The Servicemembers Civil Relief Act (SCRA) provides foreclosure protections to military personnel, and servicemembers may file a lawsuit against lenders who violate this federal law.
But in a recent case, McGreevey v. PHH Mortgage Corporation, the U.S. Court of Appeals for the Ninth Circuit held the federal catchall statute of limitations of four years (28 U.S.C. § 1658(a)) applies to private suits claiming foreclosure violations under the SCRA. As a result, Jacob McGreevy—a former U.S. Marine challenging a 2010 foreclosure—lost his case because he acted too late when alleging a violation under the SCRA.
In 2006, the plaintiff (McGreevey), a Marine, refinanced a mortgage on his home in Vancouver, Washington with a loan from PHH Mortgage Corporation (PHH). On January 16, 2009, Northwest Trustee Services, acting as trustee for PHH Mortgage, initiated a nonjudicial foreclosure. (To learn how nonjudicial foreclosures in Washington typically work, see our Summary of Washington's Foreclosure Laws.)
On May 18, 2009, the Marine Corps then recalled McGreevey to active service in Iraq. McGreevey completed his service, and the Marines released him from military duty on July 21, 2010. After his release, McGreevey told PHH about his military service and asked to refinance his loan. But PHH ignored this request and went ahead with a foreclosure sale on August 20, 2010.
Almost six years after the foreclosure sale, McGreevey filed suit in district court against PHH and Northwest Trustee Services alleging they violated the SCRA.
The SCRA prohibits a foreclosure sale during a servicemember's period of military service and for 90 days, nine months, or one year thereafter depending on when the foreclosure happens (see below) unless:
Foreclosure protection period after active duty: 90 days, nine months, or one year. Initially, when the SCRA went into effect in 2003, servicemembers received 90 days of foreclosure protection after military service ended. Congress later extended the post-service period to nine months in 2008, and then to one year in 2012. The period was set to revert to 90 days at the end of 2014, but Congress extended the one-year protection several times. The National Defense Authorization Act for Fiscal Year 2018, which President Trump signed on December 12, 2017, made the one-year protection against foreclosure after active duty permanent.
What protection period applies in the McGreevey case? The foreclosure on McGreevey's home happened in 2010, so the nine-month post-service period of protection applied in this case. Because McGreevey's service ended just one month before the foreclosure sale, he alleged that the lender and servicer violated the SCRA by holding a foreclosure sale.
In McGreevey v. PHH Mortgage Corporation, the district court dismissed the case as time-barred, which means the statute of limitations had expired when McGreevey filed his suit. So, he lost the case.
While the SCRA doesn't contain a statute of limitations, the district court applied a four-year statute of limitations under state law. According to the district court, because McGreevey filed his suit six years after the foreclosure sale, he missed the deadline to file a lawsuit for SCRA violations.
McGreevey then appealed the district court's decision to the Ninth Circuit Court of Appeals.
The Ninth Circuit Court of Appeals noted that when a federal law—like the SCRA—doesn't include a limitations period, courts usually apply the closest state limitations period, like the district court did. But in this case, the Court of Appeals decided that a four-year catchall federal limitations period applies. (28 U.S.C. § 1658(a)). So, the Court agreed that McGreevey's claim was barred (not permitted) because the four-year limitations period had expired.
The ruling in this case—that SCRA claims for foreclosure violations must be brought within four years—likely applies only in Washington state, and a U.S. Supreme Court ruling, or a ruling in a different case by a separate court, could limit the ruling's scope, or totally negate it. Still, servicemembers can avoid similar statute of limitations issues by making their SCRA claims immediately.
The civil rights section of the U.S. Attorney's Office in Seattle, which is part of the Justice Department, opened an investigation of Northwest Trustee after learning about McGreevey's case.
In September, 2018, the U.S. Justice Department determined that Northwest Trustee Services foreclosed on at least 28 veterans, including McGreevey, illegally. In response, the now-defunct company agreed to settle the case for $750,000—$125,000 each for McGreevey and five other servicemembers it foreclosed on.
If you think your lender or servicer violated the SCRA, don't wait too long to invoke your rights. Consider talking to an attorney right away to learn about your options.
Effective Date: July 26, 2018