The sad stories continue about the number of homeowners going into default and foreclosure caused by the increased monthly payments brought by adjustable rate mortgages and subprime loans that never should have been granted.
For military families with loved ones in the Middle East, including the 6,600 soldiers from approximately 15 Fort Lewis units, the stress and anxiety of making ends meet when one spouse is away is difficult enough without the extra burden of “mortgage payment shock.” However, there could be some relief for these households if they reach out and ask for it.
All military personnel on active duty are eligible for help with their mortgage and other debts under the 1940 Soldiers’ and Sailors’ Civil Relief Act. The act was rewritten and strengthened by the Servicemembers Civil Relief Act of 2003.
The act allows Reserve and National Guard members and other military personnel whose mortgage obligations pre-date the start of their active duty to cap their mortgage rates at 6 percent while they are on active duty. Other benefits of the act include a prohibition on lenders foreclosing against affected military personnel during, and three months after, their tour of active duty.
Since fixed-rate home-loan rates have hovered around 6 percent for several months, one of the most significant provisions of the act includes adjustable-rate mortgages and consumer debt. It limits the amount of interest that may be collected on all debts, not just mortgages, of persons in military service to 6 percent per year during the period of military service. This provision applies to debts incurred prior to the commencement of active duty and includes interest on credit-card debt, car loans and other debts.
The Office of the Undersecretary of Defense for Personnel and Readiness emphasized that the provision applies to pre-service debts, and the interest-rate reduction doesn’t occur automatically — service members must request it.
In addition to the mortgage-rate reduction and expanded foreclosure protection, federal officials have encouraged mortgage lenders to postpone principal payments for all servicemen and women during their activation and three months thereafter.
Reservists who were called up to active duty after August 1990 and served 90 days continuously on active recall are eligible for VA loans and other benefits. This provision was inserted to help the thousands of men and women who were pressed into service during operations in and related to Afghanistan and Iraq.
Once a service member requests the rate reduction, the creditor must either comply or apply for court relief. The act puts the burden on the creditor to show that military service has not “materially affected” a member’s ability to repay the debt. The court generally grants relief if the creditor can make his or her case.
The act also provides some assistance for renters. Another key provision protects dependents from being evicted while service members are serving. If a service member rents a house or apartment that is occupied for dwelling purposes and the rent does not exceed $1,200 per month, the landlord must obtain a court order to authorize eviction. This provision applies regardless of whether quarters were rented before or after entry into military service.
In cases of eviction from dwelling quarters, courts may grant a stay of up to three months or enter any other “order as may be just” if military service materially affects the service member’s ability to pay the rent. This provision is not intended to allow military members to avoid paying rent, but rather to protect families when they cannot pay the rent because military service has affected their ability to do so.
Another significant protection under the act relates to civil proceedings. Service members involved in civil litigation can request a delay in proceedings if they can show their military responsibilities preclude their proper representation in court. Service members who are on an extended deployment or stationed overseas most often invoke this provision.
HUD has activated a toll-free number, 888-297-8685, for service personnel who have questions about their mortgages and other financial issues.
Tom Kelly’s new book, “Cashing In on a Second Home in Central America: How to Buy, Rent and Profit in the World’s Bargain Zone,” is available at www.crabmanpublishing.com.
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