Three days before Christmas in 2005, Army National Guard Sgt. James Hurley came home to Michigan after about a year in Iraq. But he wasn't able to return to the home he'd left behind.
Hurley and his family had been living in a three-bedroom manufactured home on Michigan's Paw Paw River. But they fell behind on the mortgage, and their lender began foreclosure proceedings in 2004. While Hurley was in Iraq serving as an Army mechanic, the lender sold the house and evicted Hurley's wife and children. Hurley says he learned about it after the fact during one of his occasional phone conversations with his wife.
"She says, 'Well, you're not going to be happy and you're going to go crazy. We lost the house,' " Hurley recalls. "I kind of flew off the handle a little bit."
Complaints More Common
Now, the Hurleys are suing several parties involved with the foreclosure — including Deutsche Bank and Saxon Mortgage. The family says it should have been protected from foreclosure by a long-standing federal law known as the Servicemembers Civil Relief Act — what lawyers call the SCRA.
The law dates back to World War II and is designed to protect active-duty service members from most foreclosures, repossessions, evictions and similar financial misfortunes. Attorneys say disputes over the law are becoming more common, especially as more National Guard members and reservists go to war.
"Military people need to have certain protections when they're off trying to serve us in a war," said Matt Cooper, the Hurleys' lawyer. "One of the rights under the SCRA is that you can't foreclose on them."
Neither Deutsche Bank nor Saxon Mortgage would discuss details of Hurley's case. Morgan Stanley — which acquired Saxon in 2006 — released a written statement saying it "takes the Servicemembers Civil Relief Act very seriously."
But in legal filings, the lenders cite several reasons they believe the law doesn't apply to Hurley. For instance, they say they foreclosed a week and a half before Hurley reported for active duty, and they say the sergeant didn't provide them adequate documents to prove he really was going to Iraq.
Hurley's lawyers argue the law protected Hurley as soon as he received his military orders, which was several weeks before he reported for duty. They also say the documents Hurley provided — a copy of his unit's orders and a note from his captain — are adequate under the law.
"It doesn't take a genius to read a paper that says, 'Hey, he's in the military,' " Hurley said. "Why are you foreclosing?"
Hurley's lawsuit is scheduled for trial next year, though a judge in the case is urging the lenders to settle.
"It looks to me like the bank screwed up badly and needs to make things right," federal judge Nancy Edmunds said during a February hearing.
'They May Be A Little Rusty'
Military attorneys say Hurley's situation isn't unique. Though few disputes over the SCRA end up in court, lawyers say service members and lenders frequently clash over the law. Louisiana attorney John Odom, who specializes in SCRA cases, says he's been involved with more than 300 such cases since the war started.
"The most typical case that we see is the bank is given notice of the service members' activation, sends them back a nice letter that says, 'Thank you for your service to the country,' and somehow there's a miscommunication between the bank's legal department and the bank's payment center, and they put the mortgage for foreclosure," Odom said.
Odom says when the law works as intended, it provides a lot of benefits to troops on active duty. Not only does it protect them from foreclosures and repossessions, but it allows them to break leases on apartments or cars. It also caps the interest rate on many existing loans at 6 percent. But lending industry officials say the SCRA can be complicated, and some lenders are unfamiliar with it.
"As opposed to something that a bank sees day in and day out, this is something that comes up in an irregular fashion," said Rich Riese of the American Bankers Association. "They may be a little rusty and have to go back and check on the provisions."
Disputes Can Distract Service Members
Riese says most service members' SCRA problems "work themselves out." But even cases that get resolved without litigation can be distressing to military families.
When her husband was deployed overseas, Mindy Bailey of Brunswick, Ohio, tried to break the lease on her Chrysler 300 sedan. But after she turned in the car to a local dealer, Chrysler Financial pursued her for more than $6,000, eventually sending a collection agency after her while her husband was in Iraq.
"The night that I got off the phone with the woman from the collections agency, I was in tears crying and shaking," Bailey said. "Until I got legal representation involved, nobody wanted to hear what I had to say when we didn't do anything wrong."
The collection agency stopped contacting Bailey after a military lawyer got involved in the case. Chrysler Financial blamed the problem on what spokesman Bill Porter called a "comedy of errors." He said that after Bailey returned the car to the dealer, neither Bailey nor the dealer notified Chrysler Financial. For several months, the car was considered unaccounted for, even though it was parked on the dealer's lot.
Bailey says the dispute was stressful both for her and for her husband in Iraq, who she says was angry and upset when they talked about it on the phone. Indeed, military lawyers say the whole point of the SCRA is to protect deployed service members from financial headaches like that. They worry that somebody who is preoccupied with fighting a lender might be distracted from fighting the war.