SCRA mortgage protections: What to know

The Servicemembers Civil Relief Act (SCRA) provides crucial financial protections for those who are military service members. If you are a member of the U.S. military or another U.S. service organization, you are entitled to the enhanced financial protections that the SCRA has to offer.

Continue reading to learn more about how the enhanced protections of the SCRA help protect those who serve our country.

What is the Servicemembers Civil Relief Act (SCRA)?

The Servicemembers Civil Relief Act (SCRA) is a law that provides legal protections for active-duty service members. It suspends some civil obligations so that service members can devote themselves fully to serving their country.

It is crucial for service members and those who are protected by the SCRA to understand all their legal protections under the Act. This can ensure that they are able to take full advantage of the provisions included in the SCRA.

While the financial and legal protections offered through the SCRA are appealing, some of the details can get confusing. If you want to benefit from SCRA during a financially difficult time, consider signing up for military legal assistance to guide you through the process. This can help ensure that you have access to all legal protections to which you are guaranteed via the SCRA.

History of the SCRA

The Servicemembers Civil Relief Act (SCRA) was voted into law by Congress in 2003. It replaced the Soldiers' and Sailors’ Civil Relief Act (SSCRA), which was initially passed in 1940 and updated in 1991.

The goal of the SCRA is to provide financial protection to active duty members of the U.S. military, reserves, Coast Guard, National Guard, and other organizations when they are serving the country.

Servicemembers Civil Relief Act mortgage protections

The Servicemembers Civil Relief Act offers a range of benefits and protections to eligible members of the armed forces. One area that the SCRA covers is mortgage protections, such as interest rate caps and foreclosure protection.

Interest rate caps

Any debt that you took on before joining the military, reserves, Coast Guard, National Guard, or other qualifying organizations must be capped with an interest rate of 6%. This holds no matter what the original interest rate of this debt was. The capped interest rate will stay in place while you are on active duty. You’ll qualify for the rate cap on most forms of debt, including mortgages, home equity loans, home equity lines of credit (HELOCs), credit cards, auto loans, student loans, and personal loans.

Foreclosure protection

If you took out your mortgage loan before entering active duty service, your lender is not allowed to foreclose on you without first filing a valid court order if your ability to repay the loan is affected by your active duty service obligations. This protection provides service members who are on active duty the time to pay what they owe, since this will slow the time it takes a lender to initiate foreclosure proceedings.

Foreclosure protection lasts while you are on active duty and for an additional 12 months after the discharge from active duty from the military, reserves, National Guard, Coast Guard or other qualifying organization.

Additional protections provided by the SCRA

The SCRA also provides many other financial protections for service members beyond mortgages. Continue reading to understand protections provided under the SCRA related to income tax deferment, residential lease termination, auto lease termination, default judgements, and more.

Eviction protection

If you are unable to pay rent on time due to your service obligations, you may be protected from eviction for up to 90 days. During those 90 days, your dependents may be able to remain in the property if a judge determines that your service allows you to qualify for SCRA protections. Landlords must adhere to these protections or face legal consequences, including potentially jail time.

Income tax deferment

Under the SCRA, the Internal Revenue Service (IRS), and state and local tax authorities must defer your income taxes if your ability to pay the taxes is impacted by your military service. This can include tax payments that were due either before or during your service. During this deferment, the taxing agency cannot charge interest or penalties to the balance for deferred payments related to this protection.

Termination of residential leases

Under the SCRA, service members can cancel residential leases and leases related to agricultural, professional, and business via written notice without any financial penalties. According to Military OneSource, this protection applies to all leases entered into before service or those entered during military service when you have orders to deploy with a military unit or as an individual in support of a military operation for not less than 90 days.

To use this benefit, you’ll need to provide a copy of your military orders to the property owner.

Termination of auto leases

If you received orders to report for active duty, you also have the right to terminate your auto lease under the protections of the SCRA, according to the Department of Justice. After all, you likely won’t be able to use your vehicle if you are deployed for an extended period. Military OneSource also states that these protections apply if the individual signed the lease agreement before being called to active duty, signed a lease agreement and then received PCS orders outside CONUS or signed a lease agreement and then received orders to deploy.  

Termination of phone service

The Federal Communications Commission (FCC) states that the SCRA also allows members to cancel contracts with service providers without financial penalty. This includes contracts that members have entered with telephone, Internet, cable, and other providers. As with the SCRA’s lease protection benefit, service members must have signed these contracts before they were called into active duty. The deployment must also be for not less than 90 days to a location that does not support the contract

Default judgment protection

In a default judgment, a court order automatically rules in favor of the person or party suing you if you do not appear in court to defend yourself. This could be a serious problem for active-duty service members. If you are serving your country, you might not be able to appear in court.

Under the SCRA, though, if you are on active duty service and can't appear in court to defend yourself in a civil action, the court must grant a delay, or stay, of at least 90 days if it determines there may be a defense to the action and the defense cannot be presented without your attendance.

Postponed civil court matters

If you are involved in a civil court matter, your active-duty service might prevent you from attending the proceedings. Under the SCRA, you can request a delay or stay of 90 days, which can be extended for an additional 90 days.

While this protection applies to civil court matters (such as divorce, child paternity, and support cases), it won’t excuse you from criminal court proceedings.

Small-business owner protection

If you are a small-business owner who is called into active duty, your nonbusiness assets and military pay are protected from creditors. For example, active-duty service might force you to put business operations on hold, which could result in cash flow problems. This protection will keep your personal assets safe.

Voting rights

If you must leave your home state to serve, you won’t give up your voting rights. Instead, your voting rights are guaranteed under the SCRA, meaning you will still be able to vote in state, federal, and local elections even if you aren’t living in your home state. These protections may also be available to spouses of active-duty service members.

Life insurance coverage protection

Service members can also cancel any contracts they signed with insurance providers without penalty, thanks to the SCRA. The SCRA also says that life insurance policies can’t demand payment of additional premiums if an individual is in military service. Insurance coverage also cannot be terminated.

Increases in premium for age are not covered as a protection. However, insurance coverage cannot limit or restrict any activities required and necessary during service.

Professional liability insurance suspension

Healthcare, legal, and other professions (as noted by the Secretary of Defense) who are called to active duty can send their insurance carrier written notice to suspend their coverage. While on active duty, you won’t have to pay the premiums for this suspended coverage. After you return, you can reinstate your suspended insurance policy through a written request to your provider within 30 days of release from active duty service.

Who’s eligible for protection under the Servicemembers Civil Relief Act?

If you are an active-duty member of the Army, Navy, Air Force, Marine Corps, Coast Guard, reserve component (Army Reserves, for example), National Guard (who’ve been actively mobilized via federal order for more than 30 days), Space Force and active-duty commissioned officers of the Public Health Service or the National Oceanic and Atmospheric Administration, you have rights under the Servicemembers Civil Rights Act.

It's important to note, though, that the benefits of the SCRA are only available to those who are on active-duty service. The act does not cover veterans of these military units or organizations. However, individuals exercising and holding power of attorney for an active duty servicemember also can exercise the rights under the SCRA.

If you are the child of an active-duty service member or married to a member, some of the protections of the SCRA might also apply to you. The key is that your spouse or parent must be on active duty. For children, you'll typically need to be under 18 and not married to receive any SCRA benefits.

How do you apply for SCRA benefits?

If you want to receive a benefit outlined in the SCRA, you must request it with a lender, court, credit provider, insurance company, or other organization and verify your active-duty status.

Typically, you must also provide a copy of your active-duty orders to your lender or credit provider to prove that you are being called into service. You can get form letter templates for this from your on-base legal office.

The bottom line: The SCRA provides valuable financial protections to service members

The SCRA provides important protections for active-duty service members. This includes interest caps, income tax deferment, the ability to cancel leases and other contracts, and continued voting rights. If you qualify for the SCRA, make sure that you explore all your protections under the act. It’s important also to remember that applying for benefits typically involves communicating to a lender (via a letter) and providing proof of active-duty status.

If you are an active-duty service member ready to make the move to owning a home, get started on a mortgage application with Rocket Mortgage^® to see if you qualify for a VA loan or other type of home loan.

 

Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.