Servicemembers Civil Relief Act provides no protection to a mortgagor whose obligation is incurred while in military service even if he later reenlists

In an issue of first impression, the Fourth Circuit held in Sibert v. Wells Fargo Bank, N.A., 863 F.3d 331 (4th Cir. July 17, 2017), that 50 U.S.C. § 3953 of the Servicemembers Civil Relief Act (“SCRA”) offers a mortgagor who has multiple periods of military service no protection if the obligation was incurred during active service.

While in the Navy, the mortgagor took out a mortgage loan to purchase a home. He was discharged from the Navy in July 2008. He soon defaulted on the loan prompting the mortgagee to begin foreclosure proceedings. In April 2009, the mortgagor joined the Army and in May 2009 his home was sold at a foreclosure sale.

More than five years later, the mortgagor sued the mortgagee claiming the foreclosure violated the SCRA because the mortgagee failed to obtain a court order to foreclose and sell the Property while he was in the Army. The mortgagee asserted that there was no protection under the SCRA because the obligation was incurred while the mortgagor was in the Navy. The mortgagor argued that the SCRA offers protections to obligations incurred prior to military service, and he obtained a mortgage on the Property prior to joining the Army, so the obligation is protected by the SCRA.

The parties filed cross-motions for summary judgment and the District Court granted summary judgment for the mortgagee and the Fourth Circuit affirmed. Section 3953(a) of the SCRA requires a mortgagee to obtain a court order before foreclosing on or selling property owned by a current or recent servicemember where the mortgage obligation “originated before the period of the servicemember’s military service.” In this case, there was no dispute that the mortgagor’s obligation originated while he was in the Navy. The issue was whether the fact that the debt accrued prior to mortgagor’s subsequent entry into the Army afforded him protection under the SCRA.

The Court interpreted Section 3953(a) of the SCRA as creating two classes of obligations – a class of protected obligations originating before a servicemember enters military service and an unprotected class of obligations originating during a servicemember’s military service. By protecting obligations incurred during civilian life, Congress recognized that those obligations could unexpectedly be impacted by entering into military service and that changes in income and status would not have been contemplated when the obligation was originally incurred. However, when obligations were incurred during military service, the servicemember would be aware of his income and military status and the rationale for Section 50 U.S.C. § 3953(a) does not apply.

Because Section 3953(a) does not apply to obligations that originate while a servicemember is already in the military, the SCRA did not provide protection to the mortgagor, whose mortgage debt was incurred while he was in the Navy. A later enlistment in a different branch of the service – in mortgagor’s case, the Army – cannot work to retroactively afford protection under the SCRA for a mortgage debt incurred while the mortgagor was in a different branch of the service.

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