Mortgage investors, brokers, lenders, landlords and lease owners can all be affected by the Soldiers’ and Sailors’ Civil Relief Act (SSCRA). So can investors who are themselves in military service.
Here is one example of what is at stake: if they qualify, borrowers in the armed forces can claim that their service has affected their ability to pay, and you must reduce their interest rate to no more than 6%. This lesson summarizes the law as it stood at the time of writing.
Who the act protects
The SSCRA covers members of the armed forces, including reservists and members of the National Guard when they are in active federal service.
Some protections extend for a limited time beyond discharge, tied to the discharge date. Some of the act’s protections also extend to the service member’s dependents.
The 6% interest rate cap
If military service has affected a service member’s ability to pay on obligations such as mortgages, credit cards and loans, the service member can have the interest rate capped at 6% for the length of the military obligation.
Three conditions apply:
- The debt was incurred before the service member came on active duty.
- The service member is on active duty at the time of the request.
- Military service has materially affected the service member’s ability to pay the debt.
The cap does not apply to federally guaranteed student loans.
The service member must contact the creditor in writing and ask for the rate to be reduced to 6% under the SSCRA. The law doesn’t require it, but it’s a good idea to include a copy of the military orders placing the member on active duty.
The burden then falls on the creditor. If you believe the borrower’s military service does not materially affect the ability to pay, it’s up to you to seek relief in court.
Leases and evictions
Ending a pre-service lease
A service member who leases or rents property for a dwelling, professional, business, agricultural or similar use may terminate the lease if two things are true: the lease was signed before the service member entered active duty, and the premises have been occupied for those purposes by the service member or dependents.
The service member must deliver written notice of termination to the landlord after entering active duty or receiving orders for active duty. When the lease ends depends on its type:
| Lease type | Notice delivered | Lease ends |
|---|---|---|
| Month-to-month, rent due on the 1st | August 5 | October 1 (30 days after the next rent due date, September 1) |
| Yearly or other term | August 5 | September 30 (last day of the month after the notice) |
If rent was paid in advance, the landlord must return the unearned portion. The landlord may not keep the security deposit because of the early termination, but may still withhold it for damages, repairs and other lawful provisions of the lease.
Under the SSCRA, a lease can only be terminated if it was entered into before active duty. The act has no provision for leases signed after entering active duty. Several states (not all) have laws that let military members break a lease when they must move under military orders.
In states without such laws, active duty members often make sure the lease contains a “military clause” that lets them terminate it if they are ordered to move. Most bases require service members to have leases approved by the local military housing office, partly to make sure that clause is there.
Protection from eviction
A service member may also seek protection from eviction under the SSCRA. The property must be occupied by the service member or dependents as housing, and the rent cannot exceed $1,200 (the limit at the time of writing).
The service member or dependent who receives an eviction notice must ask the court for protection under the act. If the court finds that military duties have materially affected the ability to pay rent on time, the judge may stay (postpone) the eviction for up to 3 months or make any other “just” order.
Court proceedings and judicial foreclosures
A service member who is the plaintiff or the defendant in a civil lawsuit may ask for a stay of the proceedings. The request can be made at any point, though courts are reluctant to grant stays in the pretrial phase, such as discovery and depositions.
If a judgment is entered against a service member who could not appear because of military orders, the service member may be able to have that judgment voided.
To use these protections, the service member must actually be a party to the suit. The provision applies to civil lawsuits, paternity suits, child custody suits and bankruptcy debtor/creditor meetings. It does not apply when:
- The matter is an administrative hearing.
- The matter is a criminal proceeding.
- The matter is a child support determination.
- The service member is only a material witness, not an actual party.
- The service member has leave available and made no attempt to use it to attend.
Installment contracts, auto leases and other debts
A service member or spouse may ask for protection on pre-service debts under installment contracts and auto leases. They must show that military obligations have materially affected the ability to pay, and at least one deposit or installment payment must have been made before entry on active duty.
If the contract qualifies, the creditor may not exercise any right or option under it, such as rescinding or terminating the contract or repossessing the property, without a court order.
More broadly, a service member or dependent may apply to a court, at any time during military service or within 6 months afterward, for relief from any obligation or liability incurred before active duty, or from any tax or assessment falling during or before active service. The court may grant stays of enforcement, and no fine or penalty can accrue during the stay.
