News · Oct. 30, 2026
SCRA mortgage interest rate cap: a VA loan servicer settlement and the 6% rule for Chicago service members
Short answer
The SCRA mortgage interest rate cap limits a VA loan, or any mortgage, taken out before you entered military service to 6% a year during your service and for one year after it ends. On Oct. 19, 2026, the U.S. Justice Department announced that VA loan servicer Village Capital & Investment will pay over $500,000, including at least $425,000 to servicemembers on at least 41 mortgages, to settle claims that it did not apply the cap. To get the lower rate, send your servicer written notice and a copy of your orders no later than 180 days after you leave service.
What did the Justice Department announce?
In a release dated Oct. 19, 2026, the Justice Department said Village Capital & Investment LLC, which services VA-guaranteed home loans, agreed to resolve allegations that it violated the Servicemembers Civil Relief Act (SCRA). The figures below are from that release and cover the whole settlement, not Illinois alone; the release does not say where the affected borrowers live.
| Item | Amount or count |
|---|---|
| Total the servicer will pay | Over $500,000 |
| Paid to affected servicemembers | At least $425,000 |
| Civil penalty | $79,380 |
| Servicemember mortgages involved | At least 41 |
The department alleged that the company did not cut rates on pre-service loans to 6% back to the date of the borrowers’ orders, did not lower monthly payments by the forgiven interest, told some borrowers their rate was already under 6% when it was not, and, after some borrowers asked for the benefit, accelerated principal payments and reported their loans to VA as delinquent. The company must also change its policies and train its staff. These are allegations resolved by settlement.
How does the SCRA 6% cap work on a mortgage?
- Which loans: debts you took on before entering military service, alone or jointly with your spouse. A VA loan you closed while already on active duty is not covered.
- How long: for a mortgage, during military service and for one year after it ends. For other debts, only during service.
- Forgiven, not deferred: interest above 6% is forgiven, and your monthly payment must drop by the forgiven amount.
- What counts as interest: service charges, renewal charges and other fees count toward the 6%; bona fide insurance does not.
- Back to your orders: once the servicer gets your notice, the cap applies from the date you were called to military service.
- Guard members: federal law covers active duty, and Guard service under a call of more than 30 consecutive days authorized by the President or Secretary of Defense under 32 U.S.C. 502(f) to respond to a declared national emergency.
A court can let a lender charge more than 6% only if it finds your military service did not materially affect your ability to pay.
Does Illinois law add anything?
Yes. The Illinois Service Member Civil Relief Act (330 ILCS 63, sections 40 and 70) applies a state 6% cap and foreclosure protections to Illinois residents. They reach some state duty that the federal law does not, but the post-service window is shorter. The table compares the two as written in the statutes; it is not a ruling on any one borrower’s case.
| Rule | Federal SCRA (50 U.S.C. 3911, 3937, 3953) | Illinois (815 ILCS 205/4.05; 735 ILCS 5/15-1501.6) |
|---|---|---|
| Who is covered | Uniformed services members on active duty; Guard on certain federal 32 U.S.C. 502(f) calls over 30 days | Illinois residents in any component of the U.S. Armed Forces or the National Guard, on full-time training or duty ordered by the President or a governor |
| Rate cap | 6% a year | 6% a year |
| How long the cap lasts on a mortgage | Service plus 1 year | During military service |
| Deadline to send notice and orders | 180 days after release from service | 180 days after release (orders for more than 29 consecutive days) |
| Foreclosure | A sale during service or within 1 year after is not valid without a court order or a waiver agreement | Court must stay the case (generally 90 days after return) or adjust payments if service affects ability to pay; relief lasts up to 90 days after service |
A lawyer at a military legal assistance office can tell you which law applies to your orders.
What is the cap worth on a Chicago VA loan?
These examples are illustrative, not real loans. Each assumes a VA loan closed before the borrower’s orders, a Reserve member mobilized for 12 months, and the federal cap, which then runs 24 months in total (12 months of service plus 1 year). Formula for the first month: forgiven interest = loan balance × (note rate − 6%) ÷ 12. The amount shrinks slightly each month as the balance falls.
| Example loan | Balance | Note rate | Interest forgiven per month | About per year |
|---|---|---|---|---|
| Two-flat bought with a VA loan | $380,000 | 7.00% | $317 | $3,800 |
| Condo bought with a VA loan | $300,000 | 6.50% | $125 | $1,500 |
| House refinanced to a low rate | $250,000 | 5.75% | $0 | $0 |
Worked example: on the two-flat, $380,000 × (7.00% − 6.00%) ÷ 12 = $316.67 in the first month. The monthly payment should fall by about that much, and the servicer may not add it back later.
How do I ask my servicer for the 6% rate?
- Check the dates. The loan must have closed before your orders.
- Send written notice (electronic notice counts) with a copy of your orders, a letter from your commanding officer or another appropriate record of service. Keep a copy and proof of delivery.
- Do it within 180 days of leaving service. Sooner is better.
- Check your next statement. The excess interest should be forgiven back to your orders date and your payment lowered, not deferred.
- Check your credit and VA status. A loan should not be reported late because of the change.
- If the servicer refuses, contact the nearest Armed Forces legal assistance office (locator at legalassistance.law.af.mil) or see servicemembers.gov.
If you are already behind on payments, VA’s home retention options, including the new partial claim, still apply. Options if you are behind on a VA mortgage.
Common questions
Does the SCRA 6% cap apply to my VA loan?
Yes, if you took out the loan before entering military service. A VA loan closed while you were already on active duty is not covered by the cap.
How long does the SCRA rate cap last on a mortgage?
Under federal law, during military service and for one year after it ends (50 U.S.C. 3937). The Illinois cap for Illinois residents lasts during military service (815 ILCS 205/4.05).
How do I get the 6% SCRA rate?
Send your servicer written notice with a copy of your orders no later than 180 days after you leave service. The cap then applies back to the date you were called to service, and interest above 6% is forgiven.
Can my lender foreclose while I am deployed?
Under federal law, a sale or foreclosure of a pre-service mortgage during service or within one year after is not valid without a court order or a waiver agreement (50 U.S.C. 3953). Illinois courts must also stay or adjust a foreclosure when service affects your ability to pay.
What was the Village Capital SCRA settlement?
On Oct. 19, 2026, the Justice Department announced that VA loan servicer Village Capital & Investment will pay over $500,000, including at least $425,000 to servicemembers and a $79,380 civil penalty, to resolve claims it failed to apply the SCRA 6% cap on at least 41 mortgages.
Sources
- VA home loan servicer Village Capital to pay over $500,000 for violating servicemembers’ rights, U.S. Department of Justice (Oct. 19, 2026)
- 50 U.S.C. 3937, maximum rate of interest on debts incurred before military service
- 50 U.S.C. 3953, mortgages and trust deeds
- 50 U.S.C. 3911, SCRA definitions
- Joint letter on SCRA interest rate protections, Justice Department and CFPB (Dec. 5, 2024)
- 815 ILCS 205/4.05, Illinois Interest Act, service members (P.A. 97-913, eff. Jan. 1, 2013)
- 330 ILCS 63, Illinois Service Member Civil Relief Act (sections 10, 40, 70)
- 735 ILCS 5/15-1501.6, Illinois foreclosure protections for service members (P.A. 97-913)
What will your VA funding fee be?
Enter a price and down payment to see the 2026 fee, or check whether you are exempt.
An independent guide. Not affiliated with or endorsed by the U.S. Department of Veterans Affairs, and not a lender. General information, not legal, tax or financial advice.