7.6Servicemembers and Mortgages

One of the purposes of the Servicemembers Civil Relief Act (SCRA) is “to provide for the temporary suspension of judicial and administrative proceedings and transactions that may adversely affect the civil rights of servicemembers during their military service.” 50 USC App 502(2). See also Walters v Nadell, 481 Mich 377, 386 (2008) (“Congress enacted the SCRA as a shield to protect servicemembers from having to respond to litigation while in active service”). “[The SCRA] is always to be liberally construed to protect [servicemembers].” Boone v Lightner, 319 US 561, 575 (1943) (referring to the Soldiers’ and Sailors’ Civil Relief Act, the predecessor of the SCRA).

Title III of the SCRA, 50 USC App 531–50 USC App 538, provides protection for servicemembers in proceedings related to the sale or foreclosure of a servicemember’s mortgaged property when the servicemember’s military duty materially affects his or her ability to comply with the mortgage obligation. 50 USC App 533.

A.Sale or Foreclosure of Mortgaged Property

Unless court-ordered or authorized by written waiver,1 50 USC App 533(c)(1)-(2), the sale or foreclosure of a servicemember’s mortgaged property is not valid if

•the mortgage “originated before the period of the servicemember’s military service[,]” 50 USC App 533(a)(1);

•the servicemember remains obligated to make payments on the mortgage, 50 USC App 533(a)(1); and

•the sale or foreclosure is made “during, or within one year after,[2] the period of the servicemember’s military service[,]” 50 USC App 533(c).

When an action to enforce a mortgage is filed during or within one year of a servicemember’s active service and “the servicemember’s ability to comply with the obligation is materially affected by military service[,]” the court must, upon application by the servicemember, stay any proceedings initiated to enforce a servicemember’s mortgage “for a period of time as justice and equity require,” or the court must adjust the servicemember’s mortgage obligation “to preserve the interest of all parties.” 50 USC App 533(b)(1)-(2). Additionally, the court may take either of these actions “after a hearing and on its own motion[.]” 50 USC App 533(b).

If a servicemember’s property is sold to satisfy a mortgage, the servicemember’s “period of military service”3 is not included when computing the length of time a servicemember has to redeem the property; that is, the statutory redemption period is tolled during the servicemember’s active duty. 50 USC App 526(b).

It is a Class A misdemeanor to knowingly make, cause to be made, or knowingly attempt to make or cause to be made, a prohibited sale or foreclosure of a servicemember’s mortgaged property. 50 USC App 533(d). See 18 USC 3559(a)(6). A person guilty of the misdemeanor is subject to fine of not more than $100,000,4 imprisonment for not more than one year, or both. 50 USC App 533(d). See 18 USC 3571(b)(5).

In addition to the protections offered by the federal law under the SCRA, Michigan law also offers servicemembers protection from foreclosure proceedings under certain circumstances. According to MCL 600.3185(1)(a)-(b):

•If a servicemember is the defendant in a proceeding to foreclose a mortgage or a land contract, and

•the mortgage or land contract was entered into before the defendant became a servicemember, or

•the servicemember is deployed overseas,

•the court on its own motion or on a motion by or in behalf of the defendant must

•stay the proceedings until the servicemember has been out of military service for six months, or

•issue an equitable order to preserve all parties’ interests, or

•both,

•unless the court finds that the servicemember’s ability to comply with the terms of the mortgage or land contract “is not materially affected by the [servicemember’s] military service[.]”

MCL 600.3185 “does not apply to a mortgage or land contract entered into before [May 21, 2008].” MCL 600.3185(2).

B.Default Judgments

If a default judgment in a foreclosure proceeding was entered against a servicemember during his or her military service or within 60 days of his or her release from such service, the court, on request by the servicemember or on his or her behalf, must reopen the judgment and allow the servicemember to defend the action if:

•“the servicemember was materially affected by reason of that military service in making a defense to the action[,]” 50 USC App 521(g)(1)(A), and

•“the servicemember has a meritorious or legal defense to the action or some part of it.” 50 USC App 521(g)(1)(B).

“An application [to set aside a default judgment] must be filed not later than 90 days after the date of the termination of or release from military service.” 50 USC App 521(g)(2).

“If a court vacates, sets aside, or reverses a default judgment against a servicemember and the vacating, setting aside, or reversing is because of a provision of th[e Servicemembers Civil Relief] Act . . . , that action shall not impair a right or title acquired by a bona fide purchaser for value under the default judgment.” 50 USC App 521(h).

C.Private Right of Action for Violations of the SCRA

A person has a private civil right of action for violations of the SCRA. 50 USC App 597a(a). A court may award “[a]ny person aggrieved by a violation of th[e SCRA]” all appropriate relief, including equitable or declaratory relief and money damages. 50 USC App 597a(a)(1)-(2). The court may award costs and a reasonable attorney fee to an aggrieved person who prevails in a civil action under the SCRA. 50 USC App 597a(b).

1   A servicemember may waive provisions of the Servicemembers Civil Relief Act “only if [the waiver] is in writing and is executed as an instrument separate from the obligation or liability to which it applies.” 50 USC App 517(a).

2   Beginning January 1, 2015, this one-year period will be reduced to 90 days. Accordingly, at that time, “there will be a period of 90 days after the end of the servicemember’s military service during which a foreclosure, sale, or seizure of the servicemember’s property based on a breach of a mortgage, trust deed, or other security, without a court order or waiver, will not be valid.” https://perma.cc/VX34-W4HP. The link to this resource was created using Perma.cc and directs the reader to an archived record of the page.

3    See 50 USC App 511(3) for a definition of period of military service.

4   In the alternative, the amount of the fine may be based on a person’s pecuniary loss or on the misdemeanant’s pecuniary gain. 18 USC 3571(d). “If any person derives pecuniary gain from the offense, or if the offense results in pecuniary loss to a person other than the [misdemeanant], the [misdemeanant] may be fined not more than the greater of twice the gross gain or twice the gross loss, unless imposition of a fine under this subsection would unduly complicate or prolong the sentencing process.” Id. If the misdemeanant is an organization, it is subject to a fine of not more than $200,000. 18 USC 3571(c)(5).