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 1292

September 2012

Illegal Non-Judicial Foreclosure on Service Member’s House

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

4.3—Right to Continuance and Protection against Default Judgment
4.6—Eviction and Foreclosure Protection
4.9—SCRA Enforcement

Q:  I am an attorney in a small town in Michigan.  I have two clients—a Soldier in the United States Army and his wife.  I have never served in the military myself, and these military issues are so confusing.  Help!

Let’s call the Soldier Joe Smith.  In 2006, Joe and his wife bought a house, using a mortgage obtained from ABC Bank.  Joe was in the Army Reserve but not on active duty at the time. The standard mortgage documentation included a “deed of trust” in which Joe and his wife appointed a “trustee” who is authorized to “agree to” a non-judicial foreclosure at any time that the couple is more than two months behind on mortgage payments.

In 2007, Joe was recalled to active duty and deployed to Iraq.  After his one-year involuntary recall to active duty, Joe volunteered to stay on active duty long-term and transferred to the Regular Army.  In September 2011, Joe was transferred to Fort Hood, Texas, for four months of training in preparation for a one-year assignment in Afghanistan. 

Joe’s wife, Josephine, accompanied her husband to Fort Hood to be with him during his four months of training.  They locked up the Michigan house, leaving most of their furniture and other belongings there, and they lived in assigned military quarters at Fort Hood during Joe’s training.  At the end of December, 2011, Joe completed his Fort Hood training and deployed to Afghanistan, and Josephine then drove back to Michigan to move back into the house.

When she arrived at the house, she was shocked to find all their furniture and belongings out on the yard, damaged beyond repair by the winter weather.  The locks had been changed, and there were large padlocks blocking entrance to the doors and windows.  Josephine hired a locksmith, at considerable expense, to gain access to her own house.  Inside, she found that a contractor had “winterized” the house poorly and had caused great damage.  The Smiths’ losses, for damages to the house and belongings, are well in excess of $200,000.

Upon investigation, we learned that ABC Bank had “assumed” that the Smiths had walked away from their mortgage, because there was no one home for many weeks in the fall of 2011.  Although the Smiths were only one month behind on mortgage payments, the bank foreclosed, without a court order.  All of these damages are the direct result of the foreclosure.

I understand that there is a federal law called the Soldiers’ and Sailors’ Civil Relief Act (SSCRA) and that you are an expert in that law.  Have the Smiths’ SSCRA rights been violated?  Can I sue ABC Bank in federal court on their behalf?

A:  In 2003, Congress enacted the Servicemembers Civil Relief Act (SCRA), as a long-overdue rewrite of the SSCRA, which was originally enacted in 1917, when the United States entered World War I.  The SCRA is codified at sections 501 through 597b of the Appendix to Title 50 of the United States Code (50 U.S.C. App. 501-597b).

I invite your attention to www.servicemembers-lawcenter.org.  You will find 792 articles about the SCRA, the Uniformed Services Employment and Reemployment Rights Act (USERRA), the Uniformed and Overseas Citizens Absentee Voting Act (UOCAVA), and other laws that are especially pertinent to those who serve our country in uniform.  You will also find a detailed Subject Index[1] and a search function, to facilitate finding articles about very specific topics.  I initiated this column in 1997, and we add new articles each week.

I retired from the Judge Advocate General’s Corps of the Navy Reserve in 2007.  In 2009, I retired from the private practice of law and joined the full-time staff of the Reserve Officers Association (ROA), as the first Director of the Service Members Law Center (SMLC).  Each month, I receive and respond to upwards of 700 calls and e-mails from service members, military family members, attorneys, employers, reporters, congressional staffers, and others, with questions about military-legal topics.  I am here answering calls and e-mails during regular business hours and until 10 p.m. Eastern Time Monday and Thursday evenings.  Most of the questions are about USERRA, but I also receive a considerable number of inquiries about the SCRA.

It seems clear that ABC Bank violated section 303 of the SCRA.  That section provides as follows:

§ 533. Mortgages and trust deeds [Sec. 303]

(a) Mortgage as security. This section applies only to an obligation on real or personal property owned by a servicemember that--

(1) originated before the period of the servicemember's military service and for which the servicemember is still obligated; and

(2) is secured by a mortgage, trust deed, or other security in the nature of a mortgage.

(b) Stay of proceedings and adjustment of obligation. In an action filed during, or within 9 months after, a servicemember's period of military service to enforce an obligation described in subsection (a), the court may after a hearing and on its own motion and shall upon

application by a servicemember when the servicemember's ability to comply with the obligation is materially affected by military service--

(1) stay the proceedings for a period of time as justice and equity require, or

(2) adjust the obligation to preserve the interests of all parties.

[The phrase “or within 9 months” in subsections (b) and (c) was added by P.L. 110-289, effective July 30, 2008. The “sunset” of the additional 9 month period of protection was extended to December 31, 2012 by S.

4508. That bill passed on December 22, 2010.]

(c) Sale or foreclosure. 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 service-member'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].

(d) Misdemeanor. A person who knowingly makes or causes to be made a sale, foreclosure, or seizure of property that is prohibited by sub-section (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. App. 533.

Because Joe and Josephine obtained the mortgage and signed the deed of trust at a time when Joe was not on active duty, and because Joe was on active duty at the time of the foreclosure, it was unlawful for ABC Bank to initiate a non-judicial foreclosure.  The Department of Defense (DOD) operates a free service enabling attorneys, banks, and other creditors to learn easily that a named person (with a known date of birth and Social Security number) is or is not on active duty in the armed forces.

Section 303 of the SCRA makes it unlawful for bank to foreclose, without a court order, because the SCRA also provides procedural safeguards for service members in federal and state judicial and administrative proceedings.[2]  Your clients’ case is an excellent example of the need for the rule against non-judicial foreclosures on active duty service members.

Section 303(c)(2) of the SCRA [50 U.S.C. App. 533(c)(2)] provides for non-judicial foreclosure in these circumstances “if made pursuant to an agreement as provided in section 107” [50 U.S.C. App. 517].  Section 107 provides that a service member may waive SCRA rights, but the section has multiple requirements (including type size of at least 12) that must be met if a waiver is to be effective.  It is clear that your client Joe Smith has not effectively waived his SCRA rights.

Q:  Does the SCRA provide a private right of action?  Am I permitted to file suit in federal court on behalf of Joe and Josephine Smith?  If I file suit on their behalf and win, do I get attorney fees?

A:  Yes to all three questions.  Section 802 of the SCRA[3] (50 U.S.C. App. 597a) creates an explicit private right of action in federal court.  That section also provides for requiring the defendant to pay the attorney fees of the successful SCRA plaintiff.

It appears to me that your clients also have common law tort claims against the bank.  Because these state law claims arise out of the same set of transactions and occurrences as the SCRA claims, you can bring these state law claims in federal court, along with your federal claims, under what is known as supplemental jurisdiction.  See 28 U.S.C. 1367.

Good luck and thank you for undertaking to represent this military family.  Please let me know how the case turns out.



[1] In the Subject Index, Category 4 is about the SCRA.

[2] For example, under section 201(b) of the SCRA, 50 U.S.C. App. 521(b), the court must obtain from the plaintiff an affidavit to the effect that the defendant is not a member of the armed forces on active duty, as a condition precedent to granting a default judgment for the plaintiff.  If the defendant is on active duty, section 201 of the SCRA provides several actions that must be taken before judgment can be entered against the defendant.  The point of these safeguards is to ensure that the active duty defendant is in fact aware of the lawsuit and has had the opportunity to defend.  A bank could make a mockery of these SCRA protections if it could bypass the judicial process altogether by means of non-judicial foreclosure. 

[3] Section 802 was added by Public Law 111-275, effective October 13, 2010.  Prior to 2010, the SCRA did not contain an explicit private right of action, but most of the courts that addressed the question found an implied private right of action.