Gregg Marcus Blog: Military Families Offered Mortgage Relief

A well-deserved relief plan devised back in the days of World War II is still assisting military servicemen and women and their families today in bearing the burden of keeping up with mortgage payments while during deployment.

Called the 1940 Soldiers’ and Sailors’ Civil Relief Act, and revamped several years ago with the Service members Civil Relief Act of 2003, the program allows for military personnel who took on a mortgage prior to going into active duty to request that their mortgage interest rates be capped at 6% until their active service is completed.

The federal program also protects military families from foreclosure caused by mortgage payment default while the eligible family member is on tour, and for up to three moments following their return.

This means that troops in the Middle East won’t have to be distracted from their duties with worries of the interest rates on their adjustable rate mortgages resetting and other fallouts of the current economic climate. Reservists and National Guardsmen and women are also eligible for said relief.

This provision is not automatic - it must be requested by the eligible personnel. And it includes not just mortgage obligations predating active service but consumer debt (like credit cards) as well.

Federal government officials are also suggesting that lenders give eligible military personnel forbearance on all payments of principal due during and throughout active duty.

The Servicemember Civil Relief Act works for most other debts taken on prior to entering active duty. A couple credit cards like Sears and Discover don’t follow this and won’t reduce the rate. The key on the credit cards is it only applies to debt taken on prior to active duty. Anything charged after your date of service will be at the card’s current rate. So the thing with the mortgage rate being capped is good in theory, but consider most military families move every 3-4 yrs and will have to find a new place to live. So if you’re going to stay on active duty for several years, this would likely only help you if you wanted to keep a house back in your hometown your owned prior to active duty. With interest rates around 5%, this doesn’t really help much now if people can get a 5% fixed rate.

That line about giving a forbearance on principal while on active duty will only serve to perpetuate high mortgage balances and leave families with no equity in their homes.