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Interest Rates Must Be Reduced

The interest rate on a mortgage incurred before you entered active duty must be reduced to 6% while you’re on active duty. (This includes all other types of other obligations, too—for example, car loans and credit cards.) Past payments of interest over 6% while you were on active duty must be forgiven (refunded), and the mortgage payment must be reduced to reflect the lower interest rate while it is in force.

To get the interest rate reduction, you must notify the creditor in writing of your duty status and include a copy of the military orders requiring active duty status. You must send this notice no later than one years after your active duty status ends. It can be retroactive to the day your active duty started.

EXAMPLE: Susan is a National Guard member. She and her husband sign a mortgage to buy a house at a subprime interest rate of 9%. Their payments are $1,900 a month. Six months later, Susan is called to active duty and deployed to Iraq. Her husband continues paying the mortgage at the required rate while Susan serves in Iraq for 15 months. When she returns home and is released from active duty, she learns from a military counselor that she was entitled to have the mortgage payments reduced while she was on active duty.

 

She promptly sends a notice to the lender of her entitlement to the 6% interest rate, with a copy of her Iraq deployment orders, and demands that retroactive adjustments be made. She receives a check for $6,000. That’s 15 months times $400, the amount her payment would have been lowered had the interest rate reduction been made when she went on active duty.

Lenders may not negatively affect your credit rating for receiving the benefits you’re entitled to under the SCRA.