The Servicemembers Civil Relief Act (SCRA), originally called the Soldiers and Sailors Civil Relief Act (SCRA), was enacted in 1940 to provide protection for members of the armed forces while serving our country. It requires lenders to provide forbearance and the reduction of interest rates with respect to certain obligations of military members, as well as restricts the entry of default judgments or evictions against them and their dependents.
The SCRA is a federal statute codified at 50 U.S.C. App. §§ 501—597b. Section 527a limits the interest rate that can be charged by mortgage lenders to service members to six percent (6%) per annum, provided that the service member provides the creditor with written notice of their military service and a copy of their military orders. If the interest rate for a service member’s obligation exceeds six percent (6%) per annum, the lender must reduce the interest rate to (6%) per annum until one (1) year after the service member's return from duty. Furthermore, any interest in excess of the (6%) per annum ceiling is completely forgiven, not merely deferred.
Prior to December 31, 2012, mortgage lenders were not permitted to commence foreclosure proceedings against an active service member until nine (9) months after their active service was completed unless a court order was obtained allowing them to do so. Today, this grace period has been reduced to ninety (90) days.
In order for a plaintiff to enter a default judgment, an affidavit must be filed with the court stating that the defendant is not an active member of the military. The affidavit must be specific and contain facts that establish that the defendant was not an active member of the military; a broad statement that the defendant is not in the military will not suffice.
The reason for these protections is to prevent a default judgment from being issued against a defendant without their knowledge, or at a time during which they are unable to defend themselves because they are actively serving our country.
To determine if a defendant is in the military, one may search the United States Department of Defense’s website. Upon entering the last name and social security number of the defendant, the site will provide the lender with a report stating whether or not the defendant is currently serving in the U.S. Military. This tool can serve as the basis for the requisite affidavit.
Additionally, the SCRA provides for the vacatur of a Judgment of Foreclosure entered against an active service member, while in active service, if the foreclosure sale has not yet been held.
New York State has its own version of the law which largely mirrors the federal statute, but provides some additional protections to servicemembers. The state law is called the NY State Soldiers and Sailors Civil Relief Act, which is codified under NY military law section 300-328. Like the federal law, during a service member's active duty, interest or obligation or liability incurred before service is capped at 6%, unless the ability to pay is not materially affected by the service. So if a servicemember can pay more and that can be proven, then that 6% cap is not applicable.
One major difference between the New York and federal law: under federal law, a lender cannot foreclose while service members are in the military, or 90 days after they return from duty. However, under NY state law there is added protection. A lender cannot foreclose while someone is in military service or for 6 months after. So servicers should take note that New York state law prohibits them from foreclosing for a full 6 months after termination of a member’s service, which is significantly longer than the 90 days they must wait under federal law.
To find out more about state and federal laws that protect service members against foreclosure, click here.
Peter T. Roach & Associates, P.C.