Slobodan Milosevic doesn't know it -- he probably doesn't care, either -- but
the Yugoslav president has given a large number of reservists the opportunity
to lower
their mortgage rates without refinancing, at least for a while.
Under the Soldiers' and Sailors Civil Relief Act, a little known and
often misunderstood law passed by Congress in 1940 and amended several times
since then, the home owners among the weekend warriors called to active duty to
force Milosevic out of Kosovo may be allowed to lower their loan rates.
So far, only 33,000 part-timers have been called up by the Defense
Department. But if the conflict spreads, or if NATO decides to send in ground
troops, that number could grow. During the Gulf War in 1990, more than 230,000
troops were called to active duty, triggering the law on the grandest scale
ever, according to Alan Wolf, a Newport Beach, Calif., attorney who specializes
in mortgage law.
The basic thrust of the Act is that service personnel should not be
disadvantaged when called to active duty. As such, it requires lenders to
reduce the mortgage payments of those who enter active service after becoming
home owners to 6 percent and forgive the difference.
It also protects borrowers against legal proceedings. It waives the
collection of late fees, prohibits lenders from starting or continuing
foreclosure without written
consent of the borrower or a court order, and suspends any statutory redemption
period if the mortgage already has been foreclosed upon.
The law requires borrowers to petition the court for relief, so assistance
isn't automatic. But during the Gulf War, Fannie Mae and Freddie Mac, the
nation's largest
mortgage investors, waived that requirement, accepting instead a copy of the
individual's orders as the only evidence necessary. And they could do so again
if the size of the call-up increases.
Last time, the two huge financial institutions even extended the law to
individuals who worked in geographic areas tied "very closely" economically to
military
installations and were impacted by the shipment of troops to the Middle East.
Fannie Mae and Freddie Mac do not control all mortgages, so their marching
orders aren't followed by every lender. But many follow the lead of the two
government-sponsored enterprises, so it was worth it back then for anyone
struggling to make a house payment as a result of the conflict to contact their
lenders. And it may once again be worthwhile to pick up the phone, so stay
tuned.
Under the law, relief begins when an individual receives orders to report
to active duty and ends 90 days after separation. During that time, the
difference between the note rate and 6 percent is forgiven, not deferred. In
other words, the lender must absorb the loss, not carry it over until the
reservist goes back to work.
During the Gulf War, though, if the borrower could show extreme hardship,
Fannie and
Freddie went even further, allowing lenders to accept payments lower than those
calculated at 6 percent. Ideally, the payment should have been large enough to
cover escrow deposits for property taxes and homeowner's insurance. But no
minimum was set; each case was decided on its own merits.
Published: June 7, 1999
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