Foreclosure Protections & the Military: When a Servicemember Gets a Mortgage After Active Duty

The Servicemembers Civil Relief Act (SCRA) provides legal relief to military personnel who are in danger of foreclosure. Not only are servicemembers entitled to certain protections from the foreclosure of mortgage obligations taken out before going on active duty, there are also protections that pertain to mortgages taken outafter going on active duty. Read on to learn more about how the SCRA can help you if you are a military servicemember facing the foreclosure of your home.

Mortgage Taken Out Before Beginning Active Duty

The SCRA states that if you obtained your mortgage before you were an active military member, a foreclosure, sale, or seizure of the property is not valid if made during or within nine months (increased from 90 days in 2010) after your period of military service unless:

• a court issues an order approving the foreclosure (before the foreclosure sale), or
• the lender gets a written waiver allowing it to foreclose (50 U.S.C. App. § 533).

Timelines Will Change on January 1, 2015

Prior to February 2, 2013, the time period for which the protections applied was within 90 days after military service. On August 6, 2012, Congress enacted the Honoring America’s Veterans and Caring for Camp Lejeune Families Act of 2012, which amended and extended the period during which these SCRA protections apply to 9 months after military service. These extensions are effective starting February 2, 2013. However, the extension is scheduled to sunset on December 31, 2014, which means the time period for protection will revert back to 90 days on January 1, 2015, unless there are further amendments.)

Mortgage Taken Out After Going on Active Duty

If you took out your mortgage after going on active duty, a default judgment generally cannot be entered against you in a foreclosure action while you are on active duty (§ 521). Whether this provides protection to you depends on whether the foreclosure is judicial or nonjudicial. (To learn the difference, and to find out what is customary in your state, see our Judicial v. Nonjudicial Foreclosures topic area.)

Protection Against Default Judgments in Judicial Foreclosures

This protection against default judgments might come into play in a judicial foreclosure. In judicial foreclosures, the foreclosure is completed through the state court system. The lender initiates the process by filing a complaint and having it served on the borrower, along with a summons to appear in court. A default judgment occurs when you fail to respond to the suit, and the judge then rules against you in your absence.

The Protection Against Default Judgments Is Not Relevant in Nonjudicial Foreclosures

In nonjudicial foreclosures, a default judgment isn't an issue since the lender does not have to go through court to get a foreclosure. The foreclosure simply proceeds pursuant to the state procedures for nonjudicial foreclosures. To find out the process in your state, check our Summary of State Foreclosure Laws.

Special Judicial Foreclosure Procedures for Servicemembers

A judicial foreclosure can be completed, but only under certain circumstances. Under the SCRA, a plaintiff (the person that brings a lawsuit) who seeks a default judgment against an absent active duty servicemember must inform the court that the servicemember is on active duty. If neither the servicemember (nor an attorney on his or her behalf) appears in court, the foreclosure cannot proceed unless:

• the court appoints an attorney to represent the servicemember’s interests before a foreclosure judgment is entered (§ 521[b][2]) or
• the lender obtains a written waiver of rights from the servicemember (§ 517).

If an attorney is appointed by the court to represent the servicemember, that attorney will often seek a stay of proceedings (a delay).

90 Day Delay

If requested by the attorney (or upon the court's own motion), a court will grant a stay of proceedings for a minimum of 90 days if:

• there may be a defense and the defense cannot be presented without the servicemember’s presence, or
• after due diligence the servicemember’s attorney has not been able to contact the servicemember or otherwise determine if a meritorious defense exists (§ 521[d]).

If the appointed counsel cannot locate the servicemember, any action taken by the attorney does not waive any defense of the servicemember, nor is the servicemember bound by the actions taken by the appointed attorney on the servicemember’s behalf (§ 521[b][2]).

What If the Court Enters a Default Judgment Against You?

If the court enters a default judgment against you during your period of military service (or within 60 days after termination of or release from such military service), under certain circumstances you may be able to reopen the case later. You must demonstrate that:

• your military service substantially affected your ability to defend yourself in the case, and
• you have a defense to the claim (§ 521 [g][1]).

A request to re-open a judgment must be filed no later than 90 days after the date of the termination of or release from military service (§ 521[g][2]).

Mortgage Assistance for Military Servicemembers

If you find yourself facing foreclosure at any time during or after active military duty, contact your lender immediately and ask about loss mitigation options. Most lenders have loss mitigation programs to assist borrowers, including servicemembers, who cannot make their mortgage payments. You may be able to qualify for a:

• loan modification
• repayment agreement
• forbearance agreement
• short sale, or
• deed in lieu of foreclosure.

To get information about loss mitigation options, see our Alternatives to Foreclosure area.

To learn more about additional protections available for servicemembers, see our article Legal Protections for America's Military: The Servicemembers' Civil Relief Act.