50 U.S.C. §3937 — Maximum rate of interest on debts incurred before military service
SCRA §3937 is the most operative SCRA section for residential mortgage [LENDER]s. It imposes a 6%-per-year hard cap on interest on any pre- service obligation (including a mortgage, trust deed, or other security in the nature of a mortgage) during the servicemember's period of military service AND for one year after for mortgages (subsection (a)(1)(A)). Interest above 6% during the protected period is FORGIVEN — not deferred — and the periodic payment must be REDUCED by the forgiven amount, not re-amortized to maintain the pre-service payment (subsection (a)(3)). The cap is triggered by written notice + military orders within 180 days post-release (subsection (b)(1)(A)), or earlier by independent DMDC verification by [LENDER] (subsection (b)(1)(B), safe-harbor). On receipt of proper notice the cap is retroactive to the date the servicemember was called to military service (subsection (b)(2)). "Interest" is defined to include service charges, renewal charges, fees, and any other charges except bona fide insurance (subsection (d)(1)). Knowing violation is a federal criminal offense (subsection (e)).
Verbatim regulatory text
Verbatim provisions from 50 U.S.C. §3937 — Maximum rate of interest on debts incurred before military service — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
50 U.S.C. §3937(a)(1) — 6 percent interest rate ceiling on pre-service obligations
(1) Limitation to 6 percent An obligation or liability bearing interest at a rate in excess of 6 percent per year that is incurred by a servicemember, or the servicemember and the servicemember’ s spouse jointly, before the servicemember enters military service shall not bear interest at a rate in excess of 6 percent—
50 U.S.C. §3937(a)(2) — Forgiveness of interest above 6 percent
Interest at a rate in excess of 6 percent per year that would otherwise be incurred but for the prohibition in paragraph (1) is forgiven.
50 U.S.C. §3937(a)(3) — Reduction of periodic payment by forgiven interest
The amount of any periodic payment due from a servicemember under the terms of the instrument that created an obligation or liability covered by this section shall be reduced by the amount of the interest forgiven under paragraph (2) that is allocable to the period for which such payment is made.
50 U.S.C. §3937(b)(1) — Proof of military service / 180-day notice window
Not later than 180 days after the date of a servicemember ’s termination or release from military service , in order for an obligation or liability of the servicemember to be subject to the interest rate limitation in subsection (a), the servicemember shall provide to the creditor written notice and a copy of—
50 U.S.C. §3937(b)(2) — Retroactive application to call-to-service date
Upon receipt of written notice and a copy of orders calling a servicemember to military service , the creditor shall treat the debt in accordance with subsection (a), effective as of the date on which the servicemember is called to military service .
50 U.S.C. §3937(d)(1) — "Interest" includes service charges and fees
The term “ interest ” includes service charges, renewal charges, fees, or any other charges (except bona fide insurance) with respect to an obligation or liability .
50 U.S.C. §3937(b)(1) — Proof of military service / 180-day notice window — enumerated items (chapeau recall fix)
(i) the military orders calling the servicemember to military service and any orders further extending military service ; or (ii) any other appropriate indicator of military service , including a certified letter from a commanding officer. (B) Independent verification by creditor (i) In general A creditor may use, in lieu of notice and documentation under subparagraph (A), information retrieved from the Defense Manpower Data Center through the creditor’s normal business reviews of such Center for purposes of obtaining information indicating that the servicemember is on active duty. (ii) Safe harbor A creditor that uses the information retrieved from the Defense Manpower Data Center under clause (i) with respect to a servicemember has not failed to treat the debt of the servicemember in accordance with subsection (a) if— (I) such information indicates that, on the date the creditor retrieves such information, the servicemember is not on active duty; and (II) the creditor has not, by the end of the 180-day period under subparagraph (A), received the written notice and documentation required under that subparagraph with respect to the servicemember .