Article Library
Blog Home All Blogs
Search all posts for:   

 

New Hampshire: Statutory Amendment re Notice of Sale Requirements

Posted By USFN, Tuesday, September 1, 2015
Updated: Saturday, September 26, 2015

September 1, 2015

 

by Adam F. Faria
Harmon Law Offices, P.C. – USFN Member (Massachusetts, New Hampshire)

On June 26, 2015 New Hampshire Governor Hassan signed into law SB 50, an act “relative to the notice required prior to foreclosure of residential property.” The provisions of the law go into effect on January 1, 2016. SB 50 serves to amend NH RSA 479:25 by distinguishing and expanding the foreclosure notice of sale period for “residential mortgages” from the notice of sale requirements for all other mortgages not defined as “residential mortgages.” The Act also provides for additional disclosures in the notice of sale where the property is an owner-occupied dwelling of four or fewer units without regard to the type of mortgage.

A “residential mortgage” as defined in RSA 397-A:1, VI-c. is, “any loan, including a first or second mortgage loan, primarily for personal, family, or household use which is secured in whole or in part by a mortgage, deed of trust, or other equivalent consensual security interest upon a dwelling or any interest in real property or in residential real estate.” In the case of “residential mortgages,” SB 50 extends the notice requirement to mortgagors under NH RSA 479:25, II. Under the current language of RSA 479:25, notice of sale must be sent to mortgagors at least twenty-five days before the sale. SB 50 increases the notice period to at least forty-five days before the sale. Additionally, while the Act maintains the existing twenty-one day notice requirement to persons having a lien of record, it extends the period under which a record lienholder is entitled to notice. The current RSA 479:25 requires notice be sent to a person having a lien of record at least thirty days before the sale. SB 50 requires notice be sent to a person having a lien of record at least fifty days prior to sale.

In the case of mortgages that do not fall under the definition of “residential mortgages,” the notice period remains unchanged. Notice to the mortgagor shall be sent twenty-five days prior to the sale; notice to a person having a lien of record shall be sent at least twenty-one days before the sale; and any person having a lien of record at least thirty days prior to the sale is entitled to notice.

Moreover, SB 50 requires the following additional disclosures be included in the notice of sale for all owner-occupied dwellings of four or fewer dwelling units: “1. The address of the mortgagee for service of process and the name of the mortgagee’s agent for service of process; and 2. Contact information for the New Hampshire Banking department, along with the statement ‘for information on getting help with housing and foreclosure issues, please call the foreclosure information hotline at [ ]. The hotline is a service of the New Hampshire banking department. There is no charge for this call.’” The Act further requires the banking department to provide a toll-free telephone number. As of the time of this writing, the banking department has not provided a toll-free telephone number.

It is unclear whether the new notice requirements contained in SB 50 are required only for notices of sale sent on or after January 1, 2016, or whether they are required for any sale that occurs on or after January 1, 2016. An additional complicating factor arises for any foreclosure sale scheduled to take place in 2015 and whose notices are compliant only with the current provisions of RSA 479:25. If that sale is postponed into 2016 when the provisions of SB 50 are in effect, it is unclear whether the sale would be a valid sale. For these reasons it behooves the prudent practitioner to begin compliance with the provisions of SB 50 at the earliest opportunity.

©Copyright 2015 USFN. All rights reserved.
September e-Update

This post has not been tagged.

Share |
Permalink
 

Foreclosure Defense Attorney in Minnesota Has Been Suspended

Posted By USFN, Tuesday, September 1, 2015
Updated: Saturday, September 26, 2015

September 1, 2015

 

by Paul Weingarden and Kevin Dobie
Usset, Weingarden & Liebo PLLP – USFN Member (Minnesota)

Attorney William Bernard Butler’s war against the mortgage industry, which began in 2010 when his own home went into foreclosure (and continued even after his right to practice in the federal courts ceased in 2013), has come to a halt in state court as well. On August 12, 2015 the Minnesota Supreme Court issued an order suspending Butler for a minimum of two years, with conditions of reinstatement.

Before Butler’s formal suspension, he had litigated over 300 cases against mortgage lenders, servicers, GSEs, and their counsel. He asserted various frivolous theories, which were routinely dismissed after lengthy stalls, delays, and appeals — only to be repackaged and renewed by refiling the actions and asserting the identical facts and theories, with usually the same plaintiffs. Despite never winning a single case with these theories, Butler kept on suing, resulting in millions of dollars in lost interest and attorneys’ fees, all for the purpose of allowing his clients to remain in their homes without paying their mortgage obligations.

In late 2013, the Eighth Circuit Court of Appeals suspended Butler’s right to practice in the Eighth Circuit, and shortly thereafter the Minnesota U.S. District Court followed suit. Undaunted, Butler shifted his attention to the state courts where he asserted the same arguments in over sixty new cases, all of which had been rejected hundreds of times. Whether it was fighting evictions for “wrongful foreclosures” or starting a Torrens proceeding with the intent of re-litigating the foreclosure with old, rejected contentions, Butler pressed on — ignoring further monetary sanctions.

In CitiMortgage v. Kraus, 2015 Minn. App. Unpub. LEXIS 47 (Minn. App. 2015), after unsuccessfully asserting claims on behalf of the Krauses (whom had already litigated the validity of the foreclosure and lost at the Eighth Circuit), Butler continued to press identical theories in the post-foreclosure eviction. On January 12, 2015 the Minnesota Court of Appeals called the Krauses’ defense “one of the most frivolous that has ever been presented to this court,” and the court sanctioned Butler and the Krauses. Incredibly, Butler and the Krauses litigated the same issues yet again; and, on August 24, 2015 the Minnesota Court of Appeals once more determined that the claims had no merit. [Editor’s note: The authors’ firm represented CitiMortgage in these actions.]

For the foreseeable future, the litigation is over — and perhaps longer if Butler does not pay, or make a good faith effort to pay, court-imposed sanctions of $125,000 as well as attorneys’ fees of approximately $175,000.

©Copyright 2015 USFN. All rights reserved.
September e-Update

This post has not been tagged.

Share |
Permalink
 

Maine: New Foreclosure Laws Enacted

Posted By USFN, Tuesday, September 1, 2015
Updated: Saturday, September 26, 2015

September 1, 2015

 

by Shannon Merrill and Santo Longo
Bendett & McHugh, P.C. - USFN Member (Connecticut, Maine, Vermont)

The 127th Maine Legislative Session adjourned July 16, 2015. Several default- and foreclosure-related measures were enacted. What follows is a summary of the new laws, all of which are effective October 15, 2015.

Notice to Cure Requirements — New provisions in Maine’s notice of default statute (14 M.R.S.A. § 6111) require that default notices specifically state the total amount due to cure the default, and notices must also state that the amount needed to cure does not include any amounts that will become due after the date of the notice itself.

Certification of Proof of Ownership Required — Beginning October 15, 2015 foreclosure complaints must contain a certification of proof of ownership of the loan. This change does not require the owner of the loan to be the named plaintiff in the action, but it does require that the loan owner is specifically identified in the complaint. Although the statutory language is not entirely clear, it appears that this requirement can be met by the drafting attorney including appropriate language in the complaint, and that a separate certification document executed by another party will not be required.

Municipal Action regarding Abandoned Properties — A new law authorizes Maine municipalities to issue a finding that real property, or a mobile home, is “abandoned,” and then order the property owner to address identified conditions at the property. If the property owner fails to comply, the municipality can perform the work itself and seek reimbursement from the owner. The Act requires a mortgagee, when initiating a foreclosure action, to provide the municipality with the contact information of an in-state representative for the purposes of receiving communications from the municipality regarding property abandonment issues. Under the new law, when title to real property in Maine is transferred pursuant to a foreclosure judgment, the new owner becomes subject to orders to correct property conditions, as well as potential liability and enforcement. This includes foreclosing lenders who take title at foreclosure sales and hold properties in REO portfolios.

Expedited Final Hearing Process — New legislation will permit foreclosing plaintiffs to request an expedited final hearing in cases where either: (1) efforts to mediate did not result in settlement or dismissal of the action, and any party that has appeared in the action consents to the request; or (2) the defendant did not answer the complaint and any appearing party consents to the request. Once the court receives the request, the expedited final hearing will, “as the interests of justice require,” be scheduled not less than forty-five days from the date the request is filed. The burden of proof and statutory requirements for entry of judgment remain the same.

Because of the limitations contained in the statute, it appears that use of the new expedited hearing process will largely be limited to default cases with no parties in interest actively contesting the foreclosure.

Standing to Foreclose and MERS — In an effort to address property title issues created by the Maine Supreme Court’s 2014 decision in Bank of America v. Greenleaf, 2014 ME 89, the Maine legislature has passed a law that creates a presumption that a mortgage assignment, partial release, or discharge executed by a party acting as nominee for another party is valid. This includes mortgage-related instruments executed by Mortgage Electronic Registration Systems, Inc. when acting as nominee for lenders. Importantly, in regard to assignments of mortgage specifically, the presumption of validity only applies in the context of foreclosure actions if the judgment of foreclosure is obtained and the applicable appeal period has run without an appeal being filed as of October 15, 2015 (the effective date of the Act).

Power of Sale Foreclosure — New legislation modifies Maine’s nonjudicial foreclosure process. This process allows mortgagees to proceed directly to sale in certain cases where specific statutory requirements are met, and is generally only available in cases involving commercial properties. The changes are largely procedural, not substantive. Specifically, the archaic requirement that notices must be sent by “registered mail” has been updated to a more commercially-reasonable “certified mail” requirement. The bill also eliminates the requirement that (post-sale) a petition must be filed with the Maine Superior Court to correct a purely typographical error/omission in the final vesting documents.

©Copyright 2015 USFN. All rights reserved.
September e-Update

This post has not been tagged.

Share |
Permalink
 

Another Maine Court Decision Addresses Notices of Default

Posted By USFN, Tuesday, September 1, 2015
Updated: Saturday, September 26, 2015

September 1, 2015

 

by Tristan Birkenmeier and Santo Longo
Bendett & McHugh, P.C. - USFN Member (Connecticut, Maine, Vermont)

On August 18, 2015 the Maine Supreme Judicial Court issued its decision in Wells Fargo Bank, N.A. v. Girouard, 2015 ME 116. Girouard provides clear direction to the trial courts that entry of judgment for the defendant is required if the trial court finds that the notice of default sent to the borrower failed to strictly comply with the requirements of Maine’s notice of default statute, 14 M.R.S. § 6111.

After the Supreme Judicial Court issued its seminal decision in Bank of America v. Greenleaf, 2014 ME 89 (2014), which clarified the state statutory requirements with respect to notices of default, the Girouards filed a motion for summary judgment, contending that the notice sent by Wells Fargo failed to comply with 14 M.R.S. § 6111. Wells Fargo did not dispute the deficiencies of the notice, but asserted that because sending an adequate notice of default is a statutory prerequisite to commencing a foreclosure action, the case should be dismissed without prejudice. [There was prior Maine case law in support of this proposition. See Dutil v. Burns, 1997 ME 1, 674 A. 2d 910 (1996).] The trial court agreed, granted the defendants’ motion for summary judgment, and entered an order of dismissal without prejudice. On appeal, Maine’s high court vacated the dismissal without prejudice and remanded the case for entry of judgment for the defendants.

Prior to Girouard, there was uncertainty in the trial courts as to the proper disposition of a case after a finding that the notice of default did not strictly comply with the statutory requirements. The results varied from court to court, with some courts dismissing without prejudice, as the trial court did in Girouard. Other courts dismissed with prejudice or entered judgment for the defendants. In a few rare cases, judgment was entered for the defendants; however, the court also expressly reserved to the parties the right to re-litigate the merits of the case in a future action. Girouard leaves the trial courts with only one option: entry of judgment for the defendants.

What remains unclear after Girouard is the effect such a judgment for the defendant will have on a mortgagee’s ability to institute a second foreclosure action on the same default. In fact, the Supreme Judicial Court expressly declined to address this issue. Depending on how relevant law develops in Maine, such judgments could potentially bar re-filing. Therefore, in the wake of Girouard, it is especially important that the adequacy of the notice of default is considered before a new foreclosure action is instituted, or a pending case is brought to trial.

©Copyright 2015 USFN. All rights reserved.
September e-Update

This post has not been tagged.

Share |
Permalink
 

Illinois: Kane County’s Requirements about Recovery of Pre-Judgment Fees, Costs, Advances, and Disbursements

Posted By USFN, Tuesday, September 1, 2015
Updated: Saturday, September 26, 2015

September 1, 2015

 

by Lee Perres, Jill Rein, and Kimberly Stapleton
Pierce & Associates, P.C. (USFN Member – Illinois)

Editor’s Note: Supplemental information has been provided since this article was published on September 8, 2015 in the USFN e-Update (Sept. 2015 Ed.) That information, received on September 23, 2015, has been added in a separate section at the conclusion of the original article. Scroll down to view it.

In January 2015, Judge Downs replaced Judge Wojtecki as the sitting judge who hears mortgage foreclosure cases in Kane County, Illinois. Shortly thereafter, Judge Downs clarified her interpretation of the Illinois Mortgage Foreclosure Law as it relates to a plaintiff’s recovery of fees, costs, advances, and disbursements that are expended subsequent to the execution of the affidavit of indebtedness supporting the judgment of foreclosure and the entry of the judgment of foreclosure itself.

The court’s ruling: Absent a subsequent amendment to the judgment of foreclosure order, the fees, costs, advances, and disbursements expended by the plaintiff between the date of execution of the affidavit of indebtedness and the entry of the judgment of foreclosure cannot be recouped at confirmation of sale, This ruling is based on a strict reading of 735 ILCS 5/15-1508(b)(1), allowing for the collection of fees and costs arising between the entry of judgment of foreclosure and the confirmation hearing, in conjunction with 735 ILCS 5/15-1506(a)(2), which states that the affidavit of indebtedness contemplates the amount due to the mortgagee at judgment.

Inevitably there exists a gap in time — sometimes significant in scope — between the execution of the affidavit of indebtedness and the entry of judgment. During this time substantial fees, costs, advances, and disbursements may be expended for, among other things, tax payments, property preservation, hazard insurance, etc. Thus, to be able to include in a sales bid and subsequently collect these expenditures at confirmation of sale, a supplemental affidavit of indebtedness is now required to be submitted to the court. Alternatively, these expenditures (if insignificant in sum) can be excluded from the sales bid and the plaintiff can forgo amending its judgment.

Regardless of whether an amendment to judgment is sought, the court’s examination of the dates when expenditures were made requires that satisfactory detail be provided in the calculation of sales bids.

UPDATE — Subsequent Amendment to Judgment Expanded to Second District in Illinois
(information received September 23, 2015)


Recently this author’s firm advised that the judge hearing mortgage foreclosure cases in Kane County, Illinois (Judge Downs) clarified her interpretation of the Illinois Mortgage Foreclosure Law (IMFL) as it relates to the plaintiff’s recoverability of fees, costs, advances, and disbursements that are expended subsequent to the execution of the affidavit of indebtedness that supports the judgment of foreclosure and the entry of the judgment of foreclosure itself. In January 2015 Judge Downs ruled, absent a subsequent amendment to the judgment of foreclosure order, fees, costs, advances, and disbursements (expended by the plaintiff between the date of execution of the affidavit of indebtedness and the entry of the judgment of foreclosure) cannot be recouped at confirmation of sale.

The court based its ruling on a strict reading of 735 ILCS 5/15-1508(b)(1), which allows for the collection of fees and costs arising between the entry of judgment of foreclosure and the confirmation hearing, in conjunction with 735 ILCS 5/15-1506(a)(2), which states that the affidavit of indebtedness contemplates the amount due to the mortgagee at judgment.

On August 20, 2015 the Second District Appellate Court for Illinois found that the bank was not entitled to recover a $470,340 real estate tax payment where the bank could have, but did not, amend the judgment of foreclosure prior to the sale to include the prejudgment tax payment that the bank made about one month prior to the hearing on the bank’s motion for summary judgment. See BMO Harris Bank, N.A. v. Wolverine Properties, LLC, 2015 Ill. App. (2d) 140921 (Aug. 20, 2015). The general rule in Illinois is that but for conflict among districts, a decision is not confined to any particular district unless another district appellate court finds differently.

During the time between execution of the affidavit of indebtedness and the entry of judgment, substantial fees, costs, advances, and disbursements may be expended (i.e., tax payments, property preservation, hazard insurance, etc.). In order to include these expenditures in a sales bid and to subsequently collect these expenditures at confirmation of sale, a supplemental affidavit of indebtedness is now required to be submitted to the court with a motion to amend the judgment. The court must amend the judgment to include any additional pre-judgment expenditures prior to the date of sale. If amendment does not occur prior to the sale, the plaintiff will need to set aside the sale, amend the judgment, and conduct a new sale. Id. at ¶23. Alternatively, if it is not cost-effective to seek recovery of these expenditures, they can be excluded from the sales bid and the plaintiff can forgo amending its judgment.

©Copyright 2015 USFN and Pierce & Associates, P.C. All rights reserved.
September e-Update

This post has not been tagged.

Share |
Permalink
 

Illinois: Right to Personal Deficiency Judgment and Res Judicata.

Posted By USFN, Tuesday, September 1, 2015
Updated: Saturday, September 26, 2015

September 1, 2015

 

by Lee Perres, Jill Rein, and Kimberly Stapleton
Pierce & Associates, P.C. (USFN Member – Illinois)

On June 5, 2015, an important appellate decision was issued in the First Judicial District of Illinois about personal deficiencies. It is significant with respect to the mortgage foreclosure practice in Illinois because it directly impacts a lender’s options in pursuing a personal deficiency judgment, an option often sought after a judicial foreclosure sale on foreclosed properties. [LSREF2 Nova Investments III, LLC v. Coleman, 2015 Ill. App. (1st) 140184].

Background
The underlying suit was brought on the note for the balance due after an in rem judgment in a foreclosure suit was obtained. The appellant, LSREF2, sought review of the trial court’s ruling that LSREF2’s complaint seeking relief under a promissory note post-foreclosure was barred under the doctrine of res judicata.

According to the appellate court, where the circuit court had personal jurisdiction over a defendant to enter a personal deficiency judgment against the defendant pursuant to 735 ILCS 5/15-1508(e) in the foreclosure suit, the plaintiff’s subsequent suit for the amount of the personal deficiency as determined in the foreclosure suit was barred by the doctrine of res judicata.

Note, however, that LSREF2’s Petition for Leave to Appeal has been accepted for filing by the Illinois Supreme Court. A decision on whether or not the Illinois Supreme Court will accept the case is expected no earlier than the last week of September 2015.

Discussion
In August 2010, LSREF2 filed a single-count complaint to foreclose mortgage pursuant to the Illinois Mortgage Foreclosure Law (IMFL). In its prayer for relief, LSREF2 sought a judgment of foreclosure, in addition to a personal judgment for deficiency. The complaint alleged that the defendant Michelle Coleman was “personally liable for any deficiency.” On November 22, 2010 a judgment of foreclosure was entered, awarding LSREF2 judgment in the amount of $322,668.35 and ruling that the defendant would be personally liable for a deficiency judgment as provided by law.

A judicial sale was held and LSREF2 purchased the property. On February 28, 2011 the court entered an order approving sale, which stated that “[t]here shall be an IN REM deficiency judgment entered in the sum of $227,416.32 with interest thereon as by statute provided against the subject property.”

On May 15, 2012 LSREF2 filed a new complaint seeking to enforce the promissory note against the defendant. The defendant filed a motion to dismiss, asserting that LSREF2’s breach of promissory note action was barred by the doctrine of res judicata where the circuit court had already ruled on the defendant’s liability pursuant to the promissory note. The circuit court initially denied the defendant’s motion, but that court reconsidered its order. On December 19, 2013 LSREF2’s complaint was dismissed with prejudice based on res judicata.

In Illinois, the doctrine of res judicata bars recovery in matters that have been previously adjudicated. The Illinois Supreme Court has provided the test for application of res judicata:



“For the doctrine of res judicata to apply, three requirements must be met: (1) there was a final judgment on the merits rendered by a court of competent jurisdiction; (2) there was an identity of cause of action; and (3) there was an identity of parties or their privies.” Rein v. Noyes, 172 Ill. 2d 325; 665 N.E.2d 1199, 1206; 216 Ill. Dec. 642 (1996).


“A cause of action is defined by the facts that give a plaintiff a right to relief.” Rein, 172 Ill. 2d 325, 338.



“ ‘While one group of facts may give rise to a number of different theories of recovery, there remains only a single cause of action. “If the same facts are essential to the maintenance of both proceedings or the same evidence is needed to sustain both, then there is identity between the allegedly different causes of action asserted and res judicata bars the latter action.” ’ ” Rein, 172 Ill. 2d at 338, quoting Progressive Land, 151 Ill. 2d 285 at 295 (1992), quoting Morris v. Union Oil Co., 96 Ill. App. 3d 148, 157 (1981).


The doctrine of res judicata extends not only to what is actually decided in the original action but also to matters that could have been decided in that prior suit. Progressive Land at 294. Accordingly, a mortgage foreclosure based on a breach of the terms of the note (and mortgage), and a suit on the note, arise from an identity of a cause of action; and as a mortgage foreclosure allows for recovery under both the note and mortgage, a suit on the note meets the requirements of res judicata.

In the foreclosure action, LSREF2 explicitly sought a personal deficiency judgment against the defendant based on the defendant’s obligations under the promissory note and the mortgage. Pursuant to 735 ILCS 5/15-1508(e), with “any order confirming a sale pursuant to the judgment of foreclosure, the court shall also enter a personal judgment for deficiency against any party (i) if otherwise authorized and (ii) to the extent requested in the complaint and proven upon presentation of the report of sale in accordance with Section 15-1508.” Therefore, Section 15-1508 allowed a personal money judgment to be entered against the defendant in the foreclosure action and allowed the plaintiff to enforce and collect it to the same extent and manner applicable to any money judgment.

In addition, the judgment of foreclosure order stated that the plaintiff would be entitled to a deficiency judgment after the sale of the property, and be allowed to execute upon such judgment in the event that a deficiency amount was due. Following the judicial sale, there was a deficiency amount due. The order approving sale did not provide for an in personam deficiency judgment, only an in rem deficiency judgment, but the fact that the plaintiff did not obtain an in personam deficiency judgment as requested in its complaint to foreclose mortgage did not preclude the application of res judicata principles.

The First District Appellate Court affirmed the circuit court’s decision. The appellate court held that where the circuit court had personal jurisdiction over the defendant to enter a personal deficiency against the defendant pursuant to section 15-1508(e) based on the plaintiff’s request for a personal deficiency judgment in its complaint to foreclose mortgage, the plaintiff’s subsequent claim for the amount of the deficiency, as determined in the foreclosure suit as a result of the sale of the property, is barred by the doctrine of res judicata.

The LSREF2 case is clear that a party is barred from seeking a remedy in a subsequent case if it was previously available in a prior one. As a matter of public policy, plaintiffs are generally not permitted to split their causes of action by suing for part of a claim in one action, and then suing for the remainder in another action. Rein at 1206. Illinois courts refer to this as “claim-splitting.” Accordingly, filing a two-count complaint for both a mortgage foreclosure and a suit on note only complicates matters, without solving the problem, as a personal deficiency could be sought in a mortgage foreclosure alone.

However, the court in Rein discusses exceptions to the rule against claim-splitting, citing to section 26(1) of the Restatement (Second) of Judgments. The exception relevant here is where “the court in the first action expressly reserved the plaintiff’s right to maintain the second action.” Thus, if a plaintiff is granted leave to adjudicate the issue of personal deficiency by the chancery court, a motion to dismiss on res judicata grounds may be defeated.

Conclusion
Looking ahead, in cases where there is a possible deficiency that one would not want to pursue at the order approving sale, it may be best to file, concurrently, a motion seeking to preserve the issue of deficiency for a subsequent action. Since this is a wholly novel approach, it is uncertain whether a court would grant such a motion, and whether a second court would find that it is sufficient to prevent a motion to dismiss on res judicata grounds. There is a lack of case law on court-sanctioned subsequent actions. However, in cases where an in personam deficiency is unavailable at the entry of the order approving sale, then seeking an order preserving the right to proceed in a separate suit regarding the personal deficiency may be the only means by which a judgment creditor may recover.

As drawn from the LSREF2 case, potential concern arises moving forward if foreclosing mortgagees file a complaint to foreclose mortgage, which includes language seeking a personal deficiency judgment provided for under 735 ILCS 5/15-1508(e), because of the res judicata application.

©Copyright 2015 USFN and Pierce & Associates, P.C. All rights reserved.
September e-Update

This post has not been tagged.

Share |
Permalink
 

Connecticut: A Failure to Establish Compliance Leads to More than a Dismissal

Posted By USFN, Tuesday, September 1, 2015
Updated: Saturday, September 26, 2015

September 1, 2015

 

by Adam L. Avallone
Bendett & McHugh, P.C. – USFN Member (Connecticut, Maine, Vermont)

A Connecticut trial court has held that a plaintiff’s failure to prove compliance with the notice provisions of Connecticut’s Emergency Mortgage Assistance Program (EMAP), C.G.S. §§ 8-265dd(b) and 8-265ee(a), deprive the court of subject matter jurisdiction. This is fatal to an action when challenged. People’s United Bank v. Wright, 2015 Conn. Super. LEXIS 694 (Conn. Super. Ct. Mar. 30, 2015).

Moreover, in a subsequent decision, the trial court awarded $13,893.75 in attorneys’ fees to counsel for the defendants for successfully defending the suit. People’s United Bank v. Wright, 2015 Conn. Super. LEXIS 1829 (Conn. Super. Ct. July 15, 2015).

The court considered C.G.S. § 8-265dd(b) and the language of C.G.S. § 8-265ee(a), which states: “no ... mortgagee may commence a foreclosure of a mortgage prior to mailing such notice.” [Emphasis added]. The court concluded that the legislature has not only forestalled a foreclosure judgment unless there has been compliance, but in a subsequent section, it has prohibited even the commencement of the action. Since it is well established in Connecticut that an action is commenced by service of process, any foreclosure writ of summons and complaint served on a mortgagor before or without compliance with the notice requirement would be a nullity.

In its ruling, the trial court considered a copy of the notice as well as deposition testimony of an employee of the servicer. The court distinguished the facts in Wright from a Connecticut Supreme Court case that found proof of regular mailing based on testimony that employees were directed to mail a letter, and further testimony of the usual custom in mailing letters for their employer. In Wright, the trial court determined that although, “a computer generated order to mail by certified mail was issued, the code number on the letter which is supposed to correspond with the order is missing on the notice.”

Further, the court concluded that not having the ability to question the employee of the servicer rendered his deposition testimony “contradictory, confusing and unreliable.” The court took issue both with the witness’ lack of personal knowledge of the general mailroom process and, more significantly, with the inability to say whether the notice was ever delivered to the mailroom. Next, the court found that a substantial basis for the witness’ assertion that certified mail was ordered was his observation of digital screens. However, the screens that the witness viewed were for a borrower other than the defendants in the present case. Further, the court noted that the letter log history, upon which the witness relied, contained only the name of the primary borrower. It did not include the name of the co-borrower, despite the letter being addressed to both borrowers.

The Wright decision makes clear that in the face of a denial of receipt, affirmative evidence of the actual sending of the notice may be required to demonstrate compliance under Connecticut’s EMAP statute.

The importance of maintaining and providing to counsel the business records and documents evidencing policies and procedures of the mailing of notices is shown in Wright. As the mailing of these notices is a condition precedent to the institution of a foreclosure action, foreclosing plaintiffs who are unable to provide proper evidence can find themselves with a substantial bill from defense counsel, as well as a dismissed action that requires restarting.

©Copyright 2015 USFN. All rights reserved.
September e-Update

This post has not been tagged.

Share |
Permalink
 

New York’s Highest Court Rules on Standing to Foreclose

Posted By USFN, Tuesday, September 1, 2015
Updated: Saturday, September 26, 2015

September 1, 2015

 

by Jacqueline Fink
Druckman Law Group PLLC – USFN Member (New York)

On June 11, 2015 the New York Court of Appeals upheld a lower court decision granting summary judgment in favor of the plaintiff, holding that Aurora Loan Services, LLC had standing to foreclose. Aurora Loan Services, LLC v. Taylor, 25 N.Y.3d 355, 2015 N.Y. Slip Op. 04872 (2015).

Defendant Taylor executed a note dated July 5, 2006 to First National Bank of Arizona, as well as a mortgage to MERS as nominee for First National Bank of Arizona. Pursuant to a pooling and servicing agreement (PSA), the loan was made part of a mortgage-backed trust whereby Deutsche Bank Trust Company, as Trustee, became the owner of the note. An allonge to the note provided a chain of ownership from First National Bank of Arizona, through a few entities, and ultimately to Deutsche.

Pursuant to a master servicing assignment and assumption agreement (MSAAA) dated March 10, 2008, Aurora assumed servicing obligations under the PSA on April 1, 2008. On August 13, 2009, the mortgage was assigned by MERS to Aurora. Taylor defaulted under the terms of the note and mortgage by failing to make the payment due on January 1, 2010. By power of attorney dated May 14, 2010, Deutsche granted Aurora the right to perform acts in the trustee’s name, including the execution of foreclosure documents. On May 20, 2010, Aurora took physical possession of the note. A foreclosure action was commenced by Aurora Loan Services, LLC on May 24, 2010.

The defendant asserted that Aurora did not have standing to foreclose as Aurora did not have possession of the mortgage at the time the action was commenced. The Court of Appeals, however, rejected this argument, citing Bank of N.Y. v. Silverberg, 86 A.D.3d 274 (2d Dept. 2011). Once a note is transferred, “the mortgage passes as an incident to the note” The converse regarding physical transfer of the mortgage prior to commencement is irrelevant to standing. “The note, and not the mortgage, is the dispositive instrument that conveys standing to foreclose under New York law. In the current case, the note was transferred to Aurora before the commencement of the foreclosure action — that is what matters.” Aurora Loan Services, LLC v. Taylor, 25 N.Y.3d 355, at 366.

While some lower courts still require valid assignments of mortgages to substantiate standing, the Taylor holding should provide an argument to plaintiffs unable to produce an unbroken chain of assignments. Additionally, this recent ruling confirms the importance of having possession of the note prior to the commencement of a foreclosure action, by upholding that a non-owner holder with delegated written authority and physical possession of the note has standing to foreclose.

©Copyright 2015 USFN. All rights reserved.
September e-Update

This post has not been tagged.

Share |
Permalink
 

Maine High Court Clarifies Jurisdiction and Standing in Foreclosure Cases

Posted By USFN, Tuesday, September 1, 2015
Updated: Saturday, September 26, 2015

September 1, 2015

 

by Paul Weinstein
Bendett & McHugh, P.C. – USFN Member (Connecticut, Maine, Vermont)

On August 11, 2015 the Maine Supreme Judicial Court published its opinion in Homeward Residential, Inc. v. Gregor, 2015 ME 108, in which the court clarified the relationship among jurisdiction, justiciability, and standing in the context of a foreclosure action.

After a full trial on the merits, the trial court in Gregor found that Homeward failed to establish standing to foreclose on the mortgage, and the court entered judgment for the defendant. Specifically, the trial court found an unrecorded interim assignment of mortgage in the collateral file, which the court held deprived subsequent assignees (including the plaintiff) of an ownership interest in the mortgage and, thus, standing to foreclose. Importantly, the trial court went on to “reserve the right for both parties to re-litigate the issues discussed herein so that this action may not act as a bar to future action.” The borrower appealed, asserting that the trial court was without authority to reserve to Homeward the right to bring a second foreclosure action.

On appeal, the Maine Supreme Judicial Court vacated the judgment for the defendant and directed the trial court to enter a dismissal without prejudice. The Supreme Judicial Court explained that while the Maine foreclosure statutes grant subject matter jurisdiction in all foreclosure cases to the trial courts, a plaintiff may not invoke that jurisdiction unless it has standing to foreclose. Accordingly, when a party lacks standing to foreclose, the trial court is without authority to address the merits of the case, and instead can only dismiss the action. The Supreme Judicial Court went on to hold that the dismissal must be without prejudice, even though a full trial on the merits was completed, and the trial court had found independent grounds on which to enter a judgment in favor of the defendant. Most significantly, because the dismissal is without prejudice, the plaintiff is free to initiate a subsequent foreclosure action on the loan.

The most immediate impact of the Gregor decision will be on pending Maine foreclosure cases affected by the Supreme Judicial Court’s 2014 decision in Bank of America v. Greenleaf, 2014 ME 89. Greenleaf held that a mortgage assignment executed by MERS acting as nominee for the lender does not transfer full interest in the mortgage. In the wake of Greenleaf, the trial courts struggled with how to dispose of masses of cases involving MERS assignments that deprived plaintiffs of standing to foreclose. Gregor provides a clear directive that these matters are to be dismissed without prejudice (allowing the plaintiffs to re-file), provided that other aggravating factors requiring or weighing in favor of a dismissal with prejudice are not present.

The holding in Gregor provides plaintiffs with some protections and a degree of clarity regarding the law of standing and jurisdiction in Maine foreclosure cases. Nonetheless, the decision also foreshadows stricter evidentiary standards that future foreclosure plaintiffs may need to satisfy. In an important footnote, the Supreme Judicial Court commented that because the witness had obtained her knowledge of the servicer’s business practices from training alone, and not through direct observation or active participation in making entries, the witness was wholly unqualified to provide testimony regarding the business records of Homeward and the prior servicers. As a result, the Gregor decision could provide new ammunition to mortgagors and defense counsel attacking witness credibility.

©Copyright 2015 USFN. All rights reserved.
September e-Update

This post has not been tagged.

Share |
Permalink
 

North Carolina Enacts Version of Federal Protecting Tenants at Foreclosure Act

Posted By USFN, Tuesday, September 1, 2015
Updated: Saturday, September 26, 2015

September 1, 2015

 

by Graham H. Kidner
Hutchens Law Firm – USFN Member (North Carolina, South Carolina)

On August 5, 2015 the governor of North Carolina signed into law a bill that, among other provisions, resurrects some of the rights enjoyed by tenants under the now-defunct federal Protecting Tenants at Foreclosure Act. The federal law expired on December 31, 2014, when Congress declined to extend its terms. The new North Carolina law is effective October 1, 2015.

North Carolina Session Law 2015-178 makes a number of amendments to Chapter 45 of the North Carolina General Statutes, which sets forth North Carolina’s power of sale foreclosure process, as well as Chapter 42 of the North Carolina General Statutes, which specifies North Carolina’s landlord/tenant procedures. A new section, § 45-21.33A, provides that:



• A foreclosure sale purchaser who does not intend to occupy the property as a primary residence “shall assume title subject to the rights of any tenant to occupy the premises until the end of the remaining term of the lease or one calendar year from the date the purchaser acquires title, whichever is shorter.”

• The tenant’s rights are qualified:



o He may not be the borrower, or child, spouse, or parent of the borrower
o There must be a written lease, that is not terminable at will, and the rent must be not substantially less than fair market value
o If there is an “imminently dangerous condition” [as defined in N.C.G.S. § 42-42(a)(8)] on the premises as of the date of acquisition, then the tenant has no right to continue occupying the premises.


• The tenant must be provided with at least a 90-day notice to vacate if: (a) the purchaser will occupy the premises as his/her primary residence, (b) the tenant has only an oral lease, or (c) if the lease is terminable at will.


As was the case with the federal PTFA, it is likely that the new law will lead to litigation. Issues surround, for example, the documents necessary to prove the existence of a “written lease;” when does the lease term end; and how far below market value must the rent be before it qualifies as “substantially less”? Both identifying the tenant and communicating successfully with him to determine the salient facts about the tenancy will remain as obstacles to compliance with the new law.

Additionally, the new law provides some relief for various interested persons, which would not adversely impact foreclosing lenders:



• Tenants of borrowers in foreclosure are entitled to terminate their leases early, under certain conditions; and

• Foreclosure rescue schemes are prohibited, with limited exceptions designed to ensure such transactions are legitimate and not intended to deprive the borrower of his interest in the property.


Editor’s Note: Federal H.R. 1354 (introduced 3/13/15 to permanently extend the PTFA and sent to House Committee on Financial Services); Federal S.730 (introduced 3/12/15 to permanently extend the PTFA; read twice and sent to Senate Committee on Banking, Housing, and Urban Affairs). No status change to either bill as of September 7, 2015. Additionally, USFN has two state-by-state publications that are helpful in the post-PTFA environment: REO/Eviction Desk Guide and Eviction Timelines Matrix. They are especially effective when used together.

©Copyright 2015 USFN and Hutchens Law Firm. All rights reserved.
September e-Update

This post has not been tagged.

Share |
Permalink
 

Sixth Circuit: A Corporation May Be a Protected “Person” Under the FDCPA

Posted By USFN, Tuesday, September 1, 2015
Updated: Saturday, September 26, 2015

September 1, 2015

 

by Graham H. Kidner
Hutchens Law Firm – USFN Member (North Carolina, South Carolina)

The Sixth Circuit Court of Appeals, in a case from Tennessee, held that the definition of a protected “person” under FDCPA’s enforcement provision, 15 U.S.C. § 1692k, includes a corporation. [Anarion Investments LLC v. Carrington Mortgage Services, LLC, 2015 Westlaw 4503588 (6th Cir. July 23, 2015)].

Some background: The underlying lawsuit alleged the misrepresentation in foreclosure proceedings that the foreclosure trustee was properly appointed “by an instrument duly recorded,” which “instrument” Anarion claimed did not exist. The District Court had dismissed the action brought by a corporation, on the ground that only an individual person had standing to bring such an action. Relying on the definition of “person” in the Dictionary Act, the Sixth Circuit reversed — observing that some sections of the FDCPA are expressly applicable only to individual persons, while other sections do not contain such limitation.

The Sixth Circuit majority opinion states:



“FDCPA’s enforcement provision, 15 U.S.C. § 1692k, states that ‘any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person[.]’ 15 U.S.C. § 1692k (a) (emphasis added). The sole issue before us is whether Anarion is a ‘person’ under this provision and the Act generally. [¶] The presumptive answer to that question is yes. The federal Dictionary Act provides that, ‘[i]n determining the meaning of any Act of Congress,’ the word ‘person’ includes artificial entities — like Anarion — unless ‘the context indicates otherwise[.]’ 1 U.S.C. § 1. Here there is plenty of relevant context, since ‘person’ appears 24 times in the FDCPA. In some places, the term refers exclusively to artificial entities.” Anarion Investments LLC v. Carrington Mortgage Services, LLC, id.


The dissenting opinion strongly argued that “the context [of the FDCPA clearly and repeatedly] indicated otherwise.” The FDCPA contains several references to Congress’s intent to protect individuals from harassment and unfair collection practices, and that consumer (not business) debt, is the sole focus of the statute. The dissent warns of the precedential effect of the ruling, opening up litigation in favor of corporate plaintiffs.

The precedential effect may be somewhat limited because of the rather unusual facts: specifically, the plaintiff was the assignee of the lessee of the secured property, whose attorney was the original lessee and owner of the corporate plaintiff. The court has, nevertheless, opened the door to a new category of plaintiff that is arguably not contemplated by the purpose of the statute.

©Copyright 2015 USFN and Hutchens Law Firm. All rights reserved.
September e-Update

This post has not been tagged.

Share |
Permalink
 

Illinois: Cook County Recorder Title Freeze Act is Enacted

Posted By USFN, Tuesday, September 1, 2015
Updated: Saturday, September 26, 2015

September 1, 2015

 

by Colin Winters
Anselmo Lindberg Oliver LLC – USFN Member (Illinois)

On August 21, 2015 the governor of Illinois signed the Cook County Recorder Title Freeze Act into law, effective January 1, 2016. The new Act provides that in any foreclosure case in Cook County, the plaintiff may ask the court to bar any non-record claimants or the owner from recording any interest on the property during the pendency of the foreclosure action. Once this order is delivered to the Cook County Recorder, a non-record claimant or owner can only record an interest after displaying a certified court order allowing them to do so. If the recorder discovers that an interest was filed erroneously, the recorder will record a new document specifying the erroneous document and explicitly voiding it.

This legislative action is a reaction to the ever-increasing “paper terrorism” that sovereign citizens and their ilk file in a variety of court cases. Notably, in 2012, the federal government indicted (and later convicted) a sovereign citizen for filing bogus liens against multiple public officials (including a former U.S. prosecutor, a district court judge, and a former chief judge).

As such, this new Act should be read as a companion piece to the last legislative session’s acts concerning clouding title. Public Act 98-099 allowed recorders offices throughout the state to establish fraud referral and review programs, with the legislature finding that “Property fraud, including fraudulent filings intended to cloud or fraudulently transfer title to property by recording false or altered documents and deeds, is a rapidly growing problem throughout the State.” Further, Public Act 98-098 escalated the penalty for unlawful clouding of title from a misdemeanor to a class IV felony.

Plaintiffs will want to take advantage of this new Act any time there is an indication that someone may record bogus documents. For example, if the plaintiff were to receive a sovereign citizen-style pleading in a foreclosure case, it would be wise to freeze the title as soon as possible to prevent any fraudulent recording.

Unfortunately, the Cook County Recorder Title Freeze Act is not automatic; the legislature has placed the responsibility of seeking relief on the plaintiffs. Rather than proactively barring any non-record claimant or owner from recording interests, the Act requires that the plaintiff must first bring a motion to bar them, then record that order with the recorder’s office and pay the standard fee for recording. To best protect the interests of all plaintiffs, these motions should be presented at the earliest opportunity in each case.

©Copyright 2015 USFN and Anselmo Lindberg Oliver LLC. All rights reserved.
September e-Update

 

This post has not been tagged.

Share |
Permalink
 

Illinois: Amendment to the Residential Mortgage License Act of 1987

Posted By USFN, Friday, July 24, 2015
Updated: Friday, September 25, 2015

July 24, 2015

 

by Lee Perres and Jill Rein
Pierce & Associates, P.C. – USFN Member (Illinois)

Last year, the Second District Court of Appeals for Illinois found that a mortgage, which was originated in violation of the Residential Mortgage Licensing Act of 1987 (Licensing Act), was void against public policy. [First Mortgage Company, LLC v. Dina, 2014 IL App. (2d) 130567 (2d Dist. Mar. 31, 2014; modified upon denial of reh’g May 22, 2014)].

Specifically, the Second District Court of Appeals found that when a mortgage was originated by a party who was not authorized under the Licensing Act, nor fell into one of the Licensing Act’s exceptions, the defendant could challenge the mortgage as void, and such challenge could be raised at any time.

On July 23, 2015 the governor of Illinois signed Public Act 99-0113 into law, which amends the Licensing Act. It is effective immediately. The amendment to the Licensing Act provides that a mortgage loan brokered, funded, originated, serviced, or purchased by a party who is not licensed shall not be held to be invalid solely on the basis of specified violations of the Licensing Act.

Editor’s Note: The authors’ firm joined in lobbying efforts to overturn the Dina decision.

©Copyright 2015 USFN and Pierce & Associates, P.C. All rights reserved.
July/August e-Update

This post has not been tagged.

Share |
Permalink
 

South Carolina: Default Mitigation Management Portal

Posted By USFN, Thursday, July 23, 2015
Updated: Friday, September 25, 2015

July 23, 2015

 

by Ronald C. Scott and Reginald P. Corley
Scott & Corley, P.A. – USFN Member (South Carolina)

Previously, we wrote of the loss mitigation requirements of Judge Waites, the senior bankruptcy judge for the District of South Carolina. Earlier this year Judge Waites mandated that, for cases assigned to him, all loss mitigation reviews must occur on the Default Mitigation Management (DMM) portal. Additionally, this bankruptcy judge required that any loss mitigation activity occurring outside the portal must be reported to the court by the creditor. The judge’s rules also mandate that reviews outside the portal may only occur if the court enters an order allowing a non-portal review. [For further background, see South Carolina: Default Mitigation Management Portal (USFN e-Update, April 2015 Ed.)].

Judge Waites has reached out to the bankruptcy bar to advise that he is still being asked to approve loan modifications where the loss mitigation review was not in the DMM portal, and the court was not contacted by the creditor regarding loss mitigation activity outside of the portal. The judge has indicated that he may hold hearings to approve these loan modifications and require a representative from the creditor to appear at the hearing to explain why the creditor did not comply with the court’s requirements. Additionally, if a creditor does not comply with the requirements in the future, it is probable that the creditor will be sanctioned by the court for this conduct.

Because of the strict requirements and the possible consequences of non-compliance, it is suggested that when a borrower whose bankruptcy case is assigned to Judge Waites contacts his lender/servicer about loss mitigation, the lender/servicer should communicate with local counsel to report the loss mitigation discussions to the court. Additionally, if a loss mitigation application is sent to the borrower or if one is received from the borrower, it is advisable that the lender/servicer have local counsel file a motion for loss mitigation review outside of the DMM portal. Finally, if the lender/servicer has any current loss mitigation reviews pending outside of the portal involving borrowers in a bankruptcy case assigned to Judge Waites, best practice strongly suggests that the lender/servicer should take action to report this review to the court as soon as possible.

© Copyright 2015 USFN. All rights reserved.
July/August e-Update

This post has not been tagged.

Share |
Permalink
 

Federal Drug Law Violation: Impacts Bankruptcy Code Relief?

Posted By USFN, Thursday, July 23, 2015
Updated: Wednesday, September 9, 2015

July 23, 2015 

 

by John Kapitan
Trott Law, P.C. – USFN Member (Michigan)

The Michigan Medical Marijuana Act (MMMA) authorizes a Michigan resident to cultivate, possess, and even distribute some amount of marijuana, or its products, without offending the laws of Michigan. Federal law, in contrast, criminalizes possession and distribution of the plant with exceptions only for federally-approved research activities.

The question of whether the business of a chapter 13 debtor (legitimate under the state laws in Michigan, but criminal under federal law) precludes a court from granting relief available under the Bankruptcy Code was recently decided in the case of In re Johnson, 2015 Bankr. LEXIS 1983 (Bankr. W.D. Mich. 2015).

In Johnson, the debtor sought relief under chapter 13 of the Bankruptcy Code to save his residence, prevent the termination of utility services, and avoid repossession of his vehicle. The United States Trustee moved to dismiss the case because the debtor was engaging in the marijuana industry and believed that the court should not enforce the protections of the Bankruptcy Code to aid violations of federal law.

According to the debtor’s Schedules, Statement of Financial Affairs, and testimony during an evidentiary hearing, the debtor’s income was derived from Social Security benefits and through the cultivation and sale of marijuana to three patients through a regulated dispensary pursuant to the MMMA. A review of the debtor’s proposed plan indicated that the monthly payment was well below his monthly Social Security benefit, and the debtor testified that none of the proceeds from his activities under the MMMA would be used to fund the plan.

Cognizant of the debtor’s dire need of bankruptcy relief, the court refrained from dismissing the case, but enjoined the debtor from conducting his medical marijuana business while the case was pending in order to provide him with limited additional time to decide whether to continue his business activity or to dismiss the case.

In reaching this decision, the court did not believe it mattered that the plan was funded solely from Social Security benefits because, as a statutory matter, the same reasons that preclude the Standing Trustee from holding contraband (or using proceeds or instrumentalities of federal criminal activity) apply to the debtor. As such, the debtor could not conduct an enterprise that admittedly violates federal criminal law while enjoying the federal benefits which the Bankruptcy Code affords him, as there is no constitutional right to obtain a discharge of one’s debts in bankruptcy. Additionally, the court noted that it is not asking too much of debtors to obey federal laws, including criminal laws, as a condition of obtaining relief under the Bankruptcy Code.

© Copyright 2015 USFN. All rights reserved.
July/August e-Update

This post has not been tagged.

Share |
Permalink
 

Connecticut: Recourse to Foreclose Under Theory of Ratification and Unjust Enrichment

Posted By USFN, Thursday, July 23, 2015
Updated: Friday, September 25, 2015

July 23, 2015

 

by Nicole M. FitzGerald
Bendett & McHugh, P.C. – USFN Member (Connecticut, Maine, Vermont)

On May 21, 2015 the Stamford Superior Court issued a decision favorable to foreclosing lenders when only one of the record owners of the property signs the mortgage [HSBC Bank USA, National Association, as Trustee v. D’Agostino, FST CV-09-6002754-S].

While Deutsche Bank National Trust Company, Trustee v. Perez, 146 Conn. App. 833 (2013), held that “the record did not support a finding by clear, substantial and convincing evidence that the missing signatory participated in the mortgagor’s efforts to obtain the loan or execute the mortgage and therefore the court lacked the authority to reform the mortgage by adding her signature, (emphasis added)” the court in D’Agostino found that the plaintiff bank had recourse to foreclose against the omitted mortgagor under a theory of ratification and unjust enrichment.

Ratification, unlike reformation, is defined as “the affirmance by a person of a prior act which did not bind him but which was done or professedly done on his account.” Ratification requires “acceptance of the results of the act with an intent to ratify, and with full knowledge of all the material circumstances.” In D’Agostino, the court found that the omitted mortgagor ratified the mortgage because he had “knowledge of all of the circumstances which attended the mortgage loan transaction and intended to, did and still does accept the benefits of the transaction.”

In order for the plaintiff to obtain a recourse under the ratification theory, the court further found that the equitable cause of action of unjust enrichment was satisfied, and imposed a constructive trust as the vehicle to allow a judgment of foreclosure to be entered against the omitted mortgagor. A constructive trust arises “where a person who holds title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it.” The D’Agostino case, although only a trial court decision, is encouraging for foreclosing lenders in the wake of the Perez decision.

Editor’s Note: The author’s firm represented the plaintiff in the D’Agostino case, which is summarized here.

© Copyright 2015 USFN. All rights reserved.
July/August e-Update

This post has not been tagged.

Share |
Permalink
 

Connecticut: Allegations Involving Conduct in Mediation

Posted By USFN, Thursday, July 23, 2015
Updated: Friday, September 25, 2015

July 23, 2015

 

by Jeffrey M. Knickerbocker
Bendett & McHugh, P.C. – USFN Member (Connecticut, Maine, Vermont)

The Connecticut Court of Appeals recently rendered a decision in U.S. Bank v. Sorrentino, upholding a lower court’s dismissal of claims made by a borrower regarding the plaintiff’s conduct in mediation. The appellate court examined a motion for summary judgment decided in favor of the plaintiff bank in the trial court. [U.S. Bank v. Sorrentino, 2015 Conn. App. LEXIS 235 (June 1, 2015)].

Connecticut has a mandatory mediation program. The statute authorizing mediation has a provision mandating that the parties act in “good faith” during the mediation. In Sorrentino, among the allegations presented as affirmative defenses and a counterclaim were the following: “The plaintiff conducted the mediation process in a manner calculated effectively to ensure that the subject loan would not qualify for modification. During this process, plaintiff continually requested documents which had already been provided; regularly claimed to have lost or misplaced documents; professed to not understand the sources and amounts of income despite repeated, good faith, efforts on the part of defendants to provide this information to plaintiff. Plaintiff, on a regular basis, assured defendants that ... they would qualify for a modification, and that ‘we want you to stay in your home and keep your home’ when, in fact, plaintiff knew that the chances for a modification were negligible.”

In Sorrentino, the appellate court considered the defenses and counterclaims that are proper in a foreclosure matter, and stated: “This court previously has held that, ‘[i]n a foreclosure action, a counterclaim must relate to the making, validity or enforcement of the mortgage note in order properly to be joined with the complaint.’” JP Morgan Chase Bank, Trustee v. Rodrigues, 109 Conn. App. 125, 133, 952 A.2d 56 (2008); see also New Haven Savings Bank v. LaPlace, 66 Conn. App. 1, 9-11, 783 A.2d 1174 (affirming summary judgment for plaintiff on counterclaims not related to making, validity or enforcement of mortgage note), cert. denied, 258 Conn. 942, 786 A.2d 426 (2001). Thus, “[c]onduct on the part of the [foreclosing party] that occurred after the loan documents were executed and not necessarily directly related solely to enforcement of the note ... properly has been found not to arise out of the same transaction as the complaint.” JP Morgan Chase Bank, Trustee v. Rodrigues, supra, 134-35, citing Southbridge Associates, LLC v. Garofalo, 53 Conn. App. 11, 16-21, 728 A.2d 1114, cert. denied, 249 Conn. 919, 733 A.2d 229 (1999). [U.S. Bank v. Sorrentino, supra, 2015 Conn. App. LEXIS 235, *20-21 (June 1, 2015)].

Accordingly, actions that occur after the commencement of the action are not properly brought before the court in a foreclosure action as a counterclaim.

This judicial holding seemed to be in conflict with an earlier decision with similar facts. The Sorrentino court explained that in CitiMortgage, Inc. v. Rey, 150 Conn. App. 595, 605-606, 92 A.3d 278, cert. denied, 314 Conn. 905, 99 A.3d 635 (2014), there was a reasonable nexus between the interposed counterclaims and the making, validity, or enforcement of the note or mortgage — and ruled that such a nexus was not presented in the Sorrentino case. It concluded that the plaintiff was not required to produce evidence of its conduct during the mediation because the defendants’ claims failed, as a matter of law. Further, the appellate court held that the counterclaim could not be cured by re-pleading because the counterclaim did not attack the making, validity, or enforcement of the note.

Based on Sorrentino, claims relating to Connecticut mediation — at least in most cases — cannot be used as counterclaims against lenders in the foreclosure action.

© Copyright 2015 USFN. All rights reserved.
July/August e-Update

This post has not been tagged.

Share |
Permalink
 

Connecticut Legislature Amends Mediation Law

Posted By USFN, Thursday, July 23, 2015
Updated: Friday, September 25, 2015

July 23, 2015

 

by Richard M. Leibert
Hunt Leibert – USFN Member (Connecticut)

Connecticut’s Mediation Law as Amended by the Legislature in HB 6752 was changed effective July 1, 2015.

The changes are as follows:


1. The Mediation Program was scheduled to terminate on July 1, 2016. That termination date has been extended to July 1, 2019.

2. The definition of “mortgagor” was amended to ensure that the mortgaged property is the primary residence of the owner-occupant.

3. Any foreclosure complaints filed after October 1, 2015 may allow the following foreclosure defendants, which the legislature has designated “permitted successors-in-interest” to participate in mediation:


a. the former spouse of a decedent-mortgagor who acquired sole title to the residential real property by virtue of a transfer from his or her spouse’s estate or by virtue of the death of the mortgagor where title was held as joint tenants in the entirety; OR

b. the spouse or former spouse of a mortgagor or former mortgagor who acquired title to the residential real property by virtue of a transfer from such mortgagor or former mortgagor where such transfer resulted from a court decree dissolving the marriage, a legal separation agreement, or a property settlement agreement.

 

4. To qualify as a permitted successor-in-interest, the spouse or former spouse must ensure that the mortgagee has received all consents under law to the disclosure of the spouse’s or former spouse’s nonpublic personal financial information.

 

a. The court is required to confirm that the foreclosure mediation certificate submitted by the spouse or former spouse provides the above consent to full disclosure; AND

b. Any other person who is a mortgagor provides consent to the full disclosure by the mortgagee of such person’s nonpublic personal financial information to such spouse or former spouse to the extent that the mortgagee has such information.

If a foreclosure mediation certificate is not submitted by a mortgagor, other than a spouse or former spouse claiming to be a permitted successor-in-interest, the spouse or former spouse signing the mediation certificate can include a certification that all persons obligated on the note have consented to the mortgagee’s full disclosure of their nonpublic personal information to the spouse or former spouse.

Such mediation certificate can be rebutted conclusively by the mortgagee if the mortgagee submits a written statement to the court in which the mortgagee certifies that, based upon reasonable belief, the mortgagee does not possess such documentation allowing the full disclosure.



5. Additional Documents Mortgagee Must Send: Under current law, the mortgagee or its counsel, upon receiving notice of a case assignment to the mediation program and within 35 days of the return date of the foreclosure case, shall send an account history and related information via email to the mediator and via first-class, priority, or overnight mail to the mortgagor. The related information includes all necessary forms needed for the mortgagee to evaluate the mortgagor for common foreclosure alternatives that are available through the mortgagee, if any. The amendment requires the mortgagee to send the most current version of these forms. The amendment also requires the mortgagee to send, in addition to a copy of the note and mortgage, any agreements modifying the note and mortgage.

6. Pre-mediation Extension: Under current law, the court must: (1) assign a foreclosure mediator, and (2) schedule a meeting with the mediator and the mortgagor. Current law requires the scheduling of a pre-mediation meeting within 49 days following the return date of the foreclosure complaint.

Under current law, the mediator must facilitate and confirm submission of the forms and documentation by the mortgagor: (1) to the mortgagee’s counsel electronically, and (2) at the mortgagee’s election, directly to the mortgagee per the mortgagee’s instruction. Current law requires the mediator to do so as soon as practicable within 84 days following the return date.

The new law extends this deadline to: (1) the end of any pre-mediation period extension granted by the court (see below); or (2) three days after the court rules to deny a motion for such an extension. The new law allows the court, for good cause, to grant a mediator’s motion to extend the pre-mediation period beyond the 84th day, following the return date.

The mediator must file such motion, with a copy simultaneously sent to the mortgagee, and as soon as practicable to the mortgagor, not later than the 84th day following the return date. The mortgagee and mortgagor must file an objection or supplemental papers within five business days after the day that the motion for extension was filed. The court must issue its ruling, without a hearing, by 10 business days after the date that the motion was filed. If the court determines that good cause exists for an extension, it must establish an extended deadline so that the pre-mediation period ends as soon as practicable, but not later than 35 days after the ruling.

The court must consider the complexity of the mortgagor’s financial circumstances, the mortgagee’s documentation requirements, and the timeliness of the mortgagee’s and mortgagor’s compliance with their respective pre-mediation obligations. If the court denies the mediator’s motion, the extended deadline shall be three days after the court rules on the motion.

© Copyright 2015 USFN. All rights reserved.
July/August e-Update

This post has not been tagged.

Share |
Permalink
 

Challenge to Michigan’s Non-recourse Mortgage Loan Act Fails

Posted By USFN, Thursday, July 23, 2015
Updated: Friday, September 25, 2015

July 23, 2015

 

by Scott W. Neal
Orlans Associates, P.C. – USFN Member (Michigan)

The Borman, LLC v. 18718 Borman, LLC case, decided on February 3, 2015 by the Sixth Circuit Court of Appeals, upheld Michigan’s 2012 Non-recourse Mortgage Loan Act (NMLA). That law prevents lenders from holding guarantors of non-recourse, commercial mortgage-backed securities (CMBS) pooled loans liable for post-closing borrower insolvency.

The NMLA was enacted after the Michigan Court of Appeals’ decision in Wells Fargo Bank, NA v. Cherryland Mall Ltd. P’ship, 812 N.W.2d 799 (Mich. Ct. App. 2011), which upheld a solvency covenant in a non-recourse CMBS loan. The NMLA applies retroactively to render solvency covenants in non-recourse loans unenforceable. The Michigan Legislature reasoned that such covenants are inconsistent with the nature of non-recourse loans, are an unfair and deceptive business practice, and are against public policy.

In Borman, defendant 18718 Borman, LLC defaulted on a non-recourse secured loan, so the lender foreclosed. Plaintiff Borman, LLC, an unrelated company, purchased the property. Standing in the lender’s shoes afterwards, the plaintiff sued the defendant and its guarantor to collect an approximately $6 million deficiency. The lower court granted summary judgment in favor of the defendant, and the Sixth Circuit affirmed.

In the CMBS loan that the defendant agreed to, there was a solvency covenant that the plaintiff contended allowed it to sue not only the defendant, but also the guarantor, to obtain the deficiency. The court ruled that the NMLA made the solvency covenant in the defendant’s CMBS loan unenforceable as a matter of law, thereby preventing the plaintiff’s deficiency suit. The court also rejected the plaintiff’s various state and federal constitutional challenges to the validity of the NMLA.

This ruling should put commercial lenders and purchasers on notice that the NMLA is in full effect, the Cherryland Mall case law is no longer binding, and they will not be able to rely on suits against guarantors to collect deficiencies on CMBS loans. In other words, lender and buyer beware.

© Copyright 2015 USFN. All rights reserved.
July/August e-Update

This post has not been tagged.

Share |
Permalink
 

Freddie Mac is Not Liable for the Loan Servicer’s Failure to Use Escrow Funds to Maintain Property Insurance

Posted By USFN, Thursday, July 23, 2015
Updated: Friday, September 25, 2015

July 23, 2015

 

by Steven K. Linkon
RCO Legal, P.S. – USFN Member (Oregon, Washington)

A panel of the Ninth Circuit Court of Appeals affirmed the district court’s Rule 12(b)(6) dismissal of a homeowner’s claims for breach of contract and breach of fiduciary duty brought against the Federal Home Loan Mortgage Corporation (Freddie Mac). The claims arose after Freddie Mac had purchased the homeowner’s mortgage from Taylor, Bean & Whitaker Mortgage Co., the loan originator. Taylor Bean, which had continued to service the loan after selling it to Freddie Mac, failed to pay the insurance premium from an escrow account and caused the homeowner’s insurance to be cancelled. The home was destroyed by an accidental fire. Safeco denied the homeowners insurance claim because the policy had been cancelled before the fire.

The appellate panel held that the homeowner failed to allege facts that would establish that Freddie Mac had a contractual duty to service the loan: Freddie Mac never agreed to assume the servicing obligations when it purchased the loan from Taylor Bean; the deed of trust provided that the servicing obligations would remain with Taylor Bean, and Washington law did not prohibit the arrangement.

Additionally, the Ninth Circuit held that Freddie Mac did not assume the fiduciary duty of an escrow because under the deed of trust, the duty to hold money for the insurance premiums in escrow remained with the loan servicer, Taylor Bean. [Johnson v. Federal Home Loan Mortgage Corporation (9th Cir. July 14, 2015)].

Editor’s Note: The author’s firm represented Freddie Mac in the case summarized in this article.

© Copyright 2015 USFN. All rights reserved.
July/August e-Update

This post has not been tagged.

Share |
Permalink
 

Massachusetts: Default Notices Must Comply Strictly with Mortgage Forms

Posted By USFN, Thursday, July 23, 2015
Updated: Friday, September 25, 2015

July 23, 2015

 

by Thomas J. Santolucito
Harmon Law Offices, P.C. – USFN Member (Massachusetts, New Hampshire)

The Massachusetts Supreme Judicial Court (SJC) has issued its long-awaited ruling in Pinti v. Emigrant Mortgage Company, Inc. [Supreme Judicial Court No. SJC-11742, slip op. (July 17, 2015)]. In a 4-3 decision, the SJC held that a foreclosing mortgagee must send borrowers a default notice that complies strictly with the requirements of the mortgage.

Paragraph 22 of the Fannie Mae/Freddie Mac Uniform Mortgage Instrument (the mortgage form used in Pinti) requires, among other things, that a lender send a default notice informing the borrower of the right to bring an action to challenge the foreclosure based on the lack of a default. However, the notice sent in Pinti stated only that the borrower had the right to assert non-default as a defense in any judicial foreclosure proceeding.

The SJC reasoned that the statutory power of sale requires strict compliance with the mortgage terms and certain specific statutory requirements, particularly in light of the fact that Massachusetts foreclosures are typically nonjudicial. [Massachusetts is also known as a quasi-judicial foreclosure state. The first part of the foreclosure is a judicial SCRA action. The second part is a nonjudicial foreclosure sale. In its decisions, the court considers the “foreclosure process” in Massachusetts nonjudicial because it characterizes the required judicial process (a SCRA action) as not being part of the mortgage foreclosure proceedings.] Failing to comply strictly with the power of sale renders any attempted foreclosure void.

Because the default notice in Pinti did not comply with paragraph 22 — it did not affirmatively state that the borrower had the right to bring an action to challenge the foreclosure — the resulting foreclosure was void. The SJC applied its decision prospectively to cases where lenders send default notices after July 17, 2015. Despite its prospective ruling, the court left open the possibility of extending its decision to similar cases on appeal or (less likely) to cases before the trial courts. The SJC also suggested that mortgagees should record an affidavit as evidence of compliance with paragraph 22.

As a result of Pinti, servicers should review their Massachusetts default notices very carefully to ensure that they comply verbatim with the mortgage terms (note: language in either a contractual breach notice or a statutory 150-day default notice may comply with the requirements of the mortgage contract). It remains to be seen: (1) how courts will analyze default notices sent prior to July 17, 2015; (2) how title insurers will treat foreclosures relying upon default notices sent prior to July 17, 2015; or (3) what “Pinti affidavits” must contain.

© Copyright 2015 USFN. All rights reserved.
July/August e-Update

This post has not been tagged.

Share |
Permalink
 

Rhode Island & Mediation: Legislative Bill Partially Overrules May 2015 Court Case

Posted By USFN, Thursday, July 23, 2015
Updated: Friday, September 25, 2015

July 23, 2015

 

by Lisa Kresge
Brennan Recupero Cascione Scungio & McAllister, LLP – USFN Member (Rhode Island)

In July 2013, Rhode Island enacted a statute that required holders of individual consumer first-lien mortgages on owner-occupied properties to send written notice to mortgagors of the right to mediation prior to the initiation of foreclosure proceedings and within 120 days of the date of default. Failure to comply with the statute results in a $1,000 a month penalty and voids the foreclosure. Under the 2013 version of the statute, mortgages that were more than 120 days delinquent as of September 13, 2013 (in other words with a date of default on or before May 16, 2013) were exempt from compliance.

As of October 6, 2014, the 2013 Statute was amended. Among other things, the 2014 amendment removed the September 13, 2013 exemption language. However, the Rhode Island Division of Banks issued regulations that kept the exemption in place. Since that time, lenders moved forward with foreclosures in reliance upon that exemption.

On May 15, 2015, the Rhode Island Superior Court issued a decision in the case entitled Fontaine v. US Bank National Association, ruling that the removal of the exemption language from the 2014 Statute mandated compliance with the 2014 Statute’s mediation requirements for all mortgages, regardless of the date of default for any foreclosures initiated on or after October 6, 2014. Thus, the Fontaine ruling forced lenders to pay stiff penalties to foreclose on properties that previously fell under the exemption and voided foreclosures that had taken place since October 6, 2014 in reliance upon the exemption.

In July, the Rhode Island legislature passed a bill to reinstate the exemption. The bill went into effect on July 2, 2015. Accordingly, lenders can proceed with Rhode Island foreclosures with a date of default on or before May 16, 2013 without having to comply with the mediation rules, including payment of the resulting penalties.

However, the amended statute is not retroactive. Accordingly, foreclosures that were initiated on or after October 6, 2014 and before July 2, 2015 (“Gap Period”) in reliance upon the exemption may be void. Lenders are well-advised to review their Rhode Island portfolios to determine if any of their foreclosures fall within this Gap Period and need to be re-foreclosed.

©Copyright 2015 USFN. All rights reserved.
July/August e-Update

This post has not been tagged.

Share |
Permalink
 

Legislative Updates: Minnesota

Posted By USFN, Tuesday, June 30, 2015
Updated: Friday, September 25, 2015

June 30, 2015

 

by Brian H. Liebo
Usset, Weingarden & Liebo, PLLP
USFN Member (Minnesota)

In two separate articles, the MN information presented here first appeared in a slightly modified fashion in the USFN e-Update (May 2015 ed.). The information is republished here for those readers who missed it.


The regular 2015 legislative session concluded on May 18.

Additions to Mortgage Reinstatement Requirements — The Minnesota legislature, working with the Minnesota Bankers Association and interested parties (including this author’s firm) was able to craft and pass legislation that would have otherwise created large difficulties and delays for mortgage servicers seeking to foreclose mortgages in Minnesota.

In a recent case, the federal district court in Minnesota held that a mortgage servicer must provide a reinstatement quote to a requesting borrower within twenty-four hours of the request under Minnesota Statutes Section 580.30. That statute was silent on the deadline for providing reinstatement figures to requesting borrowers. In this legislative session, the Minnesota legislature introduced a bill to amend the statute (in response to the federal case) to provide a longer response time than twenty-four hours.

However, the original bill introduced in the legislature still only gave mortgage servicers a total of three days to provide reinstatement figures following a borrower’s request. Further, this original bill did not address which alternatives would be available if a mortgage servicer needed more than three days’ time to respond to a reinstatement inquiry, including the scenario of a borrower faxing a request late on a Friday night. As a result, the original bill would have effectively required that the mortgage servicer completely stop pending foreclosures altogether in situations where they were unable to provide borrowers with reinstatement quotes within three days of the request.

Additionally, the original bill did not contain any language allowing mortgage servicers to postpone foreclosures in order to provide reinstatement figures if they were unable to meet the three-day deadline. Moreover, the original bill did not restrict the amount of times that a borrower could submit reinstatement quote requests. Thus, borrowers seeking to disrupt and delay foreclosure proceedings could repeatedly submit reinstatement requests under the original bill.

Recognizing the troublesome implications of the original bill language, “safe harbor” language was submitted to the legislature: “If the amount necessary to reinstate the mortgage was not mailed to the mortgagor within three days of receipt of the request, no liability shall accrue to the party foreclosing the mortgage or the party’s attorney and the foreclosure shall not be invalidated if the mortgage reinstatement amount was mailed by first class mail to the mortgagor at least three days prior to the date of the completed sheriff’s sale.” This wording was carried into the final bill version passed into law.

Based on this new language, mortgage servicers will have far more breathing room in complying with borrower requests for reinstatement figures, and will also have the option to postpone sheriff’s sales — where necessary — to give this information, without having the entire foreclosure invalidated for doing so. Requesting borrowers will also still be assured of getting reinstatement figures prior to the sheriff’s sale. Mortgage servicers can now provide reinstatement quotes within three days of a request, or ensure that they convey a reinstatement quote at least three days before the date of the final sheriff’s sale as an alternative (and can postpone the original sale to accomplish this). The reinstatement quotes must be effective for seven days or until the foreclosure sale, whichever occurs first.

In a related development, the legislature also adopted into these bills new language that will be an additional curative statute provision under Minnesota Statutes Section 582.25. These provisions cause various errors to automatically “cure” with the passing of time, so that the issues can no longer be raised to overturn a completed foreclosure. In this particular situation, any errors made by a foreclosing party in connection with publishing or mailing notices for postponements of sheriff’s sales will automatically “cure” after one year has passed from the date of the expiration of the redemption period.

Finally, these bills contain a provision simply clarifying that if a borrower postpones a sheriff’s sale under Minnesota Statutes Section 580.07, subdivision 2 (for five or eleven months, whichever is applicable, in exchange for a five-week redemption period), and the related foreclosure is stopped and then restarted, the new redemption period is not permanently five weeks for any future foreclosures, unless the bankruptcy stay provision of the statute applies.

Clarification of Foreclosure Publication Statutes — In a growing area of litigation challenging foreclosures in Minnesota, the Minnesota Bar Association, the Minnesota Bankers Association, and interested parties (including this author’s firm) advocated for a necessary change to the legal publications statutes. These efforts were fruitful, and the Minnesota legislature passed a clarifying law this session under bills HF953 and SF1147.

Governed by a provision under Chapter 580 of Minnesota’s Foreclosure by Advertisement statutes, notices of sheriff’s sales must be published for six weeks prior to sheriff’s sales in qualified newspapers. For over a century, it has been the accepted custom and practice in Minnesota to publish those notices in any qualified newspapers located in the same county as the mortgaged property. Using a county-wide standard, the newspaper selection could be made based on the best quality and pricing among a larger pool of newspapers. Consistent with this practice, the Minnesota Secretary of State maintains a list of qualified legal publishers in Minnesota, which is arranged by county as the first category on the list.

Borrowers seeking to challenge foreclosures have been arguing that the newspaper selection standard should be closer to a city-based standard — rather than a county-based one — even if that would reduce competition by narrowing the selection of available legal publishers and, therefore, increase pricing that mortgage servicers and reinstating borrowers would have to pay. Under the narrower standard, if a small city only has one qualified newspaper, the publisher could charge whatever price it wanted for publishing legal notices because it would have a captive market. There is no Minnesota statute capping what newspapers can charge for such publications.

In the past few years, borrowers’ attorneys have been bringing court actions challenging foreclosures to promote the use of a narrower standard for selecting newspapers. They have been taking advantage of vague and undefined terms in related publication statutes to tie up properties in litigation. For example, one applicable statute, Minnesota Statutes Section 331A.03, requires that public notices be published in newspapers likely to give notice in the “affected area” or “to whom it is directed.” Unfortunately, neither of these terms is defined in any Minnesota statute or case law. The “affected area” for a foreclosure notice could be just the mortgaged parcel, its neighborhood, the city in which the mortgaged parcel is located, or its county. Also the “persons to whom foreclosure notices are directed” could be construed as just the borrowers, potential bidders, sheriffs conducting the sales, etc.

After persuasive prompting, bills were introduced in the Minnesota legislature to address the growing problem with the publication statutes. This new law, to be codified as Minnesota Statutes Section 580.033, now explicitly provides that a county-based standard for selecting newspapers for publishing foreclosure notices is proper. The new statute clearly provides that “publication of the notice of sale shall be sufficient if it occurs in a qualified newspaper having its known office of issue located in the county where the mortgaged premises, or some part thereof, are located.” This new statute also allows a foreclosing party to publish in a qualified newspaper having its known office of issue located in an adjoining county. However, the foreclosing party then has a higher standard to meet because the newspaper must also establish that a “substantial portion of the newspaper’s circulation is in the county where the mortgage premises, or some part thereof, are located.”

This clarifying new statute allows foreclosing parties to avoid having to contend with the vague standards of Section 331A.03 and provides greater certainty and predictability in selecting appropriate newspapers to publish foreclosure notices. It should also help in avoiding the litigation that resulted from the past applicability of an unclear statutory section to mortgage foreclosure.

The new laws are effective for all cases where the Notice of Pendency for Foreclosure is recorded on or after July 1, 2015. These notices of pendency are recorded prior to the time of the commencement of the foreclosure proceedings, which is the date of first publication.

The new publications statute will benefit parties seeking to foreclose mortgages by advertisement, as well as title companies insuring the transactions, since it creates more certainty in the laws governing these proceedings. By assuring a broader standard for selecting qualified newspapers, the new publication statute also helps to ensure that newspapers publishing legal notices will operate in a competitive environment, so that foreclosing parties can select qualified newspapers not only by location but also by factoring in pricing and quality of product among a larger pool of qualified newspapers.

Editor’s Note: The “safe harbor” provision now a part of Minn. Statutes Section 580.30, as well as the new language added to Minn. Statutes Section 582.25, was proposed and drafted by the author’s firm.

Copyright © 2015 USFN. All rights reserved.
Summer USFN Report

This post has not been tagged.

Share |
Permalink
 

Legislative Updates: Texas

Posted By USFN, Friday, June 26, 2015
Updated: Friday, September 25, 2015

June 26, 2015

 

by David Seybold
Barrett Daffin Frappier Turner & Engel, LLP
USFN Member (Texas)

Texas legislators may only be in regular session for 140 days every two years, but in this year’s session that ended on June 1, 2015, they passed a slew of new bills affecting residential real property and streamlining foreclosure processes. This is a far cry from the past several legislative sessions where only the Texas Home Equity Lien loans’ quasi-judicial foreclosure process was addressed.

Many lobbying efforts were focused in the 84th Legislature not just on passing new laws to make the nonjudicial foreclosure process more transparent and efficient, but also to defeat rogue legislation that attempted to end nonjudicial foreclosure in Texas replacing such with a quasi-judicial foreclosure process similar to that used for Texas Home Equity Lien loans — greatly increasing servicers’ foreclosure expenses and timelines.

There are three centerpiece legislative initiatives, all of which passed the legislature unanimously. These are discussed below, along with some additional bills that may be of interest to mortgage servicers.

HB 2063: Recording and Effect of Notices of Sale to act as the Appointment of Substitute Trustee — Chapter 12, Texas Property Code, is amended by adding Section 12.0012. When servicers elect to implement the process authorized by this newly amended provision, it will allow the Notice of Sale to serve as the appointment of substitute trustee and would eliminate the need, as a matter of state law, to do a separate written appointment. Chapter 51, Property Code, is amended by adding Section 51.0076 to provide that the appointment of substitute trustee in the Notice of Sale is effective as of the day it is served on the debtor, and allows the document to be recorded in the deed records after the foreclosure sale occurs as an attachment to the substitute trustee’s deed.

One of the benefits of this bill is that the Notice of Sale in the requisite form need not be notarized when attached to the substitute trustee’s deed. An additional benefit accrues to those mortgage servicers who have granted their law firms a written authorization to execute appointment documents on behalf of the mortgagee/mortgage servicer that will allow the law firm to prepare and sign the Notice of Sale acting as the appointment of the substitute trustee, thus curbing much of the litigation over the timing of appointments. This will have the salutary benefits of reducing recording costs, limiting confusion in official public records by eliminating recorded appointments that don’t relate to the completed foreclosure sale, and limiting the “first legal document execution” fire drill that we go through in Texas. On June 17, 2015 the governor filed this bill without signature (which enacts the legislation) so that the effective date of the legislation will be September 1, 2015.

HB 2066: Rescission of Sale Deed Under Mistake — Chapter 51, Property Code, is amended by adding Section 51.016 to allow the mortgagee, trustee, or substitute trustee a limited 15-calendar day window from the foreclosure sale date for rescission of the foreclosure deed by unilateral notice that includes the recording information of the foreclosure deed, and describes the rescission reason if a sale was made subject to certain conditions that have historically been the subject of litigation in Texas. The bill lists six affected conditions: (1) the statutory requirements for the sale were not satisfied; (2) the default leading to the sale was cured before the sale; (3) a receivership or dependent probate administration involving the property was pending at the time of sale; (4) a condition specified in the conditions of sale prescribed by the trustee or substitute trustee before the sale and made available in writing to prospective bidders at the sale was not met; (5) the mortgagee or mortgage servicer and the debtor agreed before the sale to cancel the sale based on an enforceable written agreement by the debtor to cure the default; or (6) at the time of the sale, a court-ordered or automatic stay of the sale, imposed in a bankruptcy case filed by a person with an interest in the property, was in effect.

The written notice is served upon the purchaser if the mortgagee is not the purchaser, and each debtor who (according to the records of the mortgage servicer of the debt) is obligated to pay the debt; each notice is filed for recording in the real property records of the county in which all or a part of the property is located.

HB 2066 specifies and limits the third party purchaser’s remedy to a return of the purchase price plus interest at the rate of 10 percent per year. It also provides that a person who wants to challenge a rescission of a foreclosure deed under this bill must do so within 30 days of the rescission, or be barred by repose.

Notably, the bill also preserves — and does not replace — traditional methods of rescission of foreclosure deeds utilized in Texas.

The governor signed this into law on June 16, 2015, so that the effective date of the legislation will be September 1, 2015; and it will only affect a foreclosure sale that occurs on or after the effective date.

For errors that are promptly discovered, this bill should eliminate the need for lawsuits to cure title as well as discourage “ransom” lawsuits by third-party purchasers who don’t want to unwind a sale without additional remuneration, even where the putative sale is clearly void. This should also help get properties back to REO sooner.

HB 2067: Rescission of Acceleration – Solving the Statute of Limitations Challenge — This bill amends Chapter 16, Texas Civil Practice and Remedies Code, by adding Section 16.038 to allow a lender for any reason or no reason to rescind an acceleration by simply sending a notice of rescission by first-class or certified mail to each debtor’s last-known address before the limitations period expires. The rescission of acceleration is effective when served, and is served when deposited in the mail. The new statute applies with respect to a maturity date accelerated before, on, or after the effective date of the legislation. The governor signed this bill, and the effective date of the legislation was immediate on June 17, 2015.

The power of rescission is unilaterally exercised by the mortgagee, servicers, or their attorneys in Texas. A rescission of acceleration effectively puts the loan back on an installment basis without waiving any default, which means that the installment loan will simply be once again an unmatured debt on which limitations do not begin to run until the last installment becomes due.

This should help in the Texas home equity area where there have been long delays, historically, which servicers do not have a lot of ability to control. It should also help to facilitate workout discussions under loss mitigation programs that have many times resulted in protracted delay resulting in necessary, but unfortunate, decisions to file a suit to avoid statute of limitations issues, even where another borrower assistance option might be available. This should be a great aid to servicers and borrowers alike, although it cuts out the plaintiff bar’s arguments concerning expiration of the Statute of Limitations.

HB 831: Disclosure of Mortgage Information to Surviving Spouse — Subchapter B, Chapter 343, Texas Finance Code, is amended by adding Section 343.103 to allow a non-obligor surviving spouse to obtain documentation regarding the promissory note for a home loan, balance information, and other information from the mortgage servicer.

The request must include a death certificate, an affidavit of heirship (including language that the survivor was married to the mortgagor at the time of the mortgagor’s death), and an affidavit of the surviving spouse that he or she is currently residing in the mortgaged property as a principal residence. Further, the request must also include a notice to the mortgage servicer that states in bold-faced, capital, or underlined letters: “THIS REQUEST IS MADE PURSUANT TO TEXAS FINANCE CODE SECTION 343.103. SUBSEQUENT DISCLOSURE OF INFORMATION IS NOT IN CONFLICT WITH THE GRAMM-LEACH-BLILEY ACT UNDER 15 U.S.C. SECTION 6802(e)(8).”

A mortgage servicer that provides the information as required under this section is not liable to the estate of the mortgagor, or any heir or beneficiary of the mortgagor, as a result of providing this information to the surviving spouse. The bill will take effect on September 1, 2015.

HB 2207: Foreclosure Sale of Property Subject to an Oil or Gas Lease — This bill was first passed by the 2013 legislature but vetoed by then-Governor Perry at the request of large oil and gas companies. Texas is a “first in time; first in right” state. This fundamental rule of real property rights is such that a property interest occurring first in time is superior to any right that is created after. Thus, if a mortgage is filed before an oil and gas lease, the mortgage is superior to the rights of the oil and gas lessee. If the mortgage is foreclosed, the oil and gas lease is terminated by the foreclosure. Under HB 2207, Subtitle B, Title 5, Property Code, is amended by adding Chapter 66 to provide that the oil and gas lease always survives, no matter when it is created if the oil or gas lease has not terminated or expired on its own terms, and was executed and recorded in the real property records of the county before the foreclosure sale. The 2015 version of the bill added protections for the interest of mortgage lenders by providing that the foreclosure of a preexisting mortgage terminates the rights under a later oil and gas lease to use the surface of the mortgaged property. An agreement (including a subordination agreement) between a lessee of an oil or gas lease and a mortgagee of real property, or the lessee of an oil or gas lease and the purchaser of foreclosed real property, controls over any conflicting provision of this section. An agreement between a mortgagor and mortgagee may not modify the application of this section unless the affected lessee agrees to the modification. Signed by the governor on June 15, 2015, the bill is prospective only and will take effect on January 1, 2016.

HB 3316: Time for Recording a Durable Power of Attorney for Certain Real Property Transactions
— Section 751.151, Estates Code, is amended to make any real property transaction carried out under a power of attorney voidable, if the power of attorney is not filed with the county clerk in the county where the real property is located within 30 days of the filing of the associated real property transaction. The bill is prospective only and will take effect on September 1, 2015.

SB 462: Transfer on Death (TOD) Deed — Subtitle C, Title 2, Estates Code, is amended by adding Chapter 114 to enact the Texas Real Property Transfer on Death Act based upon a 2009 uniform act, which has been described as providing a simple process for the non-probate transfer of real estate by allowing an owner of real property to designate a beneficiary of a TOD deed to automatically receive the property upon the owner’s death without necessity of any probate action. During the owner’s lifetime, the beneficiary of a TOD deed has no interest in the property, and the owner retains full power to transfer or encumber the property.

In addition, a TOD deed is a revocable, non-testamentary instrument and must be recorded in the deed records of the county where the property is located. A TOD deed does not affect a transferor’s interest or rights in the property during the owner’s lifetime, and is void if the owner otherwise conveys the property during his or her lifetime. A power of attorney may not be used to create a TOD deed. The bill is prospective only and will take effect on September 1, 2015.

HCR 101: Texas Legislature’s Official Mixed Drink — One cannot leave out of the legislature’s accomplishments mention of a House Concurrent Resolution, which designates the combination of Texas vodka and “a splash of” [author commentary here] Texas red grapefruit juice as the official mixed drink of the 84th Legislative Session. Cheers to the end of another Texas legislative session!

Copyright © 2015 USFN. All rights reserved.
Summer USFN Report

This post has not been tagged.

Share |
Permalink
 

Legislative Updates: Oregon

Posted By USFN, Friday, June 26, 2015
Updated: Friday, September 25, 2015

June 26, 2015

 

by John Thomas
RCO Legal, P.S.
USFN Member (Oregon, Washington)

Oregon Senate Bill 368 was recently signed into law by the state’s governor and became effective on June 8, 2015. Generally, the bill is a positive legal development, making the completion and entry of judicial foreclosure judgments more streamlined and uniform throughout Oregon.

As background, the increase in Oregon judicial foreclosure actions in the recent past has revealed a technical flaw with Oregon foreclosure statute ORS § 88.010 (1). Some Oregon state court trial-level judges have interpreted this statute to require that a money award against the borrower be included in a judgment of foreclosure, regardless of whether the lender/servicer desires that form of relief in addition to the customary in rem foreclosure relief against only the collateral property involved. However, some Oregon judges have not interpreted the foreclosure judgment statute that way, resulting in inconsistent foreclosure judgment standards within Oregon.

There are several situations where imposing a money award against a borrower would be problematic or troublesome, for example: (a) bankruptcy discharges; (b) deceased borrowers; (c) transfers of the property to non-obligors; (d) certain purchase money loans; and (e) expired statute of limitations on the underlying debt. Moreover, a money judgment can inappropriately adversely affect the debtor’s credit and cloud title (as a judgment lien) to other property owned by the debtor by operation of law. Furthermore, the servicer may wish to enter into a compromise or other non-retention agreement with the borrower that prohibits, directly or indirectly, a money award against him.

By enacting SB 368, inconsistent rulings in this area will hopefully be avoided. The bill amends ORS § 88.010 and a number of related statutes, and eliminates the need to include a money award in a foreclosure action when taking a money judgment is inappropriate, contrary to law, or simply not desired by the lender. It is a way to address some courts’ refusals to grant in rem judgments, which have been forcing lenders and their counsel to go through additional, unnecessary procedural steps. That is the most important aspect of this bill for lenders — it smooths out the uneven, county-by-county, judge-by-judge treatment of judicial foreclosures and should streamline the process to allow judgments to enter more readily.

To summarize, the legislative change is viewed as positive and it is not anticipated that there will be significant process changes for servicers. Compliance will generally rest with a servicer’s counsel in formulating the form of foreclosure judgment.

Copyright © 2015 USFN. All rights reserved.
Summer USFN Report

This post has not been tagged.

Share |
Permalink
 
Page 12 of 26
 |<   <<   <  7  |  8  |  9  |  10  |  11  |  12  |  13  |  14  |  15  |  16  |  17  >   >>   >| 
Membership Software Powered by YourMembership  ::  Legal