In the Army now (or Navy, or Air Force) but still have some big bills to pay? Some relief may be available, and a handful of big banks and mortgage companies aim to make sure you know about it.
Active-duty military personnel often aren’t aware that a federal law offers relief from high interest rates on many debts, including mortgages. President Barack Obama said in a speech to the American Legion that Bank of America, Wells Fargo, Citigroup’s mortgage unit, Quicken Loans and Ocwen Loan Servicing have agreed to start reaching out to active-duty personnel who they do business with to make sure they know that they might benefit from the 2003 Service Members Civil Relief Act.
“Under the law, our service members are entitled to reduced mortgage rates, but the burden is on them to ask for it and prove they’re eligible, which means a lot of folks don’t get the low rates they deserve,” Obama said.
Participants in the program the president sketched out can search a Pentagon database to determine the active-duty status of borrowers and make sure they know about the opportunity for savings under the law. It caps interest rates on pre-service debt, including mortgages, auto loans and credit card balances at 6%. Most service members either don’t know about the benefits of the law, don’t understand what they need to do to obtain them or simply haven’t taken the necessary steps, the Government Accountability Office said in January. To get the aid, a service member – including Marine Corps, Coast Guard and National Guard personnel – must alert the lender to his or her status and provide it with a copy of the relevant orders.
“Our preliminary analysis suggests that this new partnership will help tens of thousands of military families save money by reducing their mortgage interest rates,” Jeffrey Zients, the National Economic Council director, said about the effort.
Left on the table
At one large lender, more than 80% of those eligible for a reduced-rate mortgage were paying rates above 6%, the GAO said. In general, the agency said more than two-thirds of eligible service members may not be getting the help the law offers. Pentagon data indicate more than half a million may be eligible for relief.
Under the wing of the White House, bankers and mortgage lenders are taking action.
“We are committed to making all of our active-duty service member customers aware of the residential real estate mortgage protections available to them,” Michael DeVito, head of servicing for Wells Fargo Home Mortgage, said in a statement. He said the San Francisco-based bank will cut interest rates to 4% on SCRA-eligible real estate loans.
The savings can be considerable.
“On a $200,000 mortgage, even an interest rate reduction of only 1% will result in over $1,500 a year in savings,” Zients said in a White House blog post.
The law’s benefits may extend for as much as a year after active duty ends. So it could be a good deal for returning veterans as well as those currently on tours of duty.
Bill Emerson, the Quicken Loans chief executive in Detroit, summed it up succinctly: “Our military members have enough on their plate without burdening them with the added stress of having to contact their lenders to activate benefits the law entitles them to receive.”
Life saver image via Shutterstock.