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SCRA: Fourth Circuit Affirms District Court’s Ruling re SCRA and the Effect of Military Re-Entry by Borrower who Originated Loan during a Previous Active Duty Period

Posted By USFN, Tuesday, September 12, 2017
Updated: Monday, August 28, 2017

September 12, 2017


by Ronald Scott and Reginald Corley
Scott & Corley, P.A. – USFN Member (South Carolina)

The Court of Appeals for the Fourth Circuit, in Sibert v. Wells Fargo Bank, N.A., No. 16-1568 (4th Cir. July 17, 2017), affirmed the ruling of the District Court for the Eastern District of Virginia.

In Sibert, a servicemember had brought an action against the mortgagee, alleging that the mortgagee improperly foreclosed on his property by violating the rights afforded to him under the Servicemembers Civil Relief Act (SCRA). [The SCRA formerly appeared as 50 U.S.C. Appx. §§ 501, et seq. In 2015, the statute was transferred and is now located at 50 U.S.C.S. §§ 3901, et seq.]

The plaintiff-appellant, Richard Sibert, a sergeant in the U.S. Army, alleged that the foreclosure of his mortgage violated the SCRA, which prohibits foreclosure on a servicemember’s property during a period of military service without a court order. Briefly, the facts are that Sibert entered the U.S. Navy on July 9, 2004. On May 15, 2008, while on active duty, Sibert obtained a loan on his property secured by a promissory note. Sibert was honorably discharged from the Navy on July 8, 2008. In March 2009, eight months after Sibert’s naval discharge, Wells Fargo commenced a foreclosure proceeding on his home. In April 2009, Sibert re-enlisted in the military, joining the U.S. Army, where he remained on active duty. In May 2009, Siebert’s home was sold at public auction.

Court’s Analysis
The overarching issue resolved by the court is whether or not Sibert’s mortgage home loan qualifies under 50 U.S.C. § 3953(a), such that Wells Fargo was prohibited by 50 U.S.C. § 3953(c) from foreclosing on it without a court order. Section § 3953(c) states that a foreclosure is invalid if it is made during the period of the servicemember’s military service, except by court order which is only applicable if it complies with the protections of § 3953(a).

The interpretation of § 3953(a) is the turning point of the case: “This section applies only to an obligation on real or personal property owned by a servicemember that — (1) originated before the period of the servicemember’s military service and for which the servicemember is still obligated …” (emphasis added) [50 U.S.C.S. § 3953(a)].

Sibert contended that the SCRA is applicable to his mortgage home loan. Wells Fargo disagreed, asserting that the SCRA does not apply to his mortgage loan and, alternatively, that even if § 3953(a) did apply, Sibert voluntarily waived his rights under the SCRA in a “Servicemembers’ Civil Relief Act Addendum to Move Out Agreement.” Wells Fargo correctly maintained that “the period of ... service” described in § 3953(a) covers any period of military service, not individual periods as Sibert claimed, and because Sibert’s mortgage loan originated while he was serving in the military, the SCRA is inapplicable and the foreclosure was proper.

As a whole, § 3953(a) indicates that the SCRA does not apply to obligations that originate while the servicemember is already in the military. Due to the fact that Sibert’s mortgage originated while he was in the military, he cannot claim the remedy provided in § 3953(c).

The court ultimately decided that the SCRA’s protections did not apply to the mortgagor in this case where the mortgage originated during the servicemember’s first term of military service.

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