Soldiers fighting overseas can get extra protection from foreclosure

A federal law approved in 2003 protects most servicemen and servicewomen from losing their house or apartment if they're deployed in another country.

Q. My husband is in the Army and has been stationed in Iraq since last year. I was forced to quit my job when my husband went overseas so I could look after our four kids, but now the bills have piled up, our mortgage is two months overdue, and the bank is threatening to foreclose. A friend says that federal law protects families who have a spouse in the military against foreclosure, but she doesn't have any details. Can you help?

A. Sure. The law you're asking about is called the Servicemembers Civil Relief Act of 2003, and it generally prohibits lenders from foreclosing on a loan if the borrower or the borrower's spouse is on active military duty.

In addition, the law states that borrowers may qualify for a reduction in their interest rate or even an outright suspension of their mortgage payments if certain conditions are met.

The SCRA protects renters who are on active duty, too. It includes one provision that can stave off a landlord's eviction notice, and another that can allow a soldier to terminate an existing lease without penalty if he or she is called to war.

The rules of the Servicemembers Civil Relief Act are complex, and not every serviceman or servicewoman qualifies. For example, those who get a dishonorable discharge often are barred from seeking help under the SCRA. And, for obvious reasons, the law doesn't protect soldiers or their spouses who lied about their income on their loan applications.

The personnel officer or the commanding officer of your husband's Army unit should be able to provide more information about the SCRA. So can the regional office of the Department of Veterans Affairs, which you'll find under the "Federal Government" headings of your local White Pages.

If you have access to the Internet, you can get additional information by visiting the VA's Web site (www.va.gov) or the site operated by the U.S. Department of Housing and Urban Development (www.hud.gov).

Please send my thanks to your husband in Iraq for fighting to keep our own nation safe, and accept my thanks to you for enduring such a difficult time.

Q. I am planning to refinance my mortgage soon. I have two credit cards that I rarely use, so I am thinking about closing both accounts to eliminate their annual membership fees. Would closing the accounts now improve my chances of getting a mortgage later?

A. No. Ironically, closing the unused credit-card accounts now may temporarily lower your credit score and hurt your ability to get a mortgage at the best interest rate when you apply to refinance.

Mortgage lenders favor loan applicants who show a steady, predictable pattern of handling their credit-card accounts and other debts. If you suddenly close the two accounts today, you'll break the pattern that you have established in the past several years, and your credit score likely will decline.

Closing the accounts now also could hurt your chances of getting a mortgage later because it would increase your debt-to-credit-limit ratio - the figure that represents the percentage of available credit that you have actually used. Lenders prefer borrowers with low debt ratios, but closing the accounts would automatically push your personal ratio higher even if you didn't put any new charges on the cards.

Because of these factors, it would be better to close the accounts after you apply for the new mortgage - not before.

Q. We formed a living trust two years ago and put our home and some other assets into it. We originally named our three grown sons as the beneficiaries, but now we would like to remove one of them because he's lazy and using drugs. Will we have to create a brand-new trust in order to remove him?

A. No. Regular readers of this column know that I'm a big fan of living trusts because assets left in a trust do not have to go through the costly and time-consuming probate process that old-fashioned wills must endure. But another benefit of forming a trust is that it usually can be updated very easily. In your case, you probably should be able to eliminate the wayward son from your inheritance by changing just a paragraph or two in the trust documents and then signing the revision with today's date.

• For a copy of the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City CA 90231-2960

© 2008, Cowles Syndicate Inc.