HB 3101

Title: An act relating to foreclosures and sales.

Brief Description: Restricting the sale, foreclosure, or seizure of property belonging to a service member on deployment.

Sponsors: Representatives Darneille, Simpson, G., Campbell, Romero, Upthegrove, Ormsby, Morrell, Kenney and O'Brien.

Hearing Date: 2/5/04

Staff: Edie Adams (786-7180).

Background:

The federal Servicemember's Civil Relief Act (SCRA) provides a number of protections to military personnel while on active duty. The SCRA was adopted by Congress in 2003, and is a revision to the Soldiers' and Sailors' Civil Relief Act of 1940. The SCRA contains numerous protections for service members whose financial and legal obligations may be adversely impacted by active military duty. These protections include, among others: staying court proceedings if the service member is unable to defend his or her interests in the proceeding; reducing interest rate obligations on pre-service loans to 6%; and restricting the ability of a landlord to evict the service member's family for non-payment of rent in certain situations.

One of the provisions of the SCRA protects service members from foreclosures on property under a mortgage or deed of trust during a period of military service or within 90 days after a period of military service. If the military service affects the service member's ability to meet the mortgage or deed of trust obligation, a court must either: (1) stay any judicial proceeding seeking to enforce the obligation; or (2) adjust the obligation to preserve everyone's interest.

In addition, the SCRA makes invalid a sale, foreclosure, or seizure of property for breach of a mortgage or deed of trust obligation, if it occurs during or within 90 days after a period of military service, unless: (1) there is a court order for foreclosure granted prior to the foreclosure; or (2) the service member waived the protection against foreclosure in writing during or after the period of military service.

Mortgages and deeds of trust are two forms of security interest in real property used for real estate financing. A mortgage is a pledge of real property as security for a debt owed to the debtor (mortgagee). A mortgage creates a lien on the real property. A mortgage may be foreclosed only through a judicial proceeding according to detailed statutory requirements and proceedures. A deed of trust is basically a three-party mortgage. The borrower (grantor) grants a deed creating a lien on the real property to a third party (the trustee) who holds the deed in trust as security for an obligation due to the lender (the beneficiary).

The major distinction between a deed of trust as opposed to a mortgage is that a deed of trust may be non-judicially foreclosed. If the grantor of a deed of trust defaults on the loan obligation, the trustee may non-judicially foreclose on the real property as long as certain detailed procedural and notice requirements are met.

Summary of Bill:

A new section is added to the Deed of Trust Act that: (1) Prohibits the foreclosure of a deed of trust during or within 90 days after a service member's deployment; and (2) makes invalid a sale, foreclosure, or seizure of property made during or within 90 days after a service member's deployment.

This provision applies only to an obligation on real property purchased before the service member's deployment and for which the service member is still obligated.

Service member includes a member of each of the armed forces, national guard and armed forces reserves.

Appropriation: None.

Fiscal Note: Not requested.

Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.