August 15, 2007
DFI Reminder - The Servicemembers Civil Relief Act of 2003 (SCRA)
TO: The CEOs of All State-Chartered Financial Institutions and Others in the Financial Services Industry
FROM: Michael A. Kelley, Commissioner of Financial Institutions
Re: The Servicemembers Civil Relief Act of 2003 (SCRA) - Mortgage Relief for Active Duty Military Members
The Department of Financial Institutions (DFI) regularly reminds financial institutions of the Servicemembers Civil Relief Act (SCRA) 50 USC App. §§ 501-596, the revised and updated provisions of the Soldiers' and Sailors' Civil Relief Act of 1940. The SCRA is a federal statute passed by Congress and signed by President Bush in 2003 to allow military members to suspend or postpone some civil obligations so that the military member can devote his or her full attention to military duties. Some of the benefits under the SCRA extend to dependents of active duty military members as well.
The SCRA requires a lender to lower its interest rate to 6 percent on loans made to qualified borrowers prior to their entry to military service. The 6 percent interest rate is to remain in effect throughout the borrower's term of active duty. Under the SCRA, no interest above 6 percent may accrue for credit obligations (that were established prior to active duty or activation) while on active duty, nor can that excess interest become due once the servicemember leaves active duty. Interest over and above the 6 percent threshold is permanently forgiven. Furthermore, the monthly payment must be reduced by the amount of interest saved during the covered period. In addition to the capped interest rate, other provisions include providing temporary relief from paying mortgages and also foreclosure protection.
The Act requires some action to invoke the protections under the statute. For example, to obtain a reduction of pre-active duty mortgage or credit card interest rates, military personnel must send the lender/creditor a written request and a copy of military mobilization orders. Military personnel that think their rights under the SCRA that may have been violated or qualify for protection under the SCRA are encouraged to contact a military legal assistance office to talk with an attorney about their specific case.
A copy of the SCRA downloaded from the Global Legal Information Network (GLIN) http://www.glin.gov in PDF format is attached for your convenience.
The Department of Housing and Urban Development (HUD) provides a SCRA Questions and Answers document for lenders on the HUD Web site at: http://www.hud.gov/offices/hsg/sfh/nsc/qasscra2.cfm.
HUD also provides a Q&A for homeowners at: http://www.hud.gov/offices/hsg/sfh/nsc/qasscra1.cfm.
Additional information is available from the Department of Defense: http://www.defenselink.mil/specials/Relief_Act_Revision/.