When you’re active duty military, you sacrifice a lot to serve your country.
So it seems unfair that you could return home and discover that your lender has foreclosed because you fell behind in your mortgage payments.
The federal Servicemember’s Civil Relief Act (SCRA) is designed to protect servicemembers from civil lawsuits while they’re on active duty. Under the act, a foreclosure that occurs while you’re on active duty may be invalid, depending on the circumstances and the reason for the foreclosure.
In a federal court case last year, the United States District Court for the Eastern District of Michigan evaluated a servicemember’s request for relief from high interest rates and foreclosure.
The homeowner in Banaszak v. Citimortgage, Inc. was a captain in the Armed Services. In 2003, he signed a 30-year mortgage on his home, with a 6.785 percent interest rate. He served on active duty from 2004-2006, and again from 2007-2013. Both times, he claimed that his active duty status materially interfered with his ability to pay his mortgage. As a result, the lender agreed to two loan modifications in which interest, expenses and costs were added to the principal balance of the mortgage.
About a month after the second loan modification, the lender sent the homeowner a letter saying that his interest rate had been retroactively reduced to 6 percent in accordance with the SCRA, and that it would revert to 6.785 percent on October 1, 2008.
When the homeowner returned from active duty in March 2013, he discovered that the county treasurer had posted a foreclosure notice on his home for nonpayment of property taxes. He then filed a lawsuit against his lender, seeking money damages and an injunction to stop the foreclosure.
The court’s opinion cited four provisions of SCRA that were relevant to the case:
- Obligations incurred before the period of military service cannot bear an interest rate of greater than 6 percent during the time of active duty, and for a year afterward. Interest above 6 percent must be forgiven.
- A servicemember can apply for relief from collection of debts.
- A claim for SCRA protection cannot be the basis for an adverse credit report
- A servicemember’s real estate cannot be foreclosed for the purpose of paying taxes or other assessments.
The court found that the homeowner stated a claim against his lender for violation of SCRA because the lender did not adjust the interest rate to 6 percent for the period from October 2008 until a year after his active duty ended in March 2013.
Although SCRA prevents a foreclosure to pay taxes, the court ruled that the homeowner did not have a claim against the lender for improperly foreclosing. According to the mortgage, the homeowner, not the lender, was responsible for making tax payments. And in any event the lender wasn’t trying to foreclose: the foreclosure case was filed by the county.
For more information on fighting a Miami foreclosure, contact The Neustein Law Group PA at (305) 531-2525.