foreclose on you without first logging a valid court order. Such a court order will stretch out the time it takes to complete a foreclosure proceeding against you. This protection lasts while you are on active duty and for 12 months after you leave the military, reserves, Coast Guard, National Guard or other qualifying agency.
- Interest rate cap: Any debt that you took on before joining the military, Coast Guard, National Guard, reserves or other qualifying organizations must be capped with an interest rate of 6%, no matter the original interest rate. That rate holds while you are on active duty and, with a mortgage, an additional year after the end of active duty. What’s especially impressive is that this interest rate cap is available on most forms of debt, including mortgages, credit cards, home equity loans, student loans, auto loans and personal loans. Your lender is prohibited from adding any interest that was above 6% (the amount you would’ve been charged without SCRA) back to the loan. While you can always request the rate reduction while on active duty, you can also request it for up to 180 days after release from active duty. Don’t worry, you cannot face any penalties from your lender for using SCRA benefits. They are not allowed to deny you credit, revoke your loan, change the terms of your loan, or refuse to grant you a loan in the future because you used your SCRA benefits. They also cannot hurt your credit among other lenders because they cannot give negative information about you to a credit reporting company just for using your SCRA benefits.
- Prevents default judgments: This federal law also protects you against default judgments if you are sued in a civil legal action. A default judgment is a court order favoring the person or party suing you if you do not appear in court to defend yourself. If you are on active duty, you might not be able to appear in court, which is where the SCRA protections come in. Under the SCRA, if you are on active-duty service and can't appear to defend yourself in a civil action, the court is not allowed to enter a default judgment against you until it has first appointed an attorney to represent you. The party that has filed a lawsuit against you must file an affidavit with the court declaring whether you are on active-duty service. The court must also allow a delay of the case for at least 90 days, as long as certain conditions are met.
How To Apply For SCRA Benefits
Unfortunately, you cannot fill out one simple form to let all of your creditors know at once that you are utilizing your SCRA benefits. To take advantage of your SCRA benefits, you must obtain and submit some specific documentation and send them to the specific lenders from which you obtained a loan. To help you see how you may carry out this process, below is each step you would take to utilize your SCRA benefit to limit your mortgage interest rate to a maximum of 6%:
- Gather your documents: The most important document you need to obtain from the military is a copy of your active-duty orders. Then you must write a letter to your lender explaining the specific SCRA benefit you are taking advantage of.
- Contact your lender: You must send this notice to your lender in writing. Each lender may have different ways they prefer to receive these types of notices in writing, so it may be wise to contact them by phone to ensure you are sending it to the correct location. However, do not mistake the phone call as sufficient notice as you must submit the request in writing to formally submit it.
- Provide proof of active duty: Along with the letter requesting an interest rate reduction, you must provide proof of your active-duty status. You should be able to obtain a copy of your active-duty orders from the military branch or federal organization you serve, but that is not the only option. If you cannot obtain this copy, you can also provide a letter from your commanding officer that includes the date you began active-duty service.
- Ask for relief: Remember to ask for the specific type of SCRA benefit you are requesting from your lender. In this case, this letter would be addressed to your mortgage lender seeking to lower your mortgage rate to 6%.
Who is eligible for SCRA benefits?
You are eligible for SCRA benefits if you are on active-duty service in one of the six military branches (Army, Navy, Air Force, Marine Corps, Coast Guard and Space Force), a reservist on active duty, or a National Guard member on federal active duty for more than 30 days. Apart from the military, commissioned officers in active service of the Public Health Service and the NOAA can also utilize SCRA benefits. You will not lose your SCRA benefits if you are absent from duty for a lawful cause such as sickness, wounds or other approved absence.
What doesn’t SCRA cover?
The SCRA is designed to protect you from civil judicial proceedings. You cannot use SCRA benefits to protect you from criminal judicial proceedings. SCRA does not cancel any amounts owed outside of the lease termination benefits. For example, if you owe on a mortgage, you still have to pay your debt.
Who mandates enhanced SCRA benefits?
No specific military branch or federal organization receives enhanced SCRA benefits.
The Bottom Line
SCRA benefits can provide important financial protection to active-duty service members. If you are being sent on such duty, be sure to explore these benefits and how they can help you. If you are a member of the U.S. Military or the surviving spouse of a military member you might consider applying for a VA loan, a mortgage loan type popular because it does not require a down payment. That’s one other benefit you can receive for serving your country.