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.[i]  To determine whether a trustor is protected by the SCRA, we obtain the so-called “non-military” affidavit (the “NMA”).  The NMA is prepared by the servicer (or beneficiary) who has had contact with the trustor or another party to ensure that the trustor is not on active duty.  The servicer should also check the database maintained by the Department of Defense at https://www.dmdc.osd.mil/appj/scra to ascertain military status.  By entering the trustor’s name and social security number, the database will disclose if there is a record of whether the trustor is on active duty and the date that active duty commenced and terminated.  Preparing and/or submitting an NMA knowingly containing false information subjects the affiant to fine and/or imprisonment for up to one year.[ii]

Knowing the date active duty commenced is important as the SCRA protections are afforded when there is a change in circumstances.  If the trustor was on active duty when the loan was originated, the SCRA would not apply,[iii] because as far as the loan is concerned, nothing has changed to adversely affect the trustor’s ability to pay their debt (e.g., reduction in pay).  If the loan originated after the trustor entered active duty (or was a reservist called to active duty), then the SCRA would apply and the lender and trustee would be required to follow its guidelines.

Even though you may have received the non-military affidavit from the servicer, the trustor or another party may nonetheless advise you of the trustor’s active duty status.  If that occurs, you should verify the status on the DOD website.  If the trustor is on active duty, processing a non-judicial foreclosure must stop.[iv]  Protections afforded to active duty members include cessation of all collection activity for a minimum of 90 days, a cap on the interest rate to 6%,[v] forgiveness of interest charged in excess of 6% per annum,[vi] no acceleration of principal,[vii] no late charges may be imposed and no default interest may be accrue.[viii]  Additionally, the period of military service may toll the trustor’s right to reinstate or redeem the property prior to sale.[ix]

In order to qualify for the maximum interest rate of 6%, the servicemember must notify the creditor in writing and provide a copy of the orders calling the servicemember to active duty.[x]  The protections of the SCRA remain in effect for a minimum of 90 days and may be in effect for as long as the duration of the members’ active duty plus 90 days thereafter. Beware though, certain states (such as California) have enacted a comparable statute that restricts a Lender’s right to collect even moreso than the SCRA.  However, without either a court order allowing the proceeding to continue or a written agreement of waiver[xi] (executed after the military service commenced), a foreclosure sale may not be valid if it is made during or within nine (9) months after the period of military service ends.[xii]  Knowingly foreclosing on a property owned by a servicemember where the loan originated prior to active duty and for which the servicemember continues to be obligated, subjects the violator to fine and/or imprisonment.[xiii]

The servicemember has the authority to sue in court for equitable relief (such as a stay) and monetary damages, including attorneys’ fees.[xiv]  If a pattern emerges where there are multiple violations of the SCRA, the U.S. Attorney General is empowered to commence a civil action seeking equitable relief, monetary damages, and a civil fine not to exceed $55,000 for the first violation, and $110,000 for each subsequent violation.[xv]

All in all, if there is any question, it is better to verify the status online and avoid any headaches.

[i] SCRA §516(a)

[ii] SCRA §521(c)

[iii] SCRA §533(a)(1)

[iv] SCRA §533(b)

[v] SCRA §527(a)(1)

[vi] SCRA §571(a)(2)

[vii] SCRA §527(a)(3)

[viii] SCRA §523(a)

[ix] SCRA §526(b)

[x] SCRA §527(b)(1)

[xi] SCRA §517(a)

[xii] SCRA §533(c)

[xiii] SCRA §533(d)

[xiv] SCRA §597a

[xv] SCRA §597

 

 

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