The rules governing the SCRA notice requirements are found in the Homeownership Counseling Act provisions of the Housing and Urban Development Act of 1968, and we link to the relevant provisions in the resources below.

We believe that your bank must send this notice to all eligible borrowers who become delinquent, even if your system indicates that they are not in the military. The notice requirement applies to all “eligible homeowners,” which are borrowers whose home loans are secured by their principal residence and who have defaulted on their loan payments for one of four specified reasons (a loss or reduction in the homeowner’s employment, a similar loss or reduction experienced by a person who contributes to the homeowner’s income, a reduction in household income due to divorce or death, or a significant increase in a homeowner’s basic expenses), or whose annual income is no greater than the low- or moderate- income levels set by the Secretary of Housing and Urban Development.

Whether a loan is extended for a business purpose or consumer purpose has no bearing on a creditor’s duty to send an SCRA notice, provided the loan is secured by the borrower’s principal residence. The most recent version of the SCRA notice, which expires on March 30, 2021, is included in the resources below.

For resources related to our guidance, please see:

• Consumer Compliance Outlook, Servicemember Financial Protection Webinar: Questions and Answers (First Quarter 2013) (“The SCRA notice requirement at issue, imposed by the Homeownership Counseling Act (12 U.S.C. §1701x(c)(5)(A)), applies to loans secured by a mortgage or lien on the principal residence of the person to whom the notice must be given — whether open- or closed-end, first- or second-lien, business purpose or consumer purpose. The notice requirement is generally triggered when a borrower applies for, or defaults on, a home loan, defined as ‘a loan secured by a mortgage or lien on residential property’ secured by the borrower’s or the applicant’s principal residence.”)

• Housing and Urban Development Act of 1968, 12 USC 1701x(c)(5)(A)(i) (“Except as provided in subparagraph (C), the creditor of a loan (or proposed creditor) shall provide notice under clause (ii) to (I) any eligible homeowner who fails to pay any amount by the date the amount is due under a home loan, and (II) any applicant for a mortgage described in paragraph (4).”)

• Housing and Urban Development Act of 1968, 12 USC 1701x(c)(6) (“For the purposes of this subsection:

(A) The term ‘creditor’ means a person or entity that is servicing a home loan on behalf of itself or another person or entity.

(B) The term ‘eligible homeowner’ means a homeowner eligible for counseling under paragraph (4).

(C) The term ‘home loan’ means a loan secured by a mortgage or lien on residential property.

(D) The term ‘homeowner’ means a person who is obligated under a home loan.

(E) The term ‘residential property’ means a 1-family residence, including a 1-family unit in a condominium project, a membership interest and occupancy agreement in a cooperative housing project, and a manufactured home and the lot on which the home is situated.”)

• Housing and Urban Development Act of 1968, 12 USC 1701x(c)(4) (“A homeowner shall be eligible for homeownership counseling under this subsection if

(A) the home loan is secured by property that is the principal residence (as defined by the Secretary) of the homeowner

(B) the home loan is not assisted under title V of the Housing Act of 1949 [42 U.S.C.A. § 1471 et seq.]; and

(C) the homeowner is, or is expected to be, unable to make payments, correct a home loan delinquency within a reasonable time, or resume full home loan payments due to a reduction in the income of the homeowner because of

• (i) an involuntary loss of, or reduction in, the employment of the homeowner, the self-employment of the homeowner, or income from the pursuit of the occupation of the homeowner;
• (ii) any similar loss or reduction experienced by any person who contributes to the income of the homeowner;
• (iii) a significant reduction in the income of the household due to divorce or death; or
• (iv) a significant increase in basic expenses of the homeowner or an immediate family member of the homeowner (including the spouse, child, or parent for whom the homeowner provides substantial care or financial assistance) due to (I) an unexpected or significant increase in medical expenses; (II) a divorce; (III) unexpected and significant damage to the property, the repair of which will not be covered by private or public insurance; or (IV) a large property-tax increase; or

(D) the Secretary of Housing and Urban Development determines that the annual income of the homeowner is no greater than the annual income established by the Secretary as being of low- or moderate-income.”)