Although market analysts believe that the federal government's invocation of the Soldiers' and Sailors' Civil Relief Act of 1940 (SSCRA) will likely have minimal impact on ABS and MBS, a report from Nomura Securities last week pointed out that the Act can potentially affect different asset classes in various ways, depending upon how strongly each asset class is bolstered by credit enhancement mechanisms.

Given that the Defense Department has authorization to activate up to 50,000 National Guard and Reserve troops, reservists are now protected under the Act, which makes it more difficult for landlords or lenders to evict them when they are called to active duty. The law restricts mortgage rates to 6% or less for those on active duty and prohibits foreclosures. When active duty ends, the original interest rate is re-instated; the prohibition on foreclosures lasts until three months after the conclusion of an individual's active duty service in the military.

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