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The Servicemembers Civil Relief Act (SCRA) Part 2: Rights for Homeowners During Foreclosure Or a Short Sale

Seattle Short Sales - Friday, January 25, 2013
This article is Part 2 of a two-part series on the Servicemembers Civil Relief Act (SCRA). Part 1 focussed on how homeowners and renters can take advantage of the protections that the SCRA provides for them. This instalment looks at protections for servicemembers who are undergoing foreclosure, and the case where servicemembers who are considering a short sale of their home are asked to sign a waiver to relinquish their SCRA rights.

How can SCRA help servicemembers through foreclosure?

If a lender elects to judicially foreclose on a property then the borrower may, within 12 months after the trustee sale date, “redeem” the property by paying the amount of the highest bid at the trustee auction. During this 12-month redemption period the borrower may continue to reside in the home. (Note that, in Washington state, that this right of redemption does not apply in the majority of cases, as most lenders foreclose non-judicially).

Within the context of a judicial foreclosure lawsuit, the SCRA generally provides the servicemember with three types of relief:

  • a stay (delay) of the foreclosure proceedings, or an extension of the maturity date of the loan, along with reduced monthly payments;
  • where foreclosure judgment has already been ordered, reopening the case and “undoing” the foreclosure;
  • and where a sale has taken place under a judgment of foreclosure, the redemption period may be extended during the servicemember’s period of military service. This means the time during which you can reclaim your home by paying back the full amount of the mortgage loan, plus legal costs and fees, is extended.

The foregoing rights are only relevant to the extent that you want to put a stop to foreclosure and only if your goal is to remain in the home. For some people, however, it may make more financial for them to get rid of the underwater property, for example, via a short sale.

What if I am asked to sign a waiver of my SCRA rights in order to get a short sale approved?

If your objective is to walk away from the property or you wish to undertake a short sale, then the rights under the SCRA won’t necessarily provide you with a great deal of meaningful protection.

Lenders may require that a servicemember sign a Waiver of Rights Under the SCRA in order to approve a short sale and complete the transaction. What is a homeowner really “giving away” by signing such a waiver?

The most important rights that one would be waiving by signing the release include the protections against foreclosure and the right of redemption, both described above. In Washington State, these rights become largely irrelevant if the homeowner wishes to walk away from the property. The rights are intended to protect military homeowners who wish to keep their homes, rather than those who want to start fresh so that they may “move to freedom.”

In most cases, within a short sale transaction, signing such a waiver would result in only a very limited release of one’s rights. The waiver of rights would only apply to that particular property and only if the short sale actually closes.   

If you have additional questions about how the SCRA applies to you, you should consult with your Judge Advocate General or other military lawyer. Military legal assistance attorneys are available to provide guidance on the SCRA. You can also read the entire Act here: Servicemembers Civil Relief Act (SCRA)

Seattle Short Sales has the most experienced and most successful real estate short sale specialists working with us. We close, on average, 15% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

A short sale can improve your credit, and help you to avoid foreclosure and get a fresh start. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

The Servicemembers Civil Relief Act (SCRA) Part 1: Protections for Homeowners and Renters

Seattle Short Sales - Thursday, January 24, 2013

This article is Part 1 of a two-part series on the Servicemembers Civil Relief Act (SCRA). This instalment focusses on how homeowners and renters can take advantage of the protections that the SCRA provides for them. Part 2 of this SCRA series, to be published tomorrow, looks at protections for servicemembers who are undergoing foreclosure, and the case where servicemembers who are considering a short sale of their home are asked to sign a waiver to relinquish their SCRA rights.

Servicemembers who are on active military duty, and especially those who are serving overseas, may find it challenging to meet financial or legal obligations back home. The Servicemembers Civil Relief Act (SCRA) is a law, passed in 1940 and most recently amended in 1993, that protects servicemembers from being sued (e.g. through foreclosure) while they are protecting their country. In today’s difficult economic climate, servicemembers who are in financial difficulty or who are having trouble making their mortgage payments can take advantage of the protections that the SCRA provides.

Who is eligible under the SCRA?

Servicemembers including soldiers, sailors, Marines and airmen are eligible for relief under the SCRA, as are members of the Coast Guard and commissioned officers in the Public Health Service and the National Oceanic and Atmospheric Administration. Servicemembers are eligible while in active duty, and for up to a year afterward.

What protections does the SCRA provide?

The SCRA essentially protects servicemembers from being sued, or any legal action involving a civil matter (such as through bankruptcy, foreclosure, or divorce). These types of legal actions are put on hold until the servicemember returns from active duty.

Some highlights that pertain to servicemembers renting a home are:
  • Protection from eviction: A landlord may not evict an active servicemember other than by court order.
  • Termination of leases: A residential lease (for example, renting a home) may be terminated by the servicemember when they enter active military service or if they are already in active service and receive Permanent Change of Station Orders.
And some highlights that pertain to homeowners who are having trouble meeting their mortgage payments are:
  • 6% cap on interest rates: Interest rates are capped for active-duty servicemembers at 6%, even if the agreed rate was greater than 6% before they entered active duty.
  • Setting aside of default judgments: If a default judgment was entered against a servicemember who was unable to respond because of their deployment, the case can be set aside and reopened after the servicemember is released from service.
  • Mortgage relief: The court may stay any foreclosure proceedings against a servicemember who is in active duty (or for 90 days after their release), and may even adjust the terms of the mortgage loan in order to “preserve the interests of all parties.”

The SCRA actually provides a great deal more protections beyond those listed above for servicemembers who want to stay in their homes. The Supreme Court has held that the Act must be interpreted with "an eye friendly to those who dropped their affairs to answer their country's call."

If you think you qualify for these, or other, provisions in the SCRA, it is important that you read the details and eligibility requirements in the SCRA. Part 2 of this SCRA series, to be published tomorrow, will examine the rights of servicemembers who are being foreclosed on or who are considering a short sale.

Seattle Short Sales has the most experienced and most successful real estate short sale specialists working with us. We close, on average, 15% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

A short sale can improve your credit, and help you to avoid foreclosure and get a fresh start. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

 


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