The Servicemembers Civil Relief Act (“SCRA”) generally requires that, for a Servicemember to be protected by the provisions of the SCRA, the servicemember must affirmatively send a notice to lenders. A provision in the SCRA that shifts burden to the lender regarding notice does not exist.
The SCRA, at 50 U.S.C. 3911 et seq., provides certain protections in the context of residential foreclosures. One of those protections is a usually a moratorium on foreclosures if the loan predates the Active Duty Start Date. The length of this foreclosure not only includes the period of active duty, but a period after the Active Duty End Date.
The length of the extension period has changed over time. Originally, it read “90 days”. On July 30, 2008, but it has been changed on a temporary basis over the years. See the footnotes on this page for the current length of protection time which may be a full year.
Massachusetts, for one, has added additional protections. 2012 Mass. Acts, c. 108, § 15, added the following new subsection (e) to G.L. c. 188, § 5.
(e) The declaration of homestead shall recite whether the owner, the owner’s spouse or other family member to be benefitted is a servicemember who may be subject to protection under the Servicemembers Civil Relief Act, 50 U.S.C. app. § 533, should that owner, spouse or family member be called to active duty. A failure to include a recital as to servicemember status shall not affect the validity or enforceability of the declaration and the rights created thereunder.
The legislative concern apparently addressed by the new legislation was that the SCRA puts the onus upon servicemembers to alert lenders and invoke the rights under the SCRA, whereas the Massachusetts legislature wanted to shift the burden to the lender to prove that that individual does not enjoy those protections. Even when the servicemember had sent proper notice to the bank, there was evidence that the financial institutions’ subsidiaries and servicers often claimed that they had not received the servicemembers’ notifications. Such formed part of the basis of allegations against Saxon Mortgage Services, Inc., which was a subsidiary of Morgan Stanley and Bank of America which resulted in a large monetary.
The new statute imputes to the lenders actual notice of active duty, obviating the need for the servicemember to issue his/her own notice to invoke the rights under the SCRA. As the law shifts the burden to the lender’s additional due diligence must be undertaken during active duty verification and prior to execution of a military affidavit to determine whether an individual is covered by the SCRA.