FHA Single Family Housing Policy Handbook 4000.1, Part III — i. Servicing FHA-Insured Mortgages for Servicemember-Borrowers (03/31/2022)

FHA Single Family Housing Policy Handbook 4000.1, Part III — i. Servicing FHA-Insured Mortgages for Servicemember-Borrowers (03/31/2022)

i. Servicing FHA-Insured Mortgages for Servicemember-Borrowers (03/31/2022) i. Servicemembers Civil Relief Act The Servicemembers Civil Relief Act of 2003 (SCRA) as amended by Public Law 108- 189, effective December 19, 2003, provides legal protections and debt relief for persons in Active Duty military service. The following protections apply to the servicing of FHA- insured Mortgages: • mortgage relief; • termination of leases; • protection from eviction; • 6 percent cap on interest rates; • stays of proceedings; and • reopening Default Judgments. (A) Relief Provisions for the Military SCRA provides legal protections and debt relief for persons in Active Duty military service the criteria for which are established in 50 U.S.C. App. § 3911. Dependents of servicemembers are entitled to protection in limited situations. “Dependents” is also defined in 50 U.S.C. App. § 3911. (B) Obligations and/or Liabilities Prior to Entering into Active Military Service (1) Interest Rate Cap (a) Standard Obligations or liabilities incurred by a servicemember and/or servicemember’s spouse jointly before entering into active military service must not bear interest at a rate in excess of 6 percent per year during the period of military service and one year thereafter (unless superseded by updates to the SCRA Act), in the case of an obligation or liability consisting of a Mortgage, trust deed, or other security in the nature of a Mortgage. (b) Required Documentation The Mortgagee must apply the interest rate cap if it receives from the servicemember the documents listed below no later than 180 Days after the date of the servicemember’s termination or release from military service: • a written notice; • a copy of military orders calling the servicemember to military service; and • orders further extending military service, if any. III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages 3. Programs and Products - Servicing FHA-Insured Mortgages for Servicemember-Borrowers (03/31/2022) Handbook 4000.1 1363 Last Revised: 11/26/2025 (c) Mortgagee Implementation The Mortgagee must limit interest to 6 percent per year effective the date on which the servicemember is called to military service. Only a court may grant exceptions if the ability of the servicemember to pay interest upon the obligation or liability at a rate in excess of 6 percent per year is not materially affected by being in military service. (2) Reduction of Monthly Payments When interest must be reduced to 6 percent on an FHA-insured Mortgage due to SCRA, the Mortgagee may calculate interest due for the period of Active Duty on a per diem basis or permit the lower interest rate for the entire first and last months of service. (a) Mortgagee is Notified of SCRA Applicability Where the servicemember notifies the Mortgagee of their eligibility for SCRA protection, the Mortgagee must: • advise the servicemember or representative of the adjusted amount due; • provide adjusted coupons or billings; and • ensure reduced payments are not returned as insufficient. (b) Mortgagee is Not Notified of SCRA Applicability Where the servicemember does not notify the Mortgagee of their eligibility for SCRA protection and submits a reduced payment, the Mortgagee must: • attempt to contact the Borrower or representative to determine whether the Borrower is on Active Duty; and • return insufficient payment if appropriate explanation is not provided and otherwise in compliance with HUD guidance. (C) Verification of Military Service The Mortgagee may request a statement of military service from the U.S. Department of Defense’s Servicemembers Civil Relief Act (SCRA) website. ii. Postponement of Foreclosure (A) Reasonable Diligence Time Frame Calculation When calculating deadlines to commence foreclosure or acquire Property by other means, the Mortgagee may exclude the period of time when the Borrower is in Active Duty military service. HUD does not consider postponement or delay in initiating a foreclosure while the Borrower is Active Duty military service a failure to exercise reasonable diligence. III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages 3. Programs and Products - Servicing FHA-Insured Mortgages for Servicemember-Borrowers (03/31/2022) Handbook 4000.1 1364 Last Revised: 11/26/2025 The Mortgagee may voluntarily withhold foreclosure with or without applying Partial Payments that advance the date of Default. (B) Required Documentation The Mortgagee must document any delays associated with compliance with the SCRA in the Servicing File and the Claim File. III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages

Source: FHA Single Family Housing Policy Handbook 4000.1, Part III — i. Servicing FHA-Insured Mortgages for Servicemember-Borrowers (03/31/2022) · source URL · snapshot 8c03836f77f317e1