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Schrader Proposes New Financial Protection for Soldiers, Dares Banks to Object

The Oregonian

Motivated by the story of Jacob McGreevey, the longtime Marine who lost his Vancouver home to foreclosure, Rep. Kurt Schrader, D-Oregon, has introduced a bill strengthening active-duty soldiers' protections against banks and other creditors.

A New Jersey lender repossessed McGreevey's house in 2010 between his third and fourth tours of duty in the Middle East despite a federal law that prohibits creditors from taking collections actions against active-duty soldiers.

Schrader's act would amend the Servicemembers Civil Relief Act to give soldiers and sailors 10 years to challenge what they consider illegal collections efforts. Currently, the federal law doesn't have a statute of limitations.

This act "is a simple, no-brainer bill to protect our fighting men and women from exploitation by unscrupulous lenders while they put their lives on the line in service to our country," Schrader said. "This bill is just the right, fair thing to do."

Schrader said with bipartisan support, he expects quick passage with little if any opposition. Jaime Herrera-Buetler, R-Vancouver, agreed to co-sponsor the legislation.

The financial industry may fight an amendment that would significantly lengthen the law's statute of limitations and its own period of liability. But Schrader isn't worried. "I dare them to come out against it," he said of the banks and other lenders. "I don't anticipate any problems."

Schrader said he became aware of McGreevey's plight in a May 7 The Oregonian/OregonLive story.

McGreevey doesn't dispute he fell behind on payments on his house. Still, he argued, the foreclosure should have been prohibited by the Servicemembers Civil Relief Act. But PHH Mortgage and the specialty foreclosure firm, Northwest Trustee Services, went ahead and foreclosed on McGreevey's house.

McGreevey said he didn't know about the law at the time but learned about it later after getting his college degree and, ironically, going to work for a bank. Six years later, in 2016, McGreevey sued PHH and Northwest Trustee.

Neither PHH nor Northwest Trustee contested McGreevey's claim that the foreclosure was illegal. Instead, they argued that he waited too long to file his complaint.

As currently written, the Servicemembers Civil Relief Act does not have a statute of limitations. That forces judges to look to the closest analogous state law to determine which statute of limitations should apply.

The judge in McGreevey's case ruled that the deadline in Washington state is four years after the collection action, which meant that McGreevey filed his case too late.

McGreevey has appealed. The case is pending.

PHH, which didn't immediately return phone calls seeking comment, is a New Jersey-based lender with a history of sanctions by regulators. Most recently, the New York Department of Financial Services fined PHH $28 million last November for "shoddy" mortgage servicing.

The New York regulators singled out PHH's foreclosure practices. They determined that some PHH employees executed foreclosure documents despite conducting "little more than perfunctory reviews" of the foreclosure materials. Additionally, the company did not adequately monitor the operations of its outside vendors who were contracted to perform mortgage servicing related tasks, including foreclosure attorneys whose actions on behalf of the company had a direct impact on borrowers in financial distress, the NYDFS said.

Also last year, PHH was fined by the U.S. Consumer Financial Protection Bureau for operating what the bureau called a mortgage insurance kickback scheme.

The civil rights division of the U.S. Department of Justice launched an initiative earlier this decade to step up enforcement of the Servicemembers Civil Relief Act. Whether the Obama-era program survived the change in administrations remains unclear. 

The Department of Justice under control of Attorney General Jeff Sessions sided with PHH in the McGreevey case. Federal lawyers unexpected intervened in McGreevey's appeal in March urging the court to adopt PHH's view that the statute of limitations should be four years. The Justice Department also took PHH's side in its appeal of the Consumer Financial Protection Bureau enforcement action.

The Justice Department refused to comment on Schrader's bill.

The bill would not be effective retroactively and its impact on McGreevey's ongoing legal fight is uncertain. Schrader said passage of the bill and clarification of Congress's intent should weigh heavily with judges

"Mr. McGreevey is overjoyed that some good could come out of his situation," said Sean Riddell, his Portland lawyer. "He applauds Rep. Schrader's efforts."

Read the article at The Oregonian.
Tags: Veterans