This law establishes new rules controlling mortgage payment-free periods granted to military service members.
Military service member mortgage payment postponements – compounding and extensions
Military and Veterans Code §409.3
Amended by S.B. 720
Effective: January 1, 2014
Military service members may petition a court for a postponement of their mortgage principal and interest payments if their service has affected their ability to pay. This request may be made:
- during their service; or
- within six months of the end of their service.
If granted, the payment-free period begins on the date granted. The payment-free period is equal to the service member’s military service period. The mortgage term is extended by length of the payment-free period.
The lender may not compound interest accrued and unpaid during the payment-free period. The postponed mortgage term may run beyond the service member’s actual military service period.
Editor’s note — For example, consider a service member who petitions a court for a payment postponement. The postponement is granted 12 months into their service. The service member serves a total of 24 months. Thus, the payment-free period lasts 24 months: from the time the payment postponement is granted through the end of 12 months after the end of the service member’s service period.
The payment-free period does not postpone the required payment of property taxes, special assessments, mortgage insurance or hazard insurance through an impound account.
During the payment-free period, mortgage servicers are prohibited from:
- charging the service member penalties for nonpayment;
- compounding the interest accruing unpaid on the loan; and
- foreclosing on the mortgage.
Payments are to resume at the end of the payment-free period, under the terms of the extended mortgage.
All postponed principal and interest payments become due on the earlier of:
- any event triggering the lender’s due-on clause; or
- the end of the extended amortized mortgage term.