In Brewster v. Sun Trust Mortgage, Inc., 742 F.3d 876 (9th Cir. 2014), decided on February 7, 2014, the Ninth Circuit ruled that a mortgage servicer violated the Servicemembers Civil Relief Act (“SCRA”) (50 U.S.C. app. § 501 et seq.), due to its efforts to collect fees related to a rescinded Notice of Default while the servicemember borrower was on active duty. The SCRA is intended to postpone or suspend certain civil obligations to enable service members to devote full attention to duty and relieve stress on the family members of those deployed servicemembers.
In Brewster, the plaintiff was a Lieutenant Colonel in the United States Marine Corps reserves, who was called for active duty during three separate periods between 2008 and 2011. While he was on active duty, the plaintiff failed to make payments on his home mortgage. This original mortgage servicer, Sun Trust Mortgage, Inc. (“SunTrust”), therefore initiated the foreclosure process and recorded a Notice of Default. The amount of the default included fees associated with initiating foreclosure. The Notice of Default was eventually rescinded, but Sun Trust failed to remove the foreclosure fees from the plaintiff’s account. Nationstar Mortgage LLC (“Nationstar”) subsequently became the new servicer of the loan and attempted to recover the fees from the plaintiff while the plaintiff was away on active duty. Id. at 877-878.
After the plaintiff filed his action, Nationstar removed the fees from the account. Id. at 878, fn 2. Still, the Court found that Nationstar’s attempt to collect on the fees while the plaintiff was on active duty, regardless of whether any fees were even collected, was itself a violation of the SCRA. The Court’s ruling hinged on its liberal construction of the term “foreclosure,” as found in section 533(c) of the SCRA. Section 533(c) of the SCRA states in part that: “[a] sale, foreclosure, or seizure of property for a breach of an obligation described in subsection (a) [a mortgage that originated before the servicemember’s military service] shall not be valid if made during, or within one year after, the period of the servicemember’s military service….” 50 U.S.C. app. §533(c). The court found that, per the language found elsewhere in the statute, the term “foreclosure” included foreclosure proceedings, so that it applied not just to a single act but a process. Id. at 879. Further, the Court analyzed section 2924 of the California Civil Code governing California non-judicial foreclosure and found imposition of fees to be integral to the foreclosure process. Id. Based on these findings, and taking into account the legislative purpose of the SCRA to allow servicemembers to have peace of mind as to affairs at home while on active duty, the court defined “foreclosure” to include fees related foreclosure proceedings. Id.