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Eligible for 6% Rate As Result of New Active Duty

Answered by: 
Jim Bedsole
Andy Zavoina

Question: 
If an individual is already on active duty (either regular component or an activated Guard/Reservist) when they obtain a loan, separate or get released, then reenlist or get recalled to active duty, are they eligible for the 6% rate as result of the new period of active duty (even though they were active duty when the originally obtained the loan?
Answer: 

Answer from Jim: Are they eligible? Yes. Are you required to give it to them? No. This will be an institution choice to be made.

Answer: 

Answer from Andy: I haven't seen a case on this and the SCRA doesn't directly address it, but as a conservative compliance professional I would review the scenario closely. The intent of the SCRA (and its predecessor the SSCRA) is to assume a person going from civilian employment to the military takes a pay cut. If this borrower was an E-5 when they left the service, and they reenlisted as an E-4, their income was impacted. The spirit and intent would be met in this case with a reduction. Again though, I've not seen a hard and fast rule for this.

First published on BankersOnline.com 4/15/13

First published on 04/15/2013

Filed under: 
Compliance
Lending
Filed under compliance as: 
IT

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