We need some advice. Regarding the SSCRA & construction loan. Here's the situation, husband & wife entered into a construction/perm loan with us. Construction is being extended; they are now in default. Upon notifying them that they were in default, the husband says (1) they are now divorced and he remarried and (2) because the ex-wife is in active duty, they want relief from SSCRA.

So until the default notice, we didn't know the h/w were divorced nor that the ex-wife was active duty.

Do we have to reduce payments?
I assume we cannot collect on default?
Can we extend the construction loan?
Ex-wife still wants name on note - new wife does not want to be obligated. Does SSCRA still apply?

We are finding out the following, if the debt came first or the active duty came first if she was reserve; when they became divorced.

I don't know all the answers, but if one of the obligors is now active duty and wasn't then SCRA (fka SSCRA) will apply. I don't know that you are stuck with 6% on any renewal/perm loan. I also don't believe you will be able to require the new spouse to sign anything other than collateral documents.

Counsel may be needed on this one.

This is a first for me where the ex still wants to be obligated and the new spouse does not want to be obligated.

I'll have to do more research since I am counsel.

I’m like Andy I don’t have the answers but will share a couple of thoughts just in case you have not already thought of them.

1. Which ex-spouse is living/retaining ownership in the property?

2. If the ex-wife is not retaining ownership, is she staying on the note just to be able to put the ex-husband in a position to invoke SCRA?

3. If you extend the note, I think SCRA would apply if the ex-wife remains on the note. My reasoning is you are extending an existing loan made before her active duty and not making a new one (this is just a thought and I took nothing from the Law to back it up).

4. Depending on the delinquency category and the “customer” relationship is this a loan you may want to pursue the courts for a stay from SCRA? It would seem to me if the ex-wife has no interest in the property then her remaining on the note is manner of “fraud”. That may be too strong of a word but the only one I can think to use this early.

Thanks for your help. I've decided that we may file a default action in state court and have them remove to fed court if they want to invoke SCRA.

The husband is the one that will be living in the property with his new wife. The ex-wife, I'm not sure why she would want to be on the note; in fact, when I receive a copy of the divorce decree, this may clear some of the picture.

I believe with another reading of the SCRA, that the construction extension could arguably be part of the orgininal note; however, we could also argue that since the borrowers did not fulfill the original contract, that the extension would be a new contract/note/mortgage since the original construction mortgage did not contemplate extensions.

This is quite a sticky situation; Hopefully we can hold off until Mary Beth's teleconference. Although I think we may be taking action before that.