Samuel F. Wright

Captain, JAGC, USN (Ret.)
Director, Service Members Law Center
(800) 809-9448, ext. 730
Email: swright@roa.org
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Law Review 1242

LAW REVIEW 1242

April 2012

SCRA Forbids Non-Judicial Foreclosure During or Within Nine Months After Active Duty

By Captain Samuel F. Wright, JAGC, USN (Ret.)

4.6—Eviction and Foreclosure Protection

Q:  I am an enlisted member of the Marine Corps Reserve.  Last year, I was called to active duty for seven months (May-December) and deployed to Afghanistan.  I lost a lot of income during that period, because my civilian job pays me substantially more than I earned on active duty, even when you factor in the hazardous duty pay and tax break for serving in Afghanistan.  I was having some financial difficulties even before I was called to active duty, and the active duty made them worse.  As a result, I fell behind in the mortgage payments on my house, and now the bank is threatening to foreclose.

When I obtained the mortgage and bought the house in 2005, I signed a “deed of trust” that provides that if I fall behind in mortgage payments the “trustee” can agree to foreclosure without the bank having to go to court. That is the provision that the bank is threatening to invoke now.  I heard a presentation by a military lawyer, and she said that a federal law called the Servicemembers Civil Relief Act (SCRA) forbids non-judicial foreclosure during or within nine months after my active duty.  How does this provision work?

A:  Congress enacted the SCRA in 2003, as a long-overdue rewrite of the Soldiers’ and Sailors’ Civil Relief Act (SSCRA), which dates back to 1917.  The SCRA is codified at sections 501-597b of the Appendix to title 50 of the United States Code (50 U.S.C. App. 501-597b).  Section 533(c) provides:

A sale, foreclosure, or seizure of property for a breach of an obligation described in subsection (a) shall not be valid if made during, or within 9 months after, the period of the servicemember’s military service except—

(1)Upon a court order granted before such sale, foreclosure, or seizure with a return made and approved by the court; or

(2)If made pursuant to an agreement as provided in section 107 [50 U.S.C. App. 517].

50 U.S.C. App. 533(c) (emphasis supplied).

It is clear that your mortgage qualifies.  Under the SCRA, it is unlawful to foreclose on the property without a court order.  It does not matter that your state law permits non-judicial foreclosure under these circumstances.  Under Article VI, Section 2 of the United States Constitution (commonly called the “Supremacy Clause”), a federal statute like the SCRA trumps a conflicting state law or a provision of a state constitution.

Under section 107 of the SCRA (50 U.S.C. App. 517), you can waive your right to avoid non-judicial foreclosure on the property, but such a waiver must be in writing and must be made during or after (not before) your period of active military service.  Since you signed the deed of trust in 2005, when you bought the property, and since you were not on active duty at that time, that deed of trust does not validly waive your rights.

If you are going to sign a waiver of your rights, you should obtain something of value in exchange for the waiver.  For example, the bank might agree to a “short sale” wherein the bank agrees to accept the purchase price that you receive in exchange for the property as a full and final satisfaction of your obligations under the mortgage; i.e., the bank agrees to release you from liability over and above that purchase price.  I suggest that you need an attorney to arrange for such a settlement.  Please remember Abraham Lincoln’s famous maxim:  “A man who represents himself has a fool for a client.”

Q:  What happens if the bank proceeds with the non-judicial foreclosure during the nine months after I left active duty?

A:  Some serious consequences could follow as stated in the United States Code:

A person who knowingly makes or causes to be made a sale, foreclosure, or seizure of property that is prohibited by subsection (c) [50 U.S.C. App. 533(c)], or who knowingly attempts to do so, shall be fined as provided in title 18, United States Code, or imprisoned for not more than one year, or both. 

50 U.S.C. 533(d) (emphasis supplied).