There’s been a lot of news coverage lately concerning veterans not receiving proper medical care. Sadly, that’s just one area where our military isn’t being treated appropriately.
But many do not recognize this fact, and lenders haven’t been very forthcoming about notifying them of these financial protections afforded under that law.
As a result, President Obama has announced a new voluntary partnership with banks and lenders to help spread the word about these important rights to the military community so they have every opportunity to pursue the American Dream.
So far, Bank of America, Citi, Quicken, Wells Fargo, and Ocwen Loan Servicing have partnered up with the White House to make it easier for the military to take advantage of benefits they might not be aware of.
Here’s the plan of attack:
- Lenders will proactively identify active duty service members no less than once per quarter by querying the Defense Manpower Data Center (DMDC) against their loan portfolio
- They will contact service members that are eligible for mortgage benefits via phone, mail, and e-mail outreach
- And simplify the application process to ease the burden of enrollment and satisfaction of the SCRA written notice requirement
In simple terms, these participating lenders will actively search through their customer database to determine who is eligible for relief, instead of requiring active military to contact the bank.
When it comes down to it, active military have other things to worry about, and dealing with cumbersome paperwork is probably the last thing they have time to do.
Active Military Are Entitled to 6% Mortgage Rates
The SCRA affords certain benefits to members of the U.S. Army, Navy, Air Force, Marine Corps, and Coast Guard.
One of those key provisions is a maximum interest rate on mortgage loans, which is set at six percent.
However, the creditor only has to lower the service member’s rate after receiving a written request and a copy of their military orders. As we all know, getting this paperwork to the lender can be fraught with problems.
So ideally this partnership will make it a lot easier for the military to get lower mortgage rates, despite this coming at a time when fixed mortgage rates are much closer to 4%.
For the record, the SCRA definition of “interest” includes service and renewal charges or any other fees or charges, less bona fide insurance.
The law requires that banks maintain the interest rate reduction for the period of military service and one year after it comes to an end.
Interest charged in excess of six percent must be refunded to the service member or applied to future mortgage payments, and it can be applied retroactively.
There is a caveat. If a court determines that a borrower’s ability to pay a higher rate of interest isn’t affected by his or her military service, the bank may be granted relief from the rule.
The SCRA also affords some protections that make it more difficult to foreclose on a borrower during active military duty or evict a service member.
If you’re an active duty homeowner, or plan to be, you may want to reach out to your lender to see if you’re eligible for relief, especially if your mortgage rate exceeds six percent.