Military to get reduced rates on mortgages

Thursday, Sept. 27, 2001 | 10:08 a.m.

Reservists and members of the National Guard called to active duty will be able to save money on their monthly mortgage payments under a 61-year-old congressional action, federal officials said this week.

The policy, announced Monday by U.S. Housing and Urban Development Secretary Mel Martinez and Defense Secretary Donald Rumsfeld, calls for all Federal Housing Authority-approved lenders to reduce mortgage interest rates to no higher than 6 percent for military personnel on active duty.

"We applaud the government for this action," said Bill Yaffe of Philadelphia Freedom Mortgage Bankers, which has operated locally for 20 years.

The announcement means that on a $100,000 home, a military member who is paying $656 a month at 6 7/8 percent -- the average rate as of Tuesday -- will pay $599 a month under the 6 percent cap, said Yaffe, whose firm does FHA, Veterans Administration and conventional loans.

The action stems from the 1940 Soldiers and Sailors Civil Relief Act, which also prohibits any mortgage lender from initiating foreclosure against those on active duty without court approval or an agreement between the parties.

The act also provides reservists and Guard members who are renters some protection against evictions and the termination of their leases when they are recalled to duty.

Yaffe said he does not know whether the policy will result in reservists and National Guard members flocking to buy homes, given the uncertain climate created by the Sept. 11 terrorist attacks on New York City and Washington that has led to them being called up for active duty.

However, purchases of new homes, previously owned homes and the refinancing of homes locally has been brisk amid considerably lower interest rates in recent months, he said.

Martinez, in a news release, said the mortgage cap shows the government is standing behind its fighting men and women.

mortgage rate cap.

HUD has set up a toll-free number for servicemen and women with questions at (888) 297-8685, 5 a.m.-5 p.m. weekdays.