for any taxes, summonses, title and registration fees, and any other obligation or
liability under the lease such as fees for excessive wear, use, and mileage.
If a residential lease called for monthly rent, cancellation takes effect thirty days
after the next due date for rent following the day the written notice is sent. For
all other property leases, the cancellation is considered effective at the end of the
month following the month in which the written notice is sent.
Delinquent Notices:
Notices must be sent to all homeowners (even those who are not service members) who are in default on a residential mortgage. It must be sent 45 days from
the date a missed payment was due. Since a lender will not necessarily know if
the delinquent mortgage borrower is on active duty, all borrowers must be notified. The Department of Defense, through the Defense Manpower Data Center
(DMDC), maintains a publicly accessible website for lenders to check the active
duty status of a person with their name, social security number, and date of birth.
When confirming active duty status, lenders should be aware that there may be a
delay in posting information to this website.
SCRA Challenges
There are several challenges bankers face when trying to comply with SCRA.
Below are just a few issues that could cause problems:
■ ■ An institution may not know at the time a mortgage is originated whether a
borrower will be eligible for SCRA protections in the future. For example, a
borrower may have no intention of joining active duty at the time the mortgage
was obtained but changed their mind and enlisted six months afterwards. In
this case, the mortgage servicer may never know the borrower’s career decision
and may fail to realize they could be eligible for SCRA protections.
■ ■ It can be difficult to interpret the military orders provided by the service
member. Several of these orders can vary in format and may not clearly show
the start and end dates of active duty service. This may lead to mistakes by the
individual(s) responsible for determining eligibility.
■ ■ Military orders may not be available in a timely manner. For example, a reservist may be notified that his or her unit is being mobilized on a certain date
but he or she does not receive the actual paper orders for several weeks later.
This could cause the bank to use an incorrect start date or delay the process of
determining SCRA eligibility.
SCRA Solutions
SCRA certainly presents challenges to any bank. It’s not easy to know when a
service member goes on active duty or to decipher their orders, but by following
a few simple steps, banks can reduce the likelihood of violating SCRA, while also
improving their own controls.
Reduce the maximum rate of interest below 6 percent
Some institutions have determined it appropriate to reduce the six percent interest
rate cap required by SCRA and they established a lower rate, such as four percent,
to emphasize the importance of staying within the limit.
Frequent review of borrower’s status throughout the foreclosure
process:
When a borrower enters into the foreclosure process, check the customer’s military status prior to the initiation of foreclosure proceedings. Do it again prior to a
foreclosure sale, and check once again prior to the scheduled sale date.
DEFINITIONS ervice members are: ■ the armed Forces, army, navy, air Force, marine corps, and coast guard reserves when they are on active duty, but not when they are on inactive duty; ■ commissioned officers of the public health service; or ■ commissioned officers of the national oceanic and atmospheric administration when they are on active duty. SEPTEMBER-OCTOBER 2012 | ABA BANK COMPLIANCE | 27
Army, Navy, Air Force, Marine Corps, or Coast
Guard are on active duty when:
■ they are on full-time duty in the active military
service of the united states, which includes
full-time training duty, annual training duty, and
attendance (while in the active military service) at
a school designated as a service school by law or
by the secretary of the military department (such
term does not include full-time national guard
duty); or
■ they are a member of the national guard under a
call to active service authorized by the president
or the secretary of defense for a period of
more than 30 consecutive days for purposes of
responding to a national emergency declared by
the president and supported by Federal funds.
Note: “Inactive duty” or “inactive duty training” is the
type of duty that guardsmen and reservists perform
during the traditional weekend drill periods.
Note: Civilian employees of the armed services, retired
military personnel, and employees of government
contractors are not protected by SCRA.
Period of military service includes:
■ the period beginning on the date on which a
service member enters military service and
ending on the date on which the service member
is released from military service or dies while in
military service.
A dependent is:
■ the service member’s spouse;
■ the service member’s child (as defined in section
101( 4) of title 38, united states code); or
■ an individual for whom the service member
provided more than half of the individual’s
support for 180 days immediately preceding an
application for relief under this act.
