Joint Hearing of the Committee on Homeland Security and Governmental Affairs of the U.S. Senate and the Committee on Veterans’ Affairs of the U.S. House of Representatives at 1:00 p.m. CDT.
Witness Testimony of Mr. John S. Odom, JR., ESQ., Jones and Odom L.L.P.
Chairman Stutzman, Ranking Member Braley and members of the Subcommittee. My name is John S. Odom, Jr., and I am an attorney from Shreveport, Louisiana. I am also a retired Air Force judge advocate and served over 31 years of combined active and Reserve duty. I was recalled to active duty from retirement during 2010 to author a report to Congress for the Department of Defense concerning certain matters related to proposed amendments to the Servicemembers Civil Relief Act. The vast majority of my civilian law practice is involved with representing servicemembers in claims they have against banks and other lending institutions who have violated their rights under the SCRA. In 2011, I was lead counsel for Sgt James Hurley, formerly of the Michigan Army National Guard, in a suit against his mortgage servicing company, in what is believed to have been the first federal jury trial involving claims under the SCRA in the history of the Act. I am a frequent lecturer at all of the service judge advocate schools and speak to judges’ associations and both industry and consumer groups around the country on matters related to the SCRA. From 2006 to 2009, I served on the American Bar Association Standing Committee on Legal Assistance to Military Personnel and am the author of A Judge’s Benchbook for the Servicemembers Civil Relief Act, published by the ABA in 2011.
I am grateful for the invitation to appear today and offer comments and observations on H.R. 4740 and H.R. 5747. At the outset, let me express my appreciation to this Subcommittee and the entire House Committee on Veterans’ Affairs for following the established legislative process to consider proposed amendments to the SCRA: subcommittee hearings followed by mark-up sessions and full committee consideration. In each of the past several sessions of Congress – including this one – efforts have been made in the House version of the National Defense Authorization Act to amend the SCRA. In my opinion, including proposed amendments in that vast piece of legislation, bypassing the subcommittee and committee hearing process during which the views of experts and practitioners in the field of SCRA litigation can be heard and considered, does not produce the best legislation our servicemembers, veterans and their families deserve.
Turning first to H.R. 4740, I fully support the concept that a servicemember should be able to refinance a home during a period of active duty even though they may not be residing in the residence as a result of military orders. I understand from legal assistance attorneys who consult with me frequently on a variety of SCRA-related topics that certain mortgage companies take the policy position that a mortgagor may only refinance the home if he or she currently resides in the home. Obviously, if the absence from the home is solely as a result of military orders (regardless of whether it is a mobilized Reserve or Guard member who is deployed or stationed at a duty location away from the residence or an active duty member who has complied with permanent change of station orders and has been unable to sell their home at the former duty location), such a policy is manifestly unfair to servicemembers. While H.R. 4740 would legislatively prevent such a policy, the legislation as currently drafted that will trigger the dreaded law of unintended consequences.
The Act protects pre-service mortgages from nonjudicial foreclosure in the 27 states that allow nonjudicial foreclosures. Under H.R. 4740 as drafted, a re-financing of a mortgage while a servicemember is on active duty would cause the servicemember to lose the protections of Section 303, since the new mortgage would no longer be a pre-service obligation. I suggest that additional language needs to be added to H.R. 4740 to provide that any refinancing accomplished pursuant to this section would not alter the status of the mortgage as a pre-service obligation (even though the original debt is being extinguished and refinanced) so that the protection from nonjudicial foreclosure would still be in effect for the servicemember. That is a vital protection, especially for personnel who are deployed and may have no idea about what is happening with their homes.
As a final comment on H.R. 4740, I also question why section (b)(1)(B) of the proposed amendment requires that a deployment be for a period of not less than 18 months to qualify for protection. Many of our Reserve and Guard units and some Marine Corps units deploy for periods of less than 18 months. The period of deployment currently provided for lease cancellation protection under Section 305 of the SCRA (50 U.S.C. App. §535(b)(1)(B)) is “not less than 90 days” and I would recommend the same period be used in H.R. 4740. Whenever Congress establishes a different time period to trigger benefits under the SCRA, it ramps up compliance complexity for the industry and makes it more confusing for servicemembers.
Turning to H.R. 5747, while the goals of this proposed amendment are truly laudable, it represents a significant expansion in SCRA protection and should be evaluated very closely for two reasons: first, with regard to mortgage foreclosures, this amendment cannot be realistically implemented as drafted; and secondly, it really does not fully accomplish what the drafters are trying to do.
I agree completely with Congressman Cummings and the bill’s co-sponsors that the home of any servicemember who is deployed should never be subject to foreclosure, judicial or nonjudicial, and regardless of when the mortgage was incurred. There are simply too many factors that cannot be anticipated when a servicemember deploys and communication is too difficult from war zones for banks and mortgage companies to be seizing and selling servicemembers’ homes while they are in harm’s way.
While we agree on that fundamental position, I am equally concerned that Congress not change current Section 303 of the SCRA (50 U.S.C. App. §533) which places the onus on creditors to ascertain the military status of mortgagors prior to nonjudicial foreclosure action. Under current Section 303, the servicemember is not required to give any notice to the mortgagee to receive the protections of the Act. The best way to accomplish the proposed expansion of SCRA mortgage foreclosure protections contemplated by H.R. 5747 is to insert a new Section 303A. into the Act.
The deal killer with H.R. 5747 as drafted is simply this: there is no current database that would allow a foreclosing creditor to ascertain a servicemember’s deployment status, ascertain that a wounded warrior had been medically retired, or identify a deceased servicemember’s surviving spouse. Protection of all three of those classes of servicemembers and their families is certainly appropriate, but the absence of a searchable database will not allow that goal to be realistically achieved in a manner that is fair to both the servicemember and the industry. As a litigator, I can tell you that when judges and juries encounter requirements that cannot be met by the defendant, they are much less inclined to give the plaintiff any relief at all. Moreover, Section 303 (50 U.S.C. App. §533) only applies to nonjudicial mortgage foreclosures. It does not afford any protections whatsoever to those servicemembers (or their family members) who own homes or property in the 23 states which allow only judicial foreclosures.
If the goal is to protect deployed servicemembers, wounded warriors and surviving spouses from foreclosure regardless of when their mortgages were incurred and regardless of where they reside, Congress should add a separate statutory provision to the SCRA that would do just that. Since no database exists that would allow creditors to identify these newly-added classes of protected individuals, requiring them to give the creditors notice of their status is a reasonable accommodation to the industry in exchange for these additional protections. I have drafted the outline of a suggested new section (Section 303A., 50 U.S.C. App. §533a.) which is included with my written remarks. It would accomplish the goals of H.R. 5747, provide foreclosure protections for all mortgages in all jurisdictions and avoid the pitfalls of changing current Section 303 (50 U.S.C. App. §533). I would be pleased to work with Committee and Member staffs in any way necessary to help put this suggested Section 303A. into appropriate form for either introduction as a stand-alone bill or as an amendment to H.R. 5747.
As for the remaining provisions of H.R. 5747, I wholeheartedly endorse and recommend approval of each of those subsections. The sunset provision on extension of nonjudicial mortgage foreclosure protection needs to be eliminated, the addition of a prohibition against credit discrimination for persons who may become protected by the SCRA and the requirement for SCRA compliance officers for the banks are all well-drafted and needed. I would only caution the Subcommittee that just because a person may be designated an SCRA compliance officer at a large bank does not mean he or she has the foggiest idea of what the SCRA is, or how a bank is supposed to comply with its provisions and protections. I would urge appropriate oversight for any SCRA compliance efforts imposed on the financial services industry, because in my past experience – to put it charitably – many of them know not of what they speak.
I thank the Members for their attention to these critically important protections for our servicemembers and their families and would be pleased to respond to any questions you might have now or in the future.
John S. Odom, Jr.
Colonel, USAFR JAGC (ret.)
Outline of an Amendment to the SCRA to Provide Protection of Deployed Servicemembers, Totally Disabled Servicemembers and Spouses of Deceased Servicemembers from Mortgage Foreclosures
1. Suggested title for new Section 303A (50 U.S.C. App. §533a):
“Protection of deployed servicemembers, totally disabled servicemembers and spouses of certain deceased servicemembers from mortgage foreclosure, both judicial and nonjudicial, regardless of when the obligation was incurred”
2. Who would be protected:
a. Deployed servicemembers;
b. Totally disabled former servicemembers; and
c. Surviving spouses of servicemembers whose death was service-connected
3. Where the appropriate definitions would be placed in the Act:
All definitions would be included in Section 101 (“Definitions”) of the SCRA (50 U.S.C. App. §511).
4. Nature of protection:
If an obligor on a mortgage is a deployed servicemember, a disabled veteran, or a qualifying surviving spouse, in the event of a default in the obligation or mortgage and without regard to when the obligation was created, provided that the protected person (the deployed servicemember, disabled veteran or surviving spouse as defined in the Act) had given written notice to the mortgagee, trustee or other holder of the obligation of the protected person’s status and documentation of the protected person’s status was submitted to the obligee on the mortgage, no foreclosure action could be filed or completed in any court or nonjudicial foreclosure proceedings initiated during the protected period.
5. Duration of protected period:
a. For deployed servicemembers: duration of the deployment plus 12 months;
b. For wounded warriors: 12 months from classification as totally disabled;
c. For surviving spouses: 12 months from death of spouse.
6. Notice required to be given:
The notice required to be given must be in writing and addressed to the same address as last payment made under the mortgage or other obligation. The Secretary of Defense would be designated to design and promulgate an official Department of Defense form that could be utilized to give such notice, although any written notice would suffice if it provided sufficient information to put the mortgagee or other creditor on notice of the protected person’s status.
7. When required notice must be given:
a. For deployed personnel:
The notice required to be given could be given up to 90 days prior to the deployment, at any time during the deployment or during the additional 12 month period following the deployment.
b. For totally disabled veterans and surviving spouses, the notice required to be given could be given at any time during the 12 month protected period.
8. Actions required by obligee on mortgage upon receipt of notice:
Upon receipt of such written notice, any mortgagee, trustee or other creditor seeking to foreclose on property protected by the section would be required to immediately stay any judicial foreclosure proceeding until the expiration of the period of protection or to immediately halt any nonjudicial foreclosure proceedings that may have been initiated until the expiration of the period of protection.
John S. Odom, Jr.
Colonel, USAFR JAGC (ret.)
Jones & Odom, L.L.P.
2124 Fairfield Avenue
Shreveport, Louisiana 71104
STATEMENT OF JOHN S. ODOM, JR.
CONCERNING FEDERAL GRANTS OR CONTRACTS
I certify that I have received no Federal grant or contract relevant to the subject matter of my 21 June 2012 testimony before the Economic Opportunity Subcommittee of the House Committee on Veterans’ Affairs during the current or previous two fiscal years.
Shreveport, Louisiana, this 18th day of June, 2012.
John S. Odom, Jr.