The VA insures lenders against default if you stop making your payment on your 100% loan. But, did you know there is also protection for you, the borrower in certain situations? It’s called the Service Member’s Civil Relief Act or SCRA. It helps protect certain veterans from foreclosure proceedings. It’s not a guaranteed coverage and it doesn’t mean you can’t lose your home, but it does provide ample protection.
Here’s how you can make the most of this benefit.
What is the SCRA?
The SCRA is protection for veterans that just returned from active duty. If you already owned a home, but were unable to make your payments while you were on active duty, you would be at risk for foreclosure. VA loans work just like any other loan, once you miss 90 days of payments, they start foreclosure proceedings.
However, with the Act, you get protection that could delay the start of foreclosure proceedings for up to 9 months. This is not an excuse to not make mortgage payments for that long, though. You have to do your part too. Something important to know, though, you do not automatically get the protection. You have to apply for it with legal counsel and within 180 days of returning home from active duty. You must be able to prove that your active duty made it impossible to make your mortgage payments on time.
How to Get Approved
Applying for the help is not enough, though. Now you have to prove that you deserve it and are putting things in place to get current on your loan. The most common methods of getting current include refinancing the loan to get a lower payment or making payment arrangements to bring the payments current. Lastly, you can try applying for a mortgage modification, which may lower your interest rate and/or reduce the amount of your principal to make the loan more affordable.
It’s not enough to tell a lender you were on active duty, though. You’ll need written proof of your call to active duty and your military orders. You’ll also need to show the lender the date you originated your loan, proving that it was prior to your call to active duty.
You must be willing to work with your lender’s choices regarding bringing your account current. For example, if they offer you a refinance that gives you a lower payment and tacks the past-due principal on the back-end of the loan, you must take it. If you refuse, the SCRA cannot help you and the lender will have the right to foreclose on you.
The SCRA is not mandatory and it isn’t set in stone that the lender cannot foreclose on your home. It’s protection that if you choose to accept it and use it wisely, can help you.
The best way to ensure approval is to act fast. Don’t wait until you are in the pre-foreclosure stage and then try to ask the lender what you can do. The quicker you contact them, the more willing they will be to work with you.
Generally, they don’t forgive principal balances unless it is an extreme situation. Instead, they will put it back on your principal balance on the back-end, allowing you to make standard payments, assuming you can afford them now. Make sure you are honest with your lender about what you can afford and how you will proceed.
If you make good on your promises, the SCRA can help you prevent foreclosure on your home. It’s the best way to keep your home while getting back on your feet after returning from active duty.