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VA Loan / Veteran Mortgage News
SPONSOR:
Pioneer Military Loans offers responsible military lending solutions that can help
service members avoid or break the debt cycle. Pioneer serves active-duty and career-retired military service members,
as well as Department of Defense employees.
MARCH 2003
Overview of the Soldiers' and Sailors' Civil Relief Act of 1940 (SSCRA)
The Soldiers' and Sailors' Civil Relief Act is a statute designed to provide some relief to
service members during active duty military service so they can devote their energy to the defense
of the nation. The act has several provisions including a cap on interest rates and restrictions
in certain mortgage foreclosure proceedings. The act caps the interest rate on all obligations
and liabilities (mortgages) during the period of military service. The cap is 6% but applies
only to those mortgages entered into prior to entering active duty.
The Act uses several terms to discuss who is eligible. The Act applies to "persons in the
military service" which include all members of:
- The U.S. Army including the Army National Guard and Army Reserve
- The Navy including the Fleet Reserve and Naval Reserve
- The Marine Corps including the Fleet Marine Corps Reserve and Marine Corps Reserves
- The Air Force including the Air National Guard and Air Force Reserve
- The Coast Guard including the Coast Guard Reserve
- All officers of the Public Health Service for duty to the Army or Navy on active duty.
"Active duty" refers to a person who has the "Armed Forces as a fulltime job."
The Act applies when the period of military service begins, which is the date on which the
person enters active military service, and ends on the date the person is released from active
military service. "Entering active military service" begins on the date the person receives
the order of induction or order to report for military service.
For example, if a customer enters active duty military service after obtaining a mortgage loan,
they would be entitled to the rate cap provisions under the Act. If a customer was in the
military service as a full-time member or in the Reserves on active duty when they obtained the
mortgage loan, they are NOT eligible for the rate cap provisions of the Act because the Act
applies to obligations entered into prior to entering active military service.
Frequent Questions About the Soldiers' and Sailors' Civil Relief Act
Who is eligible to receive the reduced interest rate of 6%?
Career military and Reserve members who closed their loan before entering active military service.
Members are considered to have entered active military service when they are on active duty (working
in the Armed Forces fulltime). The date they entered active military service must occur after the
loan has closed. "Entering active military service" begins on the date the person receives the
order of induction or order to report for active military service or active duty (working fulltime).
Once the loan has closed, how does a borrower apply for relief under the Act?
Copies of military orders must be sent to the mortgage company servicing the loan. Simply call your
mortgage lender at their toll free number and find out exactly where to send the papers.
If the customer's loan is in process and they receive their orders to enter active
military service before the loan closes, are they entitled to reduce their interest rate
to 6% after the loan closes?
NO. For example, if the customer is in the Reserves and closes their loan after they receive
their orders to enter active military service, they are not eligible for the reduction in
rate because the Act applies to individuals who signed their note and mortgage prior to
entering into active military service. "Entering active military service" begins on the
date the person receives the order of induction or order to report for military service.
For a person in the Reserves, it would apply when they receive their orders to report to
active duty (fulltime).
If they close the loan before they receive their orders to enter active military service,
they would be entitled to the reduction in rate after closing as long as they can provide
a copy of the military orders to Servicing.
How long does the rate reduction apply?
The rate reduction applies as long as the person is in active military service and ends on the date
they are released from active military service.
Does a person have to be called to a war zone or military zone to be considered
active in the military service or on active duty?
NO. The Act applies to "persons in the military service" as stated above.
Are there other rights under the Soldiers' and Sailors' Civil Relief Act?
YES. There are some limitations on actions that lenders can take in foreclosure proceedings and
other provisions in the Act related to all obligations and liabilities at 50 U.S.C. App, Sections
501 et seq. Fannie Mae also provides guidelines related to the Act in part VII, Sections 304 of
the Servicer's Guide. HUD and other investors also have information regarding the Act.
Low Rates Keep Sales Strong
America's homeownership rate recently climbed to a record high of 68.3 percent of all households.
A long period of low rates has made financing easy for many, and encouraged home sales. Currently our
economy is picking up steam. Consumer spending may weaken in coming months, but more corporate
investment in computers and machinery will add strength to the U.S. economic recovery.
Increased business spending is expected to create more jobs, as companies expand to meet new
opportunities. It's also important to recall that a decade ago unemployment was markedly higher
than it is now. Real estate economists expect mortgage rates to remain attractive throughout 2003.
Today still is a great time to consider purchasing a home, or refinancing your existing mortgage.
You Deserve the Best!
We specialize in helping households that are similar to yours when they need to buy a home, or
refinance their current mortgage. Feel free to copy and pass on our mortgage newsletter to your
friends, co-workers, and relatives. Also suggest that they contact us when they have a
real estate financing need. We'll make sure your referrals are treated with extra care.
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