Veterans have the benefit of the VA loan and its 100% financing. However, they are not exempt from foreclosure proceedings if they can’t make their payments. That’s where the SCRA or Service Member’s Civil Relief Act comes into play. This Act protects service members that are still active in the military as well as those in the Reserves that must report to duty for more than 30 days. Just how does this help veterans? We explore it below.
The Protections Provided
First, you must know the SCRA does not automatically protect any veterans from foreclosure. It’s an Act put in place to help veterans, but you have to get legal counsel to put it into action. As of 2008, though, the Military Homes Protection Act helped to enforce the protection veterans receive. This Act in particular, helps members coming home from active duty by prolonging foreclosure proceedings. Rather than starting after 90 days of missed payments, lenders cannot start proceedings until 9 months after continually missed payments.
How to Get Protection
As we stated above, the protection is not automatic. You have to prove that you deserve it. You do this by proving that your time in the service took away from your ability to make your mortgage payments. You must show it affected you and your family financially. You must act fast in order to get the protection too. You have up to 180 days after your active duty ends to ask for the protection.
What Does SCRA Do?
Let’s make it very clear that SCRA does not excuse you from making your mortgage payments. In general, it prevents lenders from starting foreclosure proceedings for a short while. In the meantime, you must figure out how to make ends meet. At this point, you should get together with your lender and figure out how you will make good on your mortgage. A few typical methods include:
- Refinancing your mortgage so that the payments are more affordable
- Making a payment arrangement with the lender so that you can catch up on your payments
- Applying for a mortgage modification to make the payments more affordable
Again, it’s up to you to initiate these things so that you can get your payments back on track. After 9 months, there is nothing the SCRA can do for you. In other words, you must act fast.
What to Provide Your Lender
In order to get the protection of the SCRA, you’ll need to supply your lender with the following:
- Written notice of your need to report to active duty
- Proof from the military of your orders
- Proof that you had the mortgage before you were called to active duty
While the SCRA may help you avoid foreclosure temporarily, it’s not a permanent solution. You have to put the work in and talk to your lender. You need to find out what options you have to bring your account current. By law, the lender cannot adjust your interest rate during the 6 months following your return. They also cannot pursue foreclosure, but that’s about it. It’s up to you and the lender to determine a way to make your payments more affordable.
Any principal and interest you did not pay will not likely disappear. Instead, the lender will work out something with you so that you can make the payments up. Typically, lenders tack the unpaid principal and interest on the back-end of the loan, essentially increasing the principal amount. Other lenders work out a payment plan where the borrower pays a portion of the unpaid balance every month for a certain period.
Only you and your lender know what will work for you. Being an advocate for yourself is the only way to prevent foreclosure. Don’t let too much time pass before discussing your options with your lender. The sooner you act, the more choices you may have and the quicker you can get your payments back on track.