Military Families and Foreclosure: Does Going to War Mean Losing Your House?

A wide range of financial protections are available for individuals entering the military, called to active duty, or deployed servicemembers.

With foreclosures on the rise throughout the country, military families face special challenges as soldiers and sailors often head off to war while their homes are facing foreclosure. Fortunately there is help for military families, but many may not know what steps to take in order to avoid foreclosure.

Step 1: Don’t wait until the last minute. Seeking help early on increases your options for avoiding foreclosure, and also will decrease your stress level once your foreclosure issues are resolved. Talk to your bank as soon as possible, even before you get into trouble.

Step 2: Notify your bank that you are on active duty. The Servicemembers’ Civil Relief Act (SCRA) protects soldiers and sailors from losing homes for nonpayment of mortgages while on active duty and for 90 days after they return home.

Step 3: Notify all other creditors that you are on active duty, including your credit card companies. All debt, including credit card debt, that was incurred prior to your military service or activation can only be charged a maximum of 6% interest until 90 days after you return home. Any interest that would have normally been charged over the 6% rate must be permanently forgiven. NOTE: This rule does not apply to debt incurred after your military service began.

Foreclosure and Security Clearances

Foreclosure or a deed in lieu of foreclosure will adversely affect your credit score, which may also raise questions during security-clearance procedures. “Next to bankruptcy, a foreclosure is about the worst thing you can do to your credit,” said John Gannon, senior vice president of investor education for the Financial Industry Regulatory Authority.

In an interview with Military Times, a service official familiar with the security-clearance process said, “We take into consideration when a home goes into foreclosure because service members can’t sell their homes” due to reassignment orders. “We understand they did not choose to move.” This official also noted that, ”No one is saying a foreclosure would not have an effect on a member’s security clearances. However, we do consider the circumstances. What we look at is a pattern of behavior, regardless of the amount of debt. We look at whether you are being financially responsible, whether the condition was largely beyond your control and whether [you are making] a good-faith effort to repay the debt, or are you just ignoring the bills.”

Free Legal Assistance

Free legal assistance may be available to assist with any questions you may have. Legal assistance offices are located on almost every base, ship and installation. The VA also has nine regional loan centers to provide counselling to those with VA loans as well as non-VA loans. However, those with refinanced loans may face additional challenges, since the government can only guarantee refinanced veteran loans up to $144,000.

Here are some online resources for military legal assistance:

• Armed Forces Legal Assistance Directory
• Army Legal Services
• Navy and Marine Corps Legal Services
• Coast Guard Legal Services

• DoD Military Installation Directory

Many banks are starting to work more proactively with all homeowners who are in trouble with their mortgages, often reducing the interest rate and lowering the monthly payment for an extended period of time. Be prepared to provide a reason for your financial hardship as well as some financial data, including current income and debt figures, when you call to request a loan modification. Also, if you receive a loan modification plan that is still beyond your means, call the bank back and request that they adjust their initial offer to better suit your current financial condition. Often you’ll find that the bank’s representative will be willing to work to help find you a workable plan of action.