Bulletin: SLS2015009

Date:
June 18, 2015
To:
All Issuing Offices
RE:
UNDERWRITING - Servicemembers Civil Relief Act [Revised 5-2-17]

This bulletin updates and consolidates prior bulletins regarding the Servicemembers Civil Relief Act. 

I. BACKGROUND 

The Servicemembers Civil Relief Act (the "SCRA") (formerly known as the Soldiers' and Sailors' Civil Relief Act of 1940), is a federal statute that provides for the temporary suspension and postponement of judicial and administrative proceedings and transactions that may adversely affect the rights of servicemembers during and after their period of military service. The SCRA is codified at 50 United States Code Sections 3901 - 4043. 

The SCRA covers a variety of servicemembers' rights relating to leases, security deposits, evictions, installment contracts, interest rates and health insurance, as well as rights that affect title to real property, such as mortgage foreclosures and tax sales.  

II. PERSONS PROTECTED 

The SCRA protects active duty members in the Army, Navy, Air Force, Marine Corps and Coast Guard, and members of the National Guard called to active service for 30 days or more. 50 USC §3911. In addition, in certain situations (e.g., evictions), dependents of military members (e.g., spouse, child, and someone who is supported by the servicemember) are also protected. 50 USC §3951. 

The protections under the SCRA do not require a state of war or any form of military action. The term 'period of military service' means ”the period beginning on the date on which a servicemember enters military service and ending on the date on which the servicemember is released from military service or dies while in military service.”  50 USC §3911. 

III. PROTECTIONS AFFECTING REAL PROPERTY 

A. Provisions relating to foreclosure of mortgages and deeds of trust (50 USCS Appx § 3953) 

1. Property affected. Section 3953 of the SCRA applies to an obligation on real or personal property owned by a servicemember that: 

(a) originated before the servicemember's period of military service and for which the servicemember is still obligated, and 

(b) is secured by a mortgage, trust deed, or other security in the nature of a mortgage. 

2. Stay of Proceedings. In an action filed during, or within one year after, a servicemember's period of military service to enforce an obligation described above, the court may after a hearing and on its own motion and shall upon application by a servicemember when the servicemember's ability to comply with the obligation is materially affected by military service: 

(a) stay the proceedings for a period of time as justice and equity require, or 

(b) adjust the obligation to preserve the interests of all parties.

3. Sale or foreclosure. A sale, foreclosure or seizure of property for a breach of an obligation described above shall not be valid if made during, or within one year after, the servicemember's period of military service; except: 

(a) upon a court order granted before such sale or foreclosure; or 

(b) if made pursuant to a written agreement executed by the servicemember (see discussion below relating to written agreements).  

The one (1) year period of additional protection following a servicemember’s period of military service (described above in # 2 and # 3) was originally 90 days. Previously, the statute was amended to extend the period of additional protection from 90 days to nine (9) months. It was subsequently amended again to extend the period from nine (9) months to one (1) year. Absent further amendments, the post-service protection period is set to revert back to 90 days beginning on January 1, 2018. As the reversion date has been regularly postponed, please update your search to account for the latest information. 

The above protections apply only to mortgages or deeds of trust that were executed prior to the servicemember's military service, and for which the servicemember is still obligated, and which continue to encumber property owned by a servicemember. Mortgages and deeds of trust entered into during a servicemember's military service are not protected under this section.  

The above protections are separate from the provisions regarding default judgments against servicemembers and the tolling of time limitations, which may also apply. 

Company Policy:  

1. You may insure title to real property acquired out of any mortgage foreclosure (judicial or non-judicial) or sale pursuant to a deed of trust if you receive proof that: 

* the owner was never a servicemember;

* the mortgage or deed of trust was executed during the servicemember's period of military service; or

* the foreclosure or trustee’s sale took place more than one year after the servicemember’s period of military service.

 You may rely upon the following as evidence of the status of military service: 

  • an affidavit from the foreclosing entity or their counsel;
  • a recital in a trustee's deed; or
  • information from the SCRA website (https://scra.dmdc.osd.mil/) 

2. Judicial Foreclosure: When insuring title to real property acquired out of a judicial foreclosure, you may rely on a court ordered foreclosure. 

3. Non-Judicial Foreclosure or Trustee's Sale: In all other circumstances (e.g., non-judicial foreclosure or sale pursuant to a deed of trust, etc.), you must insert exception DTSX28 STG unless otherwise directed by a Stewart Title Guaranty Company underwriter.  

B. Provisions relating to tax sales (50 USC §3991) 

1. Property affected: Section 3991 of the SCRA applies to real property that is occupied for dwelling, professional, business, or agricultural purposes by a servicemember or the servicemember's dependents or employees before the servicemember's entry into military service and during the time the tax or assessment remains unpaid. The property may be owned individually by a servicemember or jointly by a servicemember and a dependent or dependents. 

2. Limitation on sale of property to enforce tax or assessment: Section 3991 provides that a servicemember's personal property and real property may not be sold to enforce the collection of any tax or assessment (general or special, other than income taxes) that becomes due and remains unpaid before or during the servicemember's period of military service, except by a court order determining that the military service does not materially affect the servicemember's ability to pay the unpaid tax or assessment.  

3. Redemption from tax sale: When property is sold or forfeited to enforce the collection of a tax or assessment, a servicemember shall have the right to redeem or commence an action to redeem the property during the servicemember's period of military service or within 180 days after termination of or release from military service.  

Company Policy: When insuring title to real property acquired out of a judicial proceeding to enforce the collection of a tax or assessment, you may rely on a court ordered sale of the property if: (a) the court order states that the military service does not materially affect the servicemember's ability to pay the unpaid tax or assessment, and (b) the servicemember is no longer in military service and more than 180 days have passed since the servicemember’s termination or release from military service. 

In all other circumstances (e.g., non-judicial sale, failure to appear, absence of required finding, etc.), you must insert exception DTSX28 STG, unless you are able to confirm that the owner was never a servicemember or as otherwise directed by a Stewart Title Guaranty Company underwriter. 

You may rely upon an affidavit from the taxing authority or their counsel, or a statement in a tax deed, as evidence of the status of military service. 

C. Provisions relating to default judgments (50 USC §3931) 

1. Affidavit required for a default judgment. Section 3931 of the SCRA provides that, in any civil action or proceeding in which a defendant servicemember does not make an appearance, the court, before entering a judgment for the plaintiff, must require the plaintiff to file with the court an affidavit: (a) stating whether or not the defendant is in military service and showing necessary facts to support the affidavit; or (b) stating that the plaintiff is unable to determine whether or not the defendant is in military service. 

2. Appointment of attorney to represent servicemember. If it appears that the defendant is in military service, the court may not enter a judgment until after the court appoints an attorney to represent the defendant. 

3. Reopening and vacating a default judgment. If a default judgment is entered against a servicemember during the servicemember's period of military service or within 60 days after release from military service, a servicemember may reopen the default judgment to allow him or her to defend the action if it appears that: (a) the servicemember was materially affected by reason of that military service in making a defense to the action; and (b) the servicemember has a meritorious or legal defense to the action or some part of it. 

An application to vacate or set aside a default judgment must be filed by or on behalf of the servicemember not later than 90 days after the date of the servicemember's release from military service. 

Company Policy: When insuring title to real property acquired out of any proceeding where the forfeiting defendant did not make an appearance, you must receive proof, by affidavit, that the defaulting defendant was not in military service for at least 90 days prior to such judgment. In all other circumstances, you must insert exception DTSX28 STG unless you are able to confirm that the owner was never a servicemember or as otherwise directed by a Stewart Title Guaranty Company underwriter. 

D. Other provisions potentially affecting real property 

1. Tolling of statute of limitations (50 USC §3936) 

The period of a servicemember's military service may not be included in computing any time period for:  

(a) the bringing of any action or proceeding in a court or other forum by or against a servicemember or a servicemember's heirs, executors, administrators, or assigns, or  

(b) the redemption of real property sold or forfeited to enforce an obligation, tax, or assessment.  

2. Waiver of rights pursuant to a written agreement (50 USC § 3918) 

A servicemember may waive any of the rights and protections provided by the SCRA. If the waiver permits: 

(a) the modification, termination, or cancellation of: (i) a contract, lease, or bailment; (ii) an obligation secured by a mortgage, trust, deed, lien, or other security in the nature of a mortgage, or  

(b) the repossession, retention, foreclosure, sale, forfeiture, or taking possession of property that: (i) is security for any obligation; or (ii) was purchased or received under a contract, lease, or bailment. 

The waiver is effective only if made pursuant to a written agreement executed during or after the servicemember's period of military service. 

Company Policy: In order to rely upon a written agreement acquiescing to a foreclosure, sale or taking of a servicemember's property, you must ascertain that the agreement is signed during or after the servicemember's period of military service. The written agreement must specify the legal instrument or proceeding to which it applies, and it must be in recordable form. 

IV. VERIFYING MILITARY STATUS 

A. Online verification of military status 

The Department of Defense’s Defense Manpower Data Center (the "DMDC") operates the Servicemembers Civil Relief Act Website, which may assist in the verification of a person’s military service status. It is located at the following web page: 

https://scra.dmdc.osd.mil/single_record.xhtml

B. Information required by the SCRA Website 

In order to obtain reliable information about a person from the SCRA Website, a requester must provide: 

1. the person's name, plus, 

2. either: 

(a) the person's Social Security number (preferred), and/or 

(b) the person's date of birth.   

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.