Q: When a spouse is on active duty and the insurance on the collateral, be it a home or a car, has been canceled, can collateral-placed insurance (CPI) be put on the loan? With the general public, when CPI is put on vehicles, the payment does go up, so the loan will mature correctly and it is mentioned in the disclosures at loan signing. When a mortgage has insurance added, it increases only the principal balance of the loan. Is this allowed on service member loans?
A: As noted in question 5, bona fide insurance is excluded from the 6 percent cap because the SCRA does not define it as interest. With respect to this insurance and the practice you describe, other federal or state laws may apply.