Congress Enacts Extension to SCRA Protections impacting Foreclosures

On March 31, 2016, President Obama signed into law S. 2393, the “Foreclosure Relief and Extension for Servicemembers Act of 2015,” which amends the Servicemembers Civil Relief Act by extending certain existing protections from foreclosure proceedings.  The new law extends through 2017 the one-year period after a service member's military service during which: (1) a court may stay proceedings to enforce an obligation on real or personal property owned by the service member before such military service; and (2) any sale, foreclosure, or seizure of such property shall be invalid without a court order or waiver agreement signed by the service member. 

Thus, once 50 U.S.C. § 3953 is officially amended, it should read as follows (anticipated amendments are highlighted):

(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 one year 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.

(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 one year 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 3918 of this title.

(d) Misdemeanor

A person who knowingly makes or causes to be made a sale, foreclosure, or seizure of property that is prohibited by subsection (c), or who knowingly attempts to do so, shall be fined as provided in Title 18 or imprisoned for not more than one year, or both.

Effective January 1, 2018, the prior nine-month period in place of the one-year period granted by the Act shall be restored.

Servicers should ensure that their foreclosure departments and foreclosure counsel are familiar with these changes.  Forms and notices containing references to SCRA protections may require amendment to conform to these enhanced protections.