Article Library
Blog Home All Blogs
Search all posts for:   

 

Michigan: State Codification of Trespass Liability

Posted By USFN, Tuesday, November 25, 2014
Updated: Tuesday, October 13, 2015

November 25, 2014

 

by Matthew B. Theunick
Trott & Trott, P.C. – USFN Member (Michigan)

On June 26, 2014, the Michigan legislature enacted the Trespass Liability Act, Public Acts of 2014, Act. No. 226, to codify the liability of possessors of land for injuries to trespassers. Whereas, state statutes criminalize the unlawful entry on another person’s property without permission, civil liability for injuries to trespassers — like other premises liability claims — was governed by common law in Michigan.

The impetus for Michigan’s codification of civil liability for injuries to trespassers was owing to the desire to preserve the status quo, and not increase the liability of landowners vis-à-vis trespassers. The Act notes in Sec. 3.(3) that, “This section does not increase the liability of a possessor of land and does not affect any immunity from or defenses to civil liability established or available under the statutes or common law of this state to which a possessor of land is entitled.” Thus, through the codification process, property owners would obtain greater certainty of what is expected of them in relation to trespassers, and future changes would be done legislatively, as opposed to judicially.

As noted in the Legislative Analysis of House Bill 5335, Michigan’s codification process was also prompted, in part, as a reaction to the treatment of premises liability in the latest edition of the influential, but not precedential, Restatement of Torts (3rd) released in 2012. It departed from the 1965 Restatement (2nd) by vastly expanding the duty of landowners to exercise reasonable care in making the premises safe to all persons entering upon the land, even trespassers. Michigan’s efforts to codify trespass liability appears to be a trend, as the Michigan House’s Legislative Analysis notes that “at least 13 states have passed legislation … to prevent their states from adopting the expanded philosophy of the Restatement (3rd).”

Accordingly, the Michigan Act broadly notes that the possessor of a fee, reversionary, or easement interest in land (i.e., an owner, lessee, or other lawful occupant) owes no duty of care and is not liable to a trespasser for physical harm caused by the possessor’s failure to exercise reasonable care to put the land in a condition reasonably safe for the trespasser, or to carry on activities on the land so as not to endanger the trespasser.

On the other hand, however, a possessor of land may be subject to liability for physical injury, or death to a trespasser, if any of the following apply:
• The possessor injured the trespasser by willful and wanton misconduct.
• The possessor was aware of the trespasser’s presence on the land (or should have known in the exercise of ordinary care) and failed to use ordinary care to prevent injury arising from active negligence.
• The possessor knew (or should have known from facts within his or her knowledge) that trespassers constantly intrude on a limited area of the land, and the trespasser was harmed because the possessor failed to use reasonable care for the trespasser’s safety when engaging in an activity involving a risk of death or serious bodily harm.
• The trespasser is a child injured by an artificial condition on the land and all of the following apply:

o The possessor knew (or had reason to know) that a child would be likely to trespass on the place where the condition existed.
o The possessor knew (or had reason to know) of the condition and realized (or should have realized) that the condition would involve an unreasonable risk of death or serious bodily harm to the child.
o Because of the child’s youth, the child did not discover the condition or realize the risk involved in trespassing in the area of that dangerous condition.
o The utility (or benefit) to the possessor of maintaining the condition, and the burden of eliminating the danger, were slight as compared with the risk to the child.
o The possessor failed to exercise reasonable care to eliminate the danger, or otherwise, to protect the child.

 

© Copyright 2014 USFN. All rights reserved.
Nov/Dec. e-Update

This post has not been tagged.

Share |
Permalink
 

Maine: Greenleaf Falls in Bankruptcy Court

Posted By USFN, Tuesday, November 25, 2014
Updated: Tuesday, October 13, 2015

November 25, 2014

 

by Andrew S. Cannella
Bendett & McHugh, PC – USFN Member (Connecticut, Maine, Vermont)

The Bankruptcy Court in the District of Maine has concluded that the Maine Supreme Judicial Court’s ruling in Bank of America v. Greenleaf, 2014 ME 89, 96 A.3d 700 (Me. 2014), does not impact a creditor’s standing in a bankruptcy proceeding to seek an order granting relief from the automatic stay of 11 U.S.C. § 362(a).

Based on the evidence in the record, the court in Greenleaf was unable to conclude that at the time of the origination of the mortgage loan, Mortgage Electronic Registration Systems, Inc. (MERS) received anything but the right to record the mortgage. As a result the court held that the subsequent assignment of mortgage executed by MERS only conveyed the right to record the mortgage and did not convey any other rights in, and to, the mortgage. As Maine’s foreclosure statute (14 M.R.S. § 6321) requires the plaintiff in a foreclosure case to be the mortgagee, the plaintiff in Greenleaf did not prove that it had the requisite standing to foreclose the mortgage. The plaintiff only received its assignment from MERS and not from the lender referenced in the MERS mortgage.

On September 4, 2014, the bankruptcy judge in the bankruptcy court’s Portland Division entered an order granting a creditor’s motion for relief from stay, and overruled the Chapter 7 trustee’s objection to said motion (which was based on an alleged lack of standing because the security instrument at issue was a MERS-originated mortgage and the creditor/movant was not the original lender). In re Woodman, No. 14-20483 (Bankr. D. Me. 2014). The bankruptcy court properly concluded that standing to foreclose a mortgage is irrelevant to the matter of standing to bring a motion for relief from stay.

Standing to foreclose is an issue that needs to be litigated in a state court foreclosure proceeding, not in bankruptcy court. A colorable claim is all that is required for a creditor to have standing to prosecute a motion for relief from stay in bankruptcy court. The UCC “adopts the traditional view that the mortgage follows the note; i.e., the transferee of the note acquires, as a matter of law, the beneficial interests in the mortgage, as well.” [11 M.R.S. § 9-1308 cmt. 6].

As the creditor/movant was the holder of the note, it met the requisite standing requirement to pursue a motion for relief from stay. Subsequently, in the bankruptcy court’s Bangor Division, in a Chapter 13 case in which the debtor’s counsel interposed a similar objection to a creditor’s motion for relief from stay (based on Greenleaf), the court advised the parties of its agreement with the ruling in Woodman. This occurred at a status conference on October 2, 2014. In re Mooney, No. 10-11651 (Bankr. D. Me. 2014).

Editor’s Note: In a prior article, this author’s firm addressed Bank of America v. Greenleaf, 2014 ME 89, 96 A.3d 700 (Me. 2014) [USFN e-Update, Sept. 2014 Ed.]

© Copyright 2014 USFN. All rights reserved.
Nov/Dec. e-Update

This post has not been tagged.

Share |
Permalink
 

Georgia: Settling the Law re Notices of Foreclosure

Posted By USFN, Tuesday, November 25, 2014
Updated: Tuesday, October 13, 2015

November 25, 2014

 

by T. Matthew Mashburn
Aldridge Connors, LLP – USFN Member (Georgia)

In a recent decision, Peters v. CertusBank National Association, A14A1274 (Sept. 8, 2014), the Georgia Court of Appeals ended two years of confusion in Georgia foreclosure law. The uncertainty began on July 12, 2012, with the appellate court’s decision in Reese v. Provident Funding Associates, LLP, 317 Ga. App. 353, 730 S.E.2d 551 (2012).

Reese
In light of Georgia foreclosure practice at the time, the facts in Reese were completely unremarkable. It may be that the majority in Reese believed that their decision would be as unremarkable. “No one disputes that a bank must be able to foreclose on its properties for non-payment of the mortgage per the contract, and our conclusion today does not impede this process.” Reese, 317 Ga. App. at 355, 730 S.E.2d at 559. However, the results were anything but unremarkable.

The basis of the Reese decision was that in 2008, the Georgia General Assembly had required that the secured creditor be identified in the 30-day Notice of Foreclosure (Notice), even though there was no such requirement in the statute. The Reeses successfully argued that the originating lender, and current servicer, was no longer the “secured creditor” because ownership of the note or the deed to secure debt (or both) had been transferred.

As to whether O.C.G.A. § 44-14-162.2 required the Notice to reflect both the identity of the secured creditor, as well as the person or entity with the full authority to negotiate, amend, and modify the mortgage, the appellate court’s majority was persuaded that the legislature considered it material that the secured creditor be identified during the foreclosure process. However, the Georgia General Assembly had already required that the secured creditor be identified by compelling that the document vesting title in the secured creditor be of record prior to the foreclosure.

Some History
The direct ideological parent of Reese was the opinion in Stubbs v. Bank of America, 844 F. Supp. 2d 1267, 1271, 2012 U.S. Dist. LEXIS 19846, at *1, 13, 2012 WL 516972, at *1, 5 (N. D. Ga. 2012). The Reese majority stated as much: “The Northern District’s analysis in Stubbs is compelling and, although not controlling, is persuasive authority in analyzing the very same Georgia statute that we interpret in this case.” Reese, 317 Ga. App. at 358, 730 S.E.2d at 554.

As a result of the decisions in Stubbs and Reese requiring that the Notice state the name of the secured creditor, Georgia foreclosure law was now required to directly address questions that had previously been largely ignored. (Among those questions: Who exactly is the secured creditor? Is the secured creditor the holder of the note? Is the secured creditor the holder of the deed to secure debt? What if the holder of the note and the deed to secure debt are different? Indeed, is it possible for those holders to be different?)

The Georgia Supreme Court provided the final answer to the “secured creditor” question in a unanimous opinion, which vacated the Georgia Court of Appeals. See, You v. JP Morgan Chase Bank, 293 Ga. 67, 743 S.E.2d 428 (2013).

Recognizing that the district courts were splitting on whether the secured creditor was required to be named in the Notice, the federal District Court chief judge requested that the Georgia Supreme Court provide an interpretation of Georgia law to resolve the split. This request came in the form of three certified questions to the Georgia Supreme Court in You. The Georgia Supreme Court answered that the holder of the deed to secure debt (according to the public records) is the secured creditor and is therefore authorized to conduct the foreclosure, regardless of whether the note has been assigned (beneficially or otherwise). Further, the Supreme Court responded that there was no requirement in the statute that the secured creditor be specifically identified in the Notice.

While Reese and You were dealing with the “secured creditor” issue, another thread of cases grappled with the requirement that the Notice identify the “individual or entity who shall have full authority to negotiate, amend, and modify all terms of the mortgage with the debtor.”

Second Thread of Cases
In TKW Partners, LLC v. Archer Capital Fund, L.P. Crossing Park Properties, LLC, 302 Ga. App. 443, 691 S.E.2d 300 (2010), the Court of Appeals was thought to have settled this second question by holding that “OCGA Section 44-14-162.2 does not require the individual or entity to be expressly identified as having ‘full authority to negotiate, amend, and modify all terms of the mortgage,’ and we cannot conclude that ... [the] … notice was legally deficient for failure to do so.”

In TKW, the lender’s attorney sent the Notice and provided her contact information, but did not state that she or any other person had “full authority to negotiate, amend, and modify all terms of the mortgage.” The Court of Appeals ruled that this was of no consequence because the lender was identified, and the trial court found that “a person of reasonable intelligence would have construed that … [the lender’s attorney] … was the proper agent for … [the lender] … in this case.” The Court of Appeals found that substantial compliance was all that was needed.

The next case in the series, Stowers v. Branch Banking & Trust Co., 317 Ga. App. 893 (2012), was based on an unusual set of facts. In Stowers, the Notice was sent by the lender’s attorney and listed the lender’s attorney as the person with full authority to negotiate, amend, and modify all terms of the mortgage. The undisputed evidence, however, was that the attorney only was authorized to receive communications from the debtor, to convey them to the bank, to make recommendations, and to convey the bank’s position to the debtor. Accordingly, while the correct words were used, in fact, there was no authority to negotiate or modify — and, certainly, full authority was absent.

While TKW was being litigated, the lender in Stowers became worried that substantial compliance might not be sufficient (since that was the exact issue being litigated in TKW). The lender then sought to rescind its own foreclosure sale, so as to avoid the risk that substantial compliance would be insufficient. In Stowers, the plaintiff was the purchaser at the foreclosure sale and sought to prevent the lender from setting aside its own foreclosure sale.

In the meantime, Reese v. Provident Funding Associates (cited above) was decided. There, the Court of Appeals rejected a trial court’s ruling that substantial compliance was sufficient, and found that OCGA Section 44-14-162.2 required that the secured creditor with the authority to foreclose be identified in the Notice. In essence, the Court of Appeals appeared to be taking mutually exclusive positions. In TKW, the Court of Appeals found that substantial compliance was sufficient as to the full authority question. In Reese, the Court of Appeals determined that substantial compliance was not sufficient as to the secured creditor question.

Specifically, in Stowers, the Court of Appeals ruled that: (1) the Notice did not fully comply with the statute (so the notice was bad); however, (2) the notice did not have to fully comply with the statute, in that substantial compliance was sufficient (so the notice was fine). Ultimately, the appellate court found that the bank was justified in rescinding the foreclosure, based on doubts as to whether strict compliance or substantial compliance with the statute was required (TKW decided that substantial compliance was sufficient three weeks after the foreclosure rescission in Stowers).

Conclusion
Following Stowers and Reese, lenders in Georgia wondered whether TKW had been overruled by either of those cases. On the other hand, debtors’ counsel contended that TKW had been obliterated by both of the cases.

In Peters v. CertusBank National Association (cited above), the Georgia Court of Appeals has affirmed its prior rulings in TKW and Stowers.

Georgia law has now been clarified. The secured creditor need not be identified in the Notice, and substantial compliance is all that is required in identifying the person (or entity) with full authority to negotiate the loan terms.

© Copyright 2014 USFN. All rights reserved.
Nov/Dec. e-Update

This post has not been tagged.

Share |
Permalink
 

Connecticut: Foreclosure Challenges to Standing

Posted By USFN, Tuesday, November 25, 2014
Updated: Tuesday, October 13, 2015

November 25, 2014

 

by Christopher R. Thompson
Bendett & McHugh, P.C. – USFN Member (Connecticut)

A recent Connecticut Appellate Court opinion addressed the frequently litigated matter of a mortgagee’s standing to foreclose a mortgage, in light of an alleged issue regarding the authenticity of the underlying promissory note. The court ultimately concluded that the defendant failed to meet his burden of establishing a genuine issue of fact that required a full evidentiary hearing and, therefore, affirmed the trial court’s foreclosure judgment. [Mengwall v. Rutkowski, 152 Conn. App. 459].

Pertinent facts: The defendant contested foreclosure. Throughout the course of litigation, the plaintiff entered into evidence two different versions of the note: first a copy, and then the original document (the record explains that the plaintiff initially believed the original document to be lost, but it was subsequently located). Significantly, the copy of the note, which was originally entered into evidence, contained a signature in one corner of the document, but that signature was not present on the original note.

The plaintiff eventually obtained a foreclosure judgment, and the defendant appealed. The Appellate Court briefly surveyed the applicable case law regarding standing, as follows: Production of an original note by a plaintiff creates a presumption that the party producing the note has standing to enforce it. [RMS Residential Properties, LLC v. Miller, 303 Conn. 224, 231-32, 32 A.3d 307 (2011)]. Further, a full evidentiary hearing on the alleged standing issue is only warranted if a defendant can establish the existence of a genuine issue of jurisdictional fact. [Equity One, Inc. v. Shivers, 310 Conn. 119, 135, 74 A.3d 1225 (2013)].

On appeal, the defendant argued that the discrepancy between the two documents created a “genuine issue of jurisdictional fact” regarding the authenticity of the original note and, therefore, the plaintiff’s standing to enforce it. Thus, the defendant claimed that the trial court’s failure to conduct a full evidentiary hearing on the alleged standing issue constituted reversible error.

The Appellate Court disagreed, finding that the discrepancy between the two notes did not constitute a “genuine issue of jurisdictional fact” that would have warranted the full evidentiary hearing sought by the defendant. The court noted, “[t]he additional signature on the copy of the note admitted into evidence during the summary judgment proceeding does nothing to vitiate the authenticity of the original note admitted into evidence during the motion to dismiss proceeding.” The court then affirmed the trial court’s foreclosure judgment.

© Copyright 2014 USFN. All rights reserved.
Nov/Dec. e-Update

This post has not been tagged.

Share |
Permalink
 

California: New Law re Notices of Acknowledgement (Proofs of Execution and Jurats)

Posted By USFN, Tuesday, November 25, 2014
Updated: Tuesday, October 13, 2015

November 25, 2014

 

by Sonia A. Plesset
The Wolf Firm, A Law Corporation – USFN Member (California)

On August 15, 2014, the California legislature passed SB 1050, which creates new requirements for statutory notices of acknowledgment, proofs of execution, and jurat forms used by the state’s notaries public.

The bill amends existing California Civil Code Sections 1189 and 1195, as well as Government Section 8202, which govern the form and content of these notices. The new law, effective January 1, 2015, requires that the forms include the following language in a box directly above the notary’s seal: “A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.”

While there is no font requirement, the notice must be “legible.” There is also some flexibility with regards to the format of the boxed notice, which is incorporated into each statute for “illustration purposes only.”

The purpose of the new law is to reduce opportunities for fraud, based on the representation by unscrupulous individuals that a notary’s stamp constitutes proof of the validity or enforceability of the underlying instrument. By adding the prescribed statement, the legislature hopes to dispel the notion that a notary stamp is anything more than the verification of one’s identity. While the current wording of the notary seal does provide that it is merely an attestation of the identity of the one signing, the legislature felt that a stronger statement was needed in order to protect the general public.

© Copyright 2014 USFN. All rights reserved.
Nov/Dec. e-Update

This post has not been tagged.

Share |
Permalink
 

FDCPA: Attorney’s Debt Collection Letter Overshadows Consumer’s Rights

Posted By USFN, Tuesday, November 25, 2014
Updated: Tuesday, October 13, 2015

November 25, 2014

 

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

In a September 2014 opinion, Pollard v. Law Office of Mandy Spaulding1, the U.S. First Circuit Court of Appeals found that a Massachusetts attorney violated the federal Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692-1692p. The violation stemmed from a debt collection letter that did not convey the borrower’s debt validation and dispute rights under the FDCPA in a non-confusing manner. The court further determined that the burden is on the debt collector to advise consumers of their FDCPA rights in a way that a typical “unsophisticated borrower” would understand. Lastly, the court held that, while the statute is silent on the distinction, attorney debt collection letters in the First Circuit are subject to a greater degree of scrutiny than letters sent by other debt collectors. (The First Circuit is comprised of Maine, Massachusetts, New Hampshire, and Rhode Island.)

In finding that the debt collection letter sent by the defendant law firm overshadowed and contradicted the borrower’s debt validation and dispute rights under the FDCPA, the court focused on the fact that the letter was both confusing and unclear about the debtor’s right to dispute the debt. In the court’s words: “at [the] bottom, the letter seems to threaten immediate litigation. We think that, implicit in this threat, is the idea that litigation can be avoided only if payment is made forthwith.” Additionally, because of a typographical error contained within the debt validation rights notice, the court reasoned that a consumer could conclude that her right to dispute the debt would be trumped by the attorney debt collector’s intent to litigate. This, the court held, runs afoul of FDCPA § 1692g, which requires that a debt collector’s communications are not “inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.”

While reaching its decision, the court adopted the hypothetical “unsophisticated consumer” standard when reviewing the adequacy of debt collection letters under the FDCPA. Applying this standard to the subject letter, the court found that a typo in the second to last paragraph was enough to make an important provision unintelligible and, as a result, the debtor had not been adequately apprised of his FDCPA rights. The court further stated that this determination is not based upon the debt collector’s intent but, instead, “it is the unsophisticated consumer’s perception of the letter . . . that controls a determination of whether a collection letter overshadows or contradicts a validation notice.”

The court rounded out its decision by making a distinction between attorney debt collectors and non-attorney debt collectors, stating that debt collection letters sent by attorneys “warrant closer scrutiny because their abusive collection practices are more egregious than those of lay collectors.” The Pollard case certainly reinforces the importance of clearly communicating the notice requirements of FDCPA § 1692g (a), and taking care that those rights are not overshadowed. However, the decision offers little specific guidance to debt collectors going forward.



1 Pollard v. Law Office of Mandy L. Spaulding, No. 13-2478, 2014 U.S. App. LEXIS 17345 (1st Cir. Sept. 8, 2014).

© Copyright 2014 USFN. All rights reserved.
Nov/Dec. e-Update

This post has not been tagged.

Share |
Permalink
 

Simple Technology Tips & Shortcuts

Posted By USFN, Tuesday, November 25, 2014
Updated: Tuesday, October 13, 2015

November 25, 2014

 

by Shawn J. Burke, Director, LoanSphere Sales Engineering
ServiceLink, A Black Knight Financial Services Company – USFN Associate Member
Chair, USFN Technology Committee

We all have shortcuts we use throughout the day, almost done without conscious thought, to aid in handling such things as e-mail. In this article, let’s take a moment to discuss some of them.

When to put someone on the “CC:” line of an e-mail? Taken from a college class, I offer this to my new employees or to someone who needs coaching: If you want someone to take action, put them on the “TO:” line; if you want them to be aware, then put them on the “CC:” line.

Want a shortcut to reformatting Word documents? Between RFPs, training materials, and other demonstration collateral, I find myself authoring lots of documents. I tend to add formatting to a document (such as highlighting instructions with italics). It is a nuisance when I have to format, or reformat, various pieces of the document in the same way. Here’s what I’ve learned to do: select the “format painter,” an icon that looks like a paint brush (Word 2013: Home tab, left-hand side of ribbon near the copy, cut, and paste commands). Begin by highlighting the text with the formatting that you want to copy. Click the icon. Then, highlight more of the text that you want formatted in the same way. If you want to format several sections, click the format painter twice to “lock” it on (and once to turn it off when finished). Easy!

When I “reply all” to an e-mail, I get nervous that I’ll click send before I’m ready. However, I don’t want to have to delete and then re-add the names when ready. Therefore, I put a fake name in the “CC:” line. Specifically, I type the words “donotsendyet.” If I accidentally try to send the message, a window will pop up, stating that “donotsendyet” isn’t a valid email. Once it is removed, the message sends normally, and an embarrassing blunder is avoided.

I like fillable PDF forms — the kind where you can type in all of the information in the form and then print. However, that means that the person preparing the PDF document has to have done so in a special way. Recently, someone pointed out to me that when the form isn’t “fillable,” you can go to Tools, select the Typewriter menu and then the “typewriter” option. To be able to type, first click in the desired area, then click “typewriter.” (You must repeat this step each time you want to fill in another section). This allows you to fill in information anywhere on the form. Even if the box isn’t fillable, you can click on it, and complete it as if it were.

With Office Applications, do you highlight text, right-click, and choose copy?
Or, do you highlight the text, go to the menu bar, and click the “copy” icon? Did you know that simultaneously depressing the keyboard keys Ctrl (Control) and C (the letter c, either case) is the equivalent? Ctrl+C will act as if you chose the copy icon or the option from the right-click. Furthermore, you can then use Ctrl+V to paste. Best part yet, anything that can be copied and pasted (not just text) will respond to these keyboard shortcuts.

Sending the same basic e-mail to lots of people? Maybe only changing one thing like an invoice number? While a mail merge provides a sophisticated solution, try the following for a quick alternative: Author the first email. Place your cursor on the “TO:” line. Then, click Ctrl+F simultaneously. The system will forward the message, which basically creates a copy of the first email. Change the pertinent details and send out the next email in a snap.

© Copyright 2014 USFN. All rights reserved.
Nov/Dec. e-Update

This post has not been tagged.

Share |
Permalink
 

Regulation X: Borrower Requests for Loan Servicing File

Posted By USFN, Tuesday, November 25, 2014
Updated: Tuesday, October 13, 2015

November 25, 2014

 

by Matthew B. Theunick
Trott & Trott, P.C. – USFN Member (Michigan)

Pursuant to the CFPB’s final rule modifications to Regulation X, which implements the Real Estate Settlement Procedures Act of 1974, “To the extent that a borrower requests a servicing file, the servicer shall provide the borrower with a copy of the information contained in the file subject to the limitations set forth in § 1024.36(f).” See, 12 CFR Part 1024, Docket No. CFPB-2012-0034, p. 216.

Section 1024.36 of the CFR deals with borrower requests for information, and § 1024.36(f) sets forth the specific circumstances where a servicer is not required to comply with a borrower’s request, after the servicer “reasonably determines” that any of the following apply:

• Duplicative information: The information requested is substantially the same as information previously requested by the borrower, for which the servicer has previously complied with its obligation to respond.

• Confidential, proprietary, or privileged information: The information requested is confidential, proprietary, or privileged.

• Irrelevant information: The information requested is not directly related to the borrower’s mortgage loan account.

• Overbroad or unduly burdensome information requested: The information request is overbroad or unduly burdensome. An information request is overbroad if a borrower requests that the servicer provide an unreasonable volume of documents or information to a borrower. An information request is unduly burdensome if a diligent servicer could not respond to the information request without either: exceeding the maximum time limit permitted for responding to a qualified written request [i.e., 30 days, excluding legal public holidays, Saturdays, and Sundays, pursuant to § 1024.36(d)(2)(1)(B), which may be further extended by an additional 15 days]; or incurring costs (or dedicating resources) that would be unreasonable in light of the circumstances. To the extent that a servicer can reasonably identify a valid information request within a submission that is otherwise overbroad or unduly burdensome, the servicer shall comply with the obligations of § 1024.36(c) and (d) to timely acknowledge and respond to the request.

As such, while the CFPB’s modifications to Regulation X broadly allow for borrower requests for loan servicing files, loan servicers are allowed useful carve-outs to either: refrain from providing information that is duplicative, irrelevant, or overbroad/unduly burdensome; or to redact confidential, proprietary, or privileged information. Thus, care should be taken when reviewing, responding to, and turning over loan servicing files to borrowers.

© Copyright 2014 USFN. All rights reserved.
Nov/Dec. e-Update

This post has not been tagged.

Share |
Permalink
 

Mortgage Loans: GSE, HUD, VA Record Retention Requirements

Posted By USFN, Tuesday, November 25, 2014
Updated: Tuesday, October 13, 2015

November 25, 2014

 

by Terry Ross, Director Regulatory Compliance
Barrett Daffin Frappier Turner & Engel, LLP– USFN Member (Texas)

We have all experienced the file from Hades. This is the file that never seems to go away, and then just as quickly as you inherited the file, it finalizes. Now you have to file your claim for reimbursement and, again, you retain the file — but for how long?

Retaining documentation related to the loan servicing, bankruptcy, foreclosure, eviction, and claims is an important aspect of mortgage banking. Audit teams usually request documentation weeks in advance of an audit to determine the authenticity of the claims for reimbursement. The Government-Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, and the government agencies (HUD and VA), have published guidelines outlining the documents to retain and the duration for the retention. The Consumer Financial Protection Bureau (CFPB) record retention policy mimics the retention policies.

Here is a convenient chart about the GSE and agency requirements for current and delinquent loans. This is only a quick reference tool; be sure to review the GSE and agency policies in full before making a decision on record retention.

 Holder Status Years Remarks
 Fannie Mae  Current  5   Date loan or pool is paid in full
 Fannie Mae  Delinquent  4  Date loan paid in full or claim proceeds rec'd
 Freddie Mac  Current  7  Date Freddie's interest is satisfied
 Freddie Mac  Delinquent  7  Date of the foreclosure sale
 HUD  Current  7  After the life of the mortgage loan
 HUD  Delinquent  7  Date of all claim proceeds received
 VA  Current  3  After the VA ceases to be liable
 VA  Delinquent  3  Date of all claim proceeds received


Excerpted below are snippets of bulletins, regulations, and letters. Remember to review all of the related documentation prior to deciding on record retention.

Fannie Mae — Bulletin SVC 2014-04 (February 26, 2014)

 

• Fannie Mae is clarifying its requirements for retaining mortgage loan servicing records. The servicer must retain, in the mortgage loan servicing file, all supporting documentation for all expense reimbursement claims, in addition to other servicing and liquidation information such as: property inspection reports; copies of delinquency repayment plans; copies of disclosures of ARM interest rate and payment changes; documents related to insurance loss settlements; and foreclosure records, as stated in the Servicing Guide (Part I, Section 405.01: Individual Mortgage Loan Files).


• Servicers are reminded that after a mortgage loan is liquidated, the servicer must keep the mortgage loan servicing file for at least four years (measured from the date of payoff or the date that any applicable claim proceeds are received), unless the local jurisdiction requires longer retention or Fannie Mae specifies that the records must be retained for a longer period.


• For loans that are not delinquent, you should review Requirements for Document Custodians Version 10.0, Section 7, Paragraph 7.3: Electronic Document Retention.


• Document custodians are required to retain electronic documents for five years after a loan and/or pool has been paid in full.

Freddie Mac — Single-Family Seller/Servicer Guide, Volume 2, Chapter 52, Mortgage File Retention, Paragraph 52.3 Maintenance stipulates that: 

 

• Regardless of the form in which mortgage files and records are kept, the servicer must have control and identification features in place to:

 

o Permit ready identification of the Freddie Mac loan number assigned to each mortgage serviced for Freddie Mac and Freddie Mac’s percentage of participation in each such mortgage

o Permit ready identification of which mortgages are MERS-registered and of those that are closed with MERS as original mortgagee of record

o Prevent the pledge or sale to a third party of any mortgage in which Freddie Mac has a percentage of participation

o Permit prompt retrieval and, if applicable, delivery to Freddie Mac of a file or individual components of a file by Freddie Mac loan number

o Permit prompt preparation and delivery to Freddie Mac of scheduled and unscheduled reports that Freddie Mac may require by Freddie Mac loan number and/or percentage of participation


• If, for any reason, Freddie Mac changes a loan number and had so advised the servicer, the servicer must promptly make the necessary changes to the applicable mortgage file and records to reflect the new Freddie Mac loan number and instruct its document custodian, if applicable, to take similar action.

• The servicer must maintain the mortgage file while Freddie Mac retains an interest in the applicable mortgage and for at least seven years from the date Freddie Mac’s interest in the mortgage is satisfied.

• If the mortgage was paid in full, the file must contain a copy of the canceled note. If the mortgage was repurchased by the servicer to allow a transfer of ownership that is not allowed by Freddie Mac or does not meet Freddie Mac’s requirements, the file must contain a copy of the executed transfer of ownership or assumption/release of liability instrument.

Freddie Mac — Single-Family Seller/Servicer Guide, Volume 2, Chapter 66, Foreclosure, Paragraph 66.55 File Retention (1/14/11) further stipulates that:

• The servicer must maintain accurate and complete records of the foreclosure proceedings for mortgages in the mortgage file. The servicer must maintain the mortgage file for at least seven years from the date of the foreclosure sale.

Department of Housing and Urban Development (HUD) — Mortgagee Letter 2014-16 (July 23, 2014)

• Purpose: The purpose of this mortgagee letter is to provide guidance on the retention of foreclosure-related documents in servicing files (stored electronically), and to extend the record retention period to at least seven years after the life of the FHA-insured mortgage.

• Effective Date: This mortgagee letter is effective for all foreclosures, associated with FHA-insured mortgages, occurring on or after October 1, 2014. The affected policy is located in HUD Handbook 4330.1, sections 1-4 and 7-12. [4330.1. Rev 5 Chapter 1 paragraph 1-4 E. Retention of Record. All servicing files must be retained for a minimum of the life of the mortgage, plus three years. (See Paragraphs 10-17 and 10-34 for Section 235 mortgages, and see Paragraph 9-16 for cases resulting in a claim filed with HUD.) This is changed with this mortgagee letter.]

• Electronic retention of foreclosure documents in servicing files: In addition to any requirements for retaining hard copies or originals of foreclosure-related documents, documents related to loss mitigation review must also be retained in electronic format. These documents include, but are not limited to: (1) evidence of the servicer’s foreclosure committee recommendation; (2) the servicer’s referral notice to a foreclosure attorney, if applicable; and (3) a copy of the document evidencing the first legal action necessary to initiate foreclosure and all supporting documentation, if applicable (See Mortgagee Letter 2013-38). Mortgagees have the option of using electronic storage methods for all other serving-related documents required in accordance with HUD regulations, handbooks, mortgagee letters, and notices where retention of a hard copy or original document is not required.

• Electronic retention of the mortgage note: A copy of the mortgage, mortgage note, or deed of trust, must be also retained in electronic format.


o The electronic copy of the mortgage, mortgage note, or deed of trust must be marked “copy.”

o The original mortgage, mortgage note, or deed of trust must be preserved in accordance with requirements for retaining hard copies.

o If the note has been lost, a lost note affidavit, acceptable under state law, must be retained in both hard copy and electronic format.


• Length of Retention: All servicing files must be retained for a minimum of the life of the mortgage loan, plus seven years. Pursuant to 24 CFR 203.365 for mortgages, where FHA insurance has been terminated and a claim has been filed, the claim file must be retained for at least seven years after:


o The final settlement date, which is the date of the last acknowledgement or check received by the mortgagee in response to submission of a claim or

o The final settlement date, which is the date of the last acknowledgement or check received by the mortgagee in response to submission of a claim or

o The latest supplemental settlement date, which is the date of the final payment or acknowledgement of such supplemental claim.


• Requests for Individual Account/Loan Information: Pursuant to 24 CFR 203.508, mortgagees are required to respond to HUD requests for information concerning an individual account. Within 24 hours of an oral or written request, mortgagees must make legible documents available to HUD staff in the specific electronic or hard copy format that is requested. This requirement includes all servicing information and related data, as well as the entire loan origination file.

Department of Veterans Affairs (VA) — Regulation 36.4333, Maintenance of Records


• (a)(1) The holder shall maintain a record of the amounts of payments received on the obligation and disbursements chargeable thereto and the dates thereof, including copies of bills and receipts for such disbursements. These records shall be maintained until the VA Secretary ceases to be liable as guarantor or insurer of the loan, or, if the VA Secretary has paid a claim on the guaranty, until three years after such claim was paid. For the purpose of any accounting with the VA Secretary or computation of a claim, any holder who fails to maintain such record and, upon request, make it available to the VA Secretary for review shall be presumed to have received on the dates due all sums which by the terms of the contract are payable prior to date of claim for default, or to have not made the disbursement for which reimbursement is claimed, and the burden of going forward with evidence and of ultimate proof of the contrary shall be on such holder.


o (2) The holder shall maintain records supporting their decision to approve any loss mitigation option for which an incentive is paid in accordance with § 36.4819(a). Such records shall be retained a minimum of three years from the date of such incentive payment and shall include, but not be limited to, credit reports, verifications of income, employment, assets, liabilities, and other factors affecting the obligor’s credit worthiness, work sheets, and other documents supporting the holder’s decision.

o (3) For any loan where the claim on the guaranty was paid on or after February 1, 2008, or action described in paragraph (a)(2) of this section was taken after February 1, 2008, holders shall submit any documents described in paragraph (a)(1) or (a)(2) of this section to the VA Secretary in electronic form; i.e., an image of the original document in .jpg, .gif, .pdf, or a similar widely accepted format.


• (b) The lender shall retain copies of all loan origination records on a VA-guaranteed loan for at least two years from the date of loan closing. Loan origination records include the loan application, including any preliminary application, verifications of employment and deposit, all credit reports, including preliminary credit reports, copies of each sales contract and addenda, letters of explanation for adverse credit items, discrepancies and the like, direct references from creditors, correspondence with employers, appraisal and compliance inspection reports, reports on termite and other inspections of the property, builder change orders, and all closing papers and documents. [Authority: 38 U.S.C. 501, 3703 (c)(1)]


• (c) The VA Secretary has the right to inspect, examine, or audit, at a reasonable time and place, the records or accounts of a lender or holder pertaining to loans guaranteed or insured by the VA Secretary.

© Copyright 2014 USFN. All rights reserved.
Nov/Dec. e-Update

This post has not been tagged.

Share |
Permalink
 

Post-Petition Transfers and the Applicability of the Automatic Stay

Posted By USFN, Tuesday, November 25, 2014
Updated: Tuesday, October 13, 2015

November 25, 2014

 

by Joseph C. Delmotte
Pite Duncan, LLP – USFN Member (California, Nevada)

A recent published decision by the U.S. Bankruptcy Appellate Panel of the Ninth Circuit (the BAP) in the matter of Cruz v. Stein Strauss Trust #1361, PDQ Investments, LLC, 2014 WL 4258990 (9th Cir. BAP 2014), indicates that the protections of the automatic stay may apply to property of the debtor pursuant to Bankruptcy Code Section 362(a)(5), even if that property is not property of the bankruptcy estate. [11 U.S.C. § 362(a)(5)]. The Cruz decision appears to carve out an exception to the view that the protections of the automatic stay do not extend to property that is not property of the estate. [Atighi v. DLJ Mortgage Capital, Inc., 2011 WL 3303454 (9th Cir. BAP 2011)].

Section 541 of the Bankruptcy Code defines property of the bankruptcy estate to include “all legal or equitable interests of the debtor in property as of the commencement of the case.” [11 U.S.C. § 541(a)(1) (emphasis added)]. Thus, in contrast to Chapter 12 and 13 cases where sections 1207 and 1306 expand the definition of property of the estate to include property acquired post-petition, a debtor’s post-petition acquisition of property in a Chapter 7 or 11 case is not property of the estate [11 U.S.C. §§ 1207, 1306]. However, as the BAP indicates in Cruz, this does not mean that the property is not subject to the protections of the automatic stay.

In Cruz, the wife of the original borrower of a loan securing real property executed a grant deed whereby she purported to transfer a fractionalized interest in the property to the debtor, Guido Cruz, several weeks after he filed a skeletal Chapter 7 bankruptcy petition. Three hours after the purported transfer, the property was sold to a third-party purchaser at a trustee’s sale. The bankruptcy court reasoned that because the property was acquired post-petition, it was not property of the estate and, therefore, not subject to the protections of the automatic stay. While the BAP agreed that the property was not property of the estate, it stated that the property was arguably property of the debtor and, thus, still protected by the automatic stay under 11 U.S.C. Section 362(a)(5).

Cruz reaffirms the necessity for creditors to file motions for relief from the automatic stay in cases where there is a post-petition transfer of property to a debtor. Creditors should also seek retroactive annulment of the automatic stay where there is a stay violation, regardless of whether or not the property is property of the bankruptcy estate. To the extent that there is any question regarding the applicability of the automatic stay, legal counsel should be consulted for a more detailed analysis and recommendation to avoid liability for automatic stay violations.

© Copyright 2014 USFN. All rights reserved.
Nov/Dec. e-Update

This post has not been tagged.

Share |
Permalink
 

HOA Talk: South Carolina: Two Categories of HOAs

Posted By USFN, Friday, November 7, 2014
Updated: Tuesday, October 13, 2015

November 7, 2014

 

by Harrison Rushton and Reggie Corley
Scott Law Firm, PA
USFN Member (South Carolina)

There are two different areas to consider when examining Homeowners Associations (HOA) in South Carolina: one is governed by the Horizontal Property Regime Act [S.C. Code Ann. § 27-31-10, et seq. (HPR)], and the other is the “Wild West” of uncodified and unregulated HOAs.

Those HOAs governed by the HPR are subject to clear statutory guidelines regarding the priority of HOA liens and mortgage liens that encumber the subject units. However, despite numerous attempts to codify the regulations of the vast majority of HOAs in South Carolina — those not governed by the HPR — another year has come and gone with a proposed bill that died in committee. Although the proposed legislation had more emphasis on bringing HOAs under the watchful eye of the South Carolina Office of Consumer Affairs than protecting a mortgagee’s priority over any subsequent liens, it did have the potential to shed some light on this nebulous area of real estate law.

Timeshare properties is another area in which associations are governed by statute. However, because timeshare foreclosures are handled differently than mortgage foreclosures in South Carolina, HOA issues in mortgage foreclosure actions will be the focus of this article. There is virtually no case law regarding HOAs, but the one published opinion from the South Carolina Supreme Court [Battery Homeowners Association v. Lincoln Financial Resources, Inc., 309 S.C. 247, 422 S.E.2d 93 (1992)] discusses whether a townhouse development was covered under the HPR when the master deed for the townhouse development did not expressly state that it was to be covered by the HPR. The clear implication from Battery HOA is that if the master deed does not state an intent to be covered by the HPR, then the townhouse development is not subject to the HPR and, thus, not subject to the statutory guidelines regarding lien priority. However, if the master deed grants the association the right to enforce restrictions and assessments over the lots or units, then the association has the right to do so, regardless of its lack of governance by the HPR.

As a practical matter and from an REO perspective, virtually all HOAs understand that they will not be entitled to dues that accrue during the course of a foreclosure. It is important to note that by most accounts, an HOA lien is a continuing, perpetual lien subject to the covenants, conditions, and restrictions of the HOA. In an HPR situation, the statutory language clearly addresses priority: “Where the mortgagee of any mortgage of record or other purchaser of an apartment obtains title at the foreclosure sale of such a mortgage, such acquirer of title, … shall not be liable for the share of the common expenses or assessments … accruing after the date of recording such mortgage but prior to the acquisition of title to such apartment by such acquirer. Such unpaid share of common expenses or assessments shall be deemed to be common expenses collectible from all of the apartment owners…” [S.C. Code Ann. § 27-31-210(b)].

Inasmuch as the HPR makes a distinction between those liens accruing prior to a mortgage being recorded and those accruing afterwards, this distinction seems to have carried over as a rule of thumb to the other HOA arena. As a general practice, default counsel in the judicial state of South Carolina will want to name the HOA as a defendant in the foreclosure action and add language to address any outstanding or prior liens, as well as those dues and liens that may accrue after the filing of the mortgage or during the course of the foreclosure action. Naming the HOA as a defendant in this manner will ensure that the lien of the HOA is released from the subject property by virtue of the foreclosure sale. [S.C. Code Ann. § 15-39-880].


Copyright © 2014 USFN. All rights reserved.
Autumn 2014 USFN Report

This post has not been tagged.

Share |
Permalink
 

Legal Issues Update: Standing Challenges v. Judicial Estoppel

Posted By USFN, Friday, November 7, 2014
Updated: Tuesday, October 13, 2015

November 7, 2014

 

by Charles Pullium and William Holmes
Millsap & Singer, LLC
USFN Member (Missouri)

The legal concept of standing has been much litigated and much studied in the past few years. “Standing to sue” means a party has sufficient stake in an otherwise justiciable controversy to obtain judicial resolution on that controversy. In the context of a borrower who has previously filed a bankruptcy petition and, thus, transferred that borrower’s assets to the bankruptcy estate, the question is: Does the borrower later have standing to assert claims post-bankruptcy? The answer requires a tiered factual analysis, which may result in the borrower being barred from asserting particular claims.

Similarly, the related concept of “judicial estoppel” may bar a party from making certain claims. Under this doctrine, a party is bound by his judicial declarations and may not contradict them in a subsequent proceeding involving the same issues and parties. That is, a party who — by its pleadings, statements, or contentions, under oath — has assumed a particular position in a judicial proceeding is estopped from assuming an inconsistent position in a subsequent action. Although the concepts are related and are often discussed interchangeably, the two theories are distinctly separate. Each requires a different analysis.

Standing to sue — The U.S. Court of Appeals for the Second Circuit recently held that a borrower, who failed to disclose claims in bankruptcy, was not barred from bringing those claims at a later date in a separate action, because her bankruptcy petition was dismissed; the debtor had not been discharged. Dismissal or discharge is important: a borrower/debtor who does not schedule a claim in the bankruptcy schedules is barred from later asserting that claim after discharge and the closing of the case, because the claim is not abandoned to the debtor, but instead remains part of the estate. If a claim remains part of the estate after discharge and closure of the case, the borrower/debtor has no standing to assert the claim, [Crawford v. Franklin Credit Mgmt., 2014 U.S. App. LEXIS 13179 (2d Cir. N.Y. July 11, 2014)].

The analysis: the first question that must be asked is, was the claim that the borrower is now asserting scheduled in the prior bankruptcy proceeding? If yes, then the borrower’s claim is not barred by the doctrine of standing with regard to the earlier bankruptcy. If the claim was not scheduled, then it must be asked whether the bankruptcy case was dismissed prior to discharge, or whether the case resulted in a discharge and was then closed. If the case was dismissed prior to discharge, then the unscheduled claim would revert back to the borrower from the estate, and the claim would not likely be barred by the doctrine of standing with regard to the earlier bankruptcy. If the bankruptcy case resulted in a discharge and the case was then closed (as is a frequent bankruptcy case scenario), then the unscheduled claim does NOT revert back to the borrower, and the borrower lacks standing to later assert the claim. See 11 U.S.C. § 349. In that situation, the claim that was property of the estate was neither administered, nor abandoned; therefore, it remains property of the estate under 11 U.S.C. § 554(d).

Judicial estoppel — On the other hand, this is a doctrine that generally prevents a party from prevailing in a phase of a case on one argument, and then relying on a contradictory argument to prevail in another phase, [Pegram v. Herdrich, 530 U.S. 211, 227, n.8; 120 S. Ct. 2143 (2000)]. In deciding whether to invoke judicial estoppel, a court looks at whether “a party’s later position … [is] clearly inconsistent with its earlier position,” and whether the court in the first proceeding adopted the party’s position, [New Hampshire v. Maine, 532 U.S. 742, 750-51 (2001)].

The goal is to protect the integrity of the judicial system and to not allow parties to play fast and loose with the facts, the law, and the courts. Accordingly, investigating and reviewing the positions that the borrower has taken in earlier bankruptcy proceedings and prior litigation is critical. Then, examine whether those positions were to the borrower’s advantage, as well as whether it would be fundamentally inconsistent to allow the borrower to take a different position at a later date.

Under either a standing or judicial estoppel analysis, a prudent attorney will investigate all prior proceedings involving the borrower before litigating the case at hand.

Copyright © 2014 USFN. All rights reserved.
Autumn 2014 USFN Report

This post has not been tagged.

Share |
Permalink
 

Washington: Appellate Court Defines “Beneficiary”

Posted By USFN, Friday, November 7, 2014
Updated: Tuesday, October 13, 2015

November 7, 2014

 

by Joshua Schaer & Lance Olsen
RCO Legal, P.S.
USFN Member (Arkansas, Oregon, Washington)

On June 2, 2014, Division One of the Washington Court of Appeals affirmed a trial court ruling dismissing all claims against NW Trustee Services, Inc. (NWTS) for alleged violations of state law. [Trujillo v. NW Trustee Services, Inc., 326 P.3d 768].

The appellant/borrower, Trujillo, had obtained a loan in 2006, and secured repayment with a deed of trust. Shortly thereafter, the loan was sold to Wells Fargo, and then to Fannie Mae. Wells Fargo retained servicing rights. In November 2011, Trujillo defaulted on the loan.

As part of nonjudicial foreclosure proceedings, Wells Fargo executed a beneficiary declaration and delivered it to NWTS. That declaration stated, “Wells Fargo is the actual holder of the promissory note ... evidencing the loan or has requisite authority under RCW 62A.3–301 to enforce said obligation.” The court analyzed the beneficiary declaration statute, which requires that: “[b]efore the notice of trustee’s sale is recorded, transmitted, or served, the trustee shall have proof that the beneficiary is the owner of any promissory note or other obligation secured by the deed of trust. A declaration by the beneficiary made under the penalty of perjury stating that the beneficiary is the actual holder of the promissory note or other obligation secured by the deed of trust shall be sufficient proof as required under this subsection.”

According to the statute, unless the trustee has violated its statutory duty of good faith, the trustee is entitled to rely on this declaration. The court held that, because no evidence contradicted the declaration’s validity or truthfulness, it “should be taken as true,” and Wells Fargo provided the necessary proof for purposes of the statute.

The court also concluded that a “beneficiary” is defined under Washington law as the note holder, and that it “need not show that it is the owner of the note.” Accordingly, the question of a note’s ownership is “irrelevant” in a Washington nonjudicial foreclosure.

Further, the borrower’s arguments concerning the applicability of various cases and codes were all rejected. The court found: (1) UCC § 9-313 “has no bearing” on the foreclosure; (2) UCC § 3-301 is “dispositive on the question of who is entitled to enforce the note,” as supported by the Washington Supreme Court decision of Bain v. Metropolitan Mtg. Grp., Inc.; and (3) the limited federal district court case law suggesting that a beneficiary must also be the note owner is “not persuasive.” Lastly, the court affirmed that no violation of NWTS’s good faith duty occurred, and the trustee was fully able to rely on Wells Fargo’s beneficiary declaration.

The Trujillo case is the first Washington appellate decision that specifically addresses the beneficiary declaration, and confirms that the “beneficiary” in the deed of trust act is the “note holder,” and not the “owner.” For these reasons, the court decided to publish the Trujillo decision. Therefore, it is controlling authority in Washington and may be relied upon to defeat similar pending and future claims.

Copyright © 2014 USFN. All rights reserved.
Autumn 2014 USFN Report

This post has not been tagged.

Share |
Permalink
 

New York: Settlement Conferences

Posted By USFN, Friday, November 7, 2014
Updated: Tuesday, October 13, 2015

November 7, 2014

 

by Andrew Morganstern
Rosicki, Rosicki & Associates, P.C.
USFN Member (New York)

Court-mediated settlement conferences are mandatory in New York State in residential foreclosure actions involving a “home loan.” Pursuant to statute, CPLR 3408, the parties “shall negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible.” The statute does not define “good faith,” nor does it specify the penalties that may be imposed in the event a party fails to negotiate in good faith. A recent appellate decision, US Bank National Association v. Sarmiento, 2014 WL 3732457 (2d Dept. 2014), helps to fill in the details.

What is good faith? Many of the judges and referees who conduct the conferences expect the servicer to offer a settlement of some form in order to satisfy the good faith requirement. However, in 2012, an appellate court held that the servicer’s failure to make a settlement offer did not establish a lack of good faith, considering the borrower’s financial circumstances. Wells Fargo Bank, N.A. v. Van Dyke, 101 A.D.3d 638 (1st Dept. 2012).

In the recent Sarmiento decision, the court explained the basis for finding that the servicer did not negotiate in good faith. The court held that the totality of the circumstances must be examined to ascertain whether the “party’s conduct did not constitute a meaningful effort at reaching a resolution.” The court further stated that a finding of “lack of good faith” is appropriate “where a plaintiff failed to expeditiously review submitted financial information, sends inconsistent and contradictory communications, and denies requests for a loan modification without adequate grounds.”

What penalty may be imposed? Without statutory guidance, courts have imposed various penalties upon servicers that fail to negotiate in good faith. Many of these penalties have been deemed inappropriate and stricken upon appeal. Appellate courts have ruled that even if the servicer did not act in good faith, a court cannot cancel a mortgage, reduce the mortgage payments, or compel a mortgagee to permanently abide by the terms of a trial loan modification.

In Sarmiento, the borrower requested that the court bar the plaintiff from collecting interest or fees that accrued from the date that the borrower submitted his complete HAMP application, bar attorneys’ fees, and require a new review for a HAMP modification excluding all interest and charges that accrued from the submission of the HAMP application. The lower court granted the borrower’s motion. The appellate court affirmed, noting that the plaintiff did not contend that these particular sanctions were excessive or improvident. However, the decision creates some uncertainty as to the type of penalty that may be imposed, by stating that courts may not rewrite the contract or impose contractual terms which were not agreed by the parties.

Conclusion — Sarmiento clarified the meaning of “good faith.” It also made clear that the lack of good faith allows imposition of appropriate penalties, yet the type of penalty that may be imposed is still uncertain.

Copyright © 2014 USFN. All rights reserved.
Autumn 2014 USFN Report

This post has not been tagged.

Share |
Permalink
 

Indiana: Dual Tracking

Posted By USFN, Friday, November 7, 2014
Updated: Tuesday, October 13, 2015

November 7, 2014

by Bryan K. Redmond
Feiwell & Hannoy, P. C.
USFN Member (Indiana)

In August of this year, the Indiana Court of Appeals looked at a case with allegations of “dual tracking” in a mortgage foreclosure action [Kretschmer v. Bank of America, NA., 2014 WL 3970507 (Ind. Ct. App. 2014)]. While it has been a fairly common practice for Indiana courts to find that allegations of dual tracking, or a lender/servicer failing to respond to a short sale offer, could state a claim for relief from a default judgment under Indiana Trial Rules 60(B)(1) and 60(B)(3), the courts have always required an additional meritorious defense. In a case of first impression, the Kretschmer court found that those same allegations can simultaneously state a meritorious defense, as required by the rule.

In Kretschmer, the appellate court heard an appeal of the trial court’s denial of a borrower’s TR 60(1) and 60(B)(3) motion for relief from a default. In support of the motion, Kretschmer alleged that: (1) after being served with a copy of the complaint, but prior to the entry of a default, he contacted lender’s counsel to notify them that he was working on a short sale. The borrower further alleged that he was, in turn, notified by counsel’s office “not to worry about anything and to continue with the short sale;” and (2) after the entry of default, the lender failed to timely respond to two short sale offers, causing the potential buyers to rescind their offers. Kretschmer contended that under these facts, it was excusable neglect that he failed to timely respond to the complaint. Further, the borrower maintained that the communications of the lender and its counsel constituted misrepresentations or fraud, upon which he reasonably relied to his detriment, and induced him to allow a default to be entered in the matter.

The lender countered that even if those alleged facts constituted excusable neglect, or even a misrepresentation, that Kretschmer had wholly failed to allege a meritorious defense — as required by the rule — when he failed to challenge any of the underlying contract elements including: the validity of the promissory note or mortgage, standing to enforce the note or mortgage, breach/default under the agreements, or accrued damages. The lender further argued that it was under no obligation to accept less than it was owed, and that any acceptance was purely discretionary.

Applying an abuse of discretion standard, the Kretschmer court held that the trial court did abuse its discretion when it denied Kretschmer’s motion for relief. After emphasizing that default judgments are an extreme remedy, and are generally disfavored, the court found that the borrower’s failure to timely respond to the complaint was due to his own excusable neglect, as well as the alleged fraud or misrepresentations of the lender and its counsel. The court further held that the very same allegations, without more, also constituted two meritorious defenses; namely, (1) estoppel; and (2) contractual sabotage under the Hamlin doctrine. The Hamlin doctrine prevents a party from committing contractual sabotage by acting in bad faith to cause the failure of a contractual provision to the detriment of another contracting party. In Kretschmer, the court found that once the lender promised to provide the borrower additional time to obtain an acceptable short sale offer, it was incumbent upon the lender to give due consideration to any offers that the borrower presented. To do otherwise was acting in bad faith and violated the Hamlin doctrine. Lastly, the court noted that the lender might be liable for additional damages pursuant to Ind. Code § 24-4.4-2-201 and 12 U.S.C. 2605(f) (RESPA), if the borrower’s allegations were proven.

One is left to wonder how the Kretschmer court would have interpreted similar facts in the context of a motion for a summary judgment, instead of a default. Is the court’s ruling truly intended as an expansion of TR 60(B), or simply another admonishment — in the many recent ones —from the appellate court that it takes a dim view of default judgments (particularly in equity cases), and that relief should be liberally granted?

Copyright © 2014 USFN. All rights reserved.
Autumn 2014 USFN Report






This post has not been tagged.

Share |
Permalink
 

Georgia: Substantial Compliance

Posted By USFN, Friday, November 7, 2014
Updated: Tuesday, October 13, 2015

November 7, 2014

 

by Susan Reid and Kent Altom
McCalla Raymer, LLC
USFN Member (Georgia)

For 16 months, since the Georgia Supreme Court’s decision in You v. JP Morgan Chase Bank, N.A., 743 S.E.2d 428, 293 Ga. 67 (May 20, 2013), default services attorneys in Georgia have been holding their collective breath wondering if, and when, the Georgia Supreme Court or the Georgia Court of Appeals would adopt the Eleventh Circuit’s unpublished decision in Carr v. U.S. Bank, NA, 534 Fed. Appx. 878 (2013). (Carr was aligned with two previous opinions of the Georgia Court of Appeals: In both TKW Partners v. Archer Capital Fund, 302 Ga. App. 443, 445-446(1), 691 S.E.2d 300 (2010); and Stowers v. Branch Banking & Trust Co., 317 Ga. App. 893, 896(1), 731 S.E.2d 367 (2012), the appellate court held that a lender’s foreclosure notice to its borrower need only substantially comply with Georgia’s foreclosure statute.)

Specifically, regarding lenders’ foreclosure notices sent to borrowers, the Eleventh Circuit in Carr cited TKW and stated that, in order to satisfy the contact information requirement of OCGA § 44-14-162.2(a), “… the notice only needs to inform the debtor of the contact information if he wishes to pursue a modification of the security deed.” In so doing, the Eleventh Circuit in Carr implicitly — if not directly — adopted the “substantial compliance” standard for providing contact information in foreclosure notices, which had been set forth by the Georgia Court of Appeals in TKW and Stowers.

For the most part, the wait ended in early September. In Peters v. CertusBank National Association, A14A1274 (Ga. App., Sept. 8, 2014), the Georgia Court of Appeals has indicated its likely concurrence with the standard articulated by the Eleventh Circuit in Carr, albeit without expressly stating as much. Notably, in Peters, the foreclosing lender’s mistake was that its foreclosure notice was sent by regular mail rather than by certified mail — an error too critical, according to the court, to overcome even under the “substantial compliance” standard. The court observed that: “… It is true that we have permitted substantial compliance with OCGA § 44-14-162.2(a) in a limited circumstance involving the requirement to provide certain contact information. See TKW Partners v. Archer Capital Fund, [citations omitted] (permitting substantial compliance where notice listed contact information for an individual — the lender’s attorney — who had “as much authority as any individual to negotiate a loan modification on [the lender’s] behalf, [in circumstances where] there was no individual at [the lender] with full authority to modify the loan because [that] would be a group decision”) (punctuation omitted); see also Stowers v. Branch Banking & Trust Co., [citations omitted] (noting that holding in TKW Partners stands for the principle “that substantial compliance with the contact information requirement of OCGA § 44-14-162.2(a) is sufficient.”) We decline to extend that holding [to the foreclosing lender in this instance]” Peters, at 6.

For Georgia default services attorneys, the real question has been: what impact, if any, did the Georgia Supreme Court’s You decision have on the Georgia Court of Appeals’ earlier holdings requiring mere “substantial compliance” in Stowers and TKW? That question seems to have been answered in Peters, even if the appellate court did not reference Carr by name or adopt its holding outright. With a strong degree of certainty, foreclosing lenders and their Georgia counsel can anticipate that the “substantial compliance” standard articulated by the Eleventh Circuit in Carr will be applied by Georgia courts post-You. That said, while “substantial compliance” will cure certain mistakes in a foreclosure notice, foreclosing lenders and their Georgia counsel should not assume that it will cure all mistakes. Lastly, it should be noted that because one of the three judges in Peters concurred in the judgment only, the appellate decision is considered physical, not binding, precedent. Ga. Ct. App. R. 33(a).

Copyright © 2014 USFN. All rights reserved.
Autumn 2014 USFN Report

This post has not been tagged.

Share |
Permalink
 

Protecting Your Secured Claim

Posted By USFN, Friday, November 7, 2014
Updated: Tuesday, October 13, 2015

November 7, 2014

 

by Linda St. Pierre
Hunt Leibert
USFN Member (Connecticut)

One of the biggest challenges faced by secured creditors is how to protect their secured claims in Chapter 11 and 13 bankruptcy cases. Motions to determine secured status under Bankruptcy Code § 506 continue to be filed on a frequent basis. This is largely due to the fact that any recent increase in property value has not been significant enough to impede the filing of these motions.

Pursuant to § 506(a), a borrower may modify the rights of a secured claimant by seeking to bifurcate the claim into secured and unsecured portions, based upon the current fair market value of the property. Junior liens can be deemed wholly unsecured and lien-stripped entirely. According to the anti-modification provisions under § 1123(b)(5) and § 1322(b)(2), if the property is a single-family residence that is the debtor’s principal residence, a first mortgage claim cannot be modified if the claim is secured by that property alone. Further, any junior mortgage claim can only be modified upon the showing of zero equity.

Secured creditors are consistently faced with the potential for a claim modification. Nonetheless, servicers should be aware that there are many opportunities available to them in both Chapter 11 and 13 cases that can potentially limit a debtor’s ability to modify a secured claim. These options can protect a secured claim in its entirety — or close to it.

Chapter 11: The Absolute Priority Rule
The absolute priority rule bars junior claimants, including debtors, from retaining any interest in property when a dissenting senior class of creditors has not been paid in full. Under this rule, a creditor holding a potentially unsecured claim can effectively block plan confirmation if its claim is not to be paid in full before the reorganized debtor retains pre-petition property. This rule clearly applies to business debtors; however, courts across the country continue to be divided on whether it applies to individual debtors since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 took effect.

The overwhelming weight of circuit court authority and bankruptcy court decisions support application to Chapter 11 individual debtors. The Sixth Circuit recently joined the Fourth, Fifth, and Tenth U.S. Courts of Appeals (and numerous bankruptcy courts) in holding that the rule applies to individual Chapter 11 debtors. See Ice House Am., LLC. v. Cardin, 2014 U.S. App. LEXIS 8882 (6th Cir. 2014); In re Stephens, 704 F.3d 1279 (10th Cir. 2013); In re Lively, 717 F.3d 406 (5th Cir. 2013); In re Maharaj, 681 F.3d 558 (4th Cir. 2012). If applicable, the absolute priority rule can be a very powerful tool for any secured creditor seeking to protect its secured claim.

Chapter 11: 1111(b) Election

An 1111(b) election prohibits a debtor from bifurcating a claim into secured and unsecured portions. Effectively, this election will protect a secured creditor’s claim in full. This election must be made prior to approval of the disclosure statement unless the court fixes a different date. When this election is taken, a secured creditor will retain its lien for the full amount of its claim. Creditors should be aware that once made, the election cannot be withdrawn, and the creditor will lose its right to vote on the plan as an unsecured creditor.

Although a debtor must propose deferred payments that are equal to at least the full amount of the secured creditor’s claim, and with a present value that is equal to at least the value of the property, the debtor can propose other terms (i.e., extended amortization, balloon payments) that are unfavorable to a secured creditor. Both debtors and creditors may prefer to avoid an 1111(b) election and, thus, choose to reach an agreement to repayment terms that are more valuable to both parties than would be the case if the election were taken. Consequently, wielding the ability to make an 1111(b) election can be a persuasive negotiation technique for a secured creditor.

Chapter 11: Voting Block
A creditor’s right to vote can also be powerful in a Chapter 11 case. Pursuant to 11 U.S.C. § 1126(a), a holder of a claim or interest allowed under § 502 is permitted to accept or reject a proposed plan of reorganization. A class of creditors has accepted the plan if at least two-thirds in amount, and more than one-half in number, of the allowed claims of the class that are voted are cast in favor of the plan. If a creditor is the only secured creditor and potentially will be the largest unsecured creditor, that creditor can effectively block confirmation of the plan. Similarly, multiple creditors in the same case can work together to oppose confirmation. A calculated block may force the debtor to propose repayment terms that are acceptable to the creditors, or otherwise face dismissal or conversion of the case.

Chapters 11 and 13: Residential Status of Property
As mentioned earlier, if the property is a single-family residence and the anti-modification provisions under § 1322(b)(2) are present, a first mortgage claim cannot be modified. (§ 1123(b)(5) is the anti-modification provision applicable in Chapter 11 cases.) Further, a junior mortgage claim can only be modified upon the showing of zero equity. To date, the majority of courts are following an objective standard (“bright line rule”) in looking at whether or not a property is the debtor’s principal residence.

Issues arise when the property is also being used for commercial purposes or has become income property. For example, where the debtor’s former residence is now being rented out. To quote the majority opinion in a recent decision, “… there is nothing in the bankruptcy code indicating that, once a commercial use of a property becomes sufficiently ‘significant,’ that property ceases being the debtor’s principal residence — either a property is a debtor’s principal residence or it is not” [In re Wages, 2014 DJDAR 3648 (9th Cir. BAP Mar. 7, 2014)].

On the other hand, the dissent in Wages sided with the reasoning and holding of Scarborough v. Chase Manhattan Mortgage Corporation, (In re Scarborough), 461 F.3d 406, 410-13 (3d Cir. 2006). In Wages, the dissenting opinion stated that “Scarborough effectively construed the anti-modification provisions to apply only to mortgaged real property the debtor uses exclusively as his or her principal residence.” Also resulting in conflicting judicial opinions on this topic is whether the relevant date for considering the property’s status should be the petition date or the loan transaction date.

Courts have reviewed additional facts, including the timing of the property conversion, as well as whether bad faith on the part of the debtor exists. See In re Smart, 214 B.R. 63 (Bankr. D. Conn. 1997); In re Kelly, 486 B.R. 882 (Bankr. E.D. Mich. 2013); In re Christopherson, 446 B.R. 831 (Bankr. N.D. Ohio 2011); In re Larios, 259 B.R. 675 (Bankr. N.D. Ill. 2011). Accordingly, servicers should review whether the property is multi-family, whether the executed mortgage contained a “Second Home Rider” or “Occupancy Rider,” the conversion timing, and proof of rental income. Further, pre-petition loan modification applications and utility bills can provide servicers with helpful evidence. All of these factors can definitely play a part during plan negotiations.

Chapter 11 and 13: Due-on-Sale Clauses

Due-on-sale provisions are contained in many mortgages. In pertinent part, these provide that the lender may, at its option, require immediate payment in full of all sums secured by the mortgage if all or any part of the property, or if any right in the property, is sold or transferred without the lender’s written permission. Application of this clause can arise when a borrower quitclaims property to a third party who, thereafter, files for bankruptcy. That debtor then seeks to cramdown the secured creditor’s claim.

Whether or not these Chapter 13 plans are confirmable under § 1325(a)(1) and § 1322(b)(2) has been subject to much litigation. Although courts to date have been divided on whether a debtor in default under a due-on-sale clause can modify a creditor’s rights, many decisions have ruled against plan confirmation in these circumstances. See In re Espanol, 509 B.R. 422 (Bankr. D. Conn. 2014); In re Martin, 176 B.R. 675 (Bankr. D. Conn. 1995); In re Tewell, 355 B.R. 674 (Bankr. N.D. Ill. 2006). Using this line of cases, servicers may be able to effectively block plan confirmation.

Chapter 13: Exceeding the Debt Limitations
Pursuant to 11 U.S.C. § 109(e), only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $383,175 and noncontingent, liquidated, secured debts of less than $1,149,525 may be a debtor under Chapter 13.

This article began with reference to motions to determine secured status under Bankruptcy Code § 506. Indeed, application of § 506(a) may turn out to be a deciding factor when determining eligibility for relief under Chapter 13. A debtor seeking to bifurcate a secured claim will effectively increase unsecured debt by the amount of the secured claim that is deemed unsecured. See In re Miller v. United States, 907 F.2d 80 (8th Cir. S.D. 1990). Accordingly, a debtor who proposes a bifurcation that increases the debtor’s unsecured debt over the § 109(e) debt limitations may prove to be ineligible for Chapter 13 relief in those jurisdictions that take these facts into consideration.

Conclusion
As touched on in this article, secured creditors have many options when objecting to a claim modification in both Chapter 11 and 13 cases. Servicers should consult with their local bankruptcy counsel to implement the best course of action, based upon local practice and law in that jurisdiction.

Copyright © 2014 USFN. All rights reserved.
Autumn 2014 USFN Report

This post has not been tagged.

Share |
Permalink
 

Rhode Island: Statutory Amendments to Post-Foreclosure Eviction Process

Posted By USFN, Monday, October 13, 2014
Updated: Tuesday, October 13, 2015

October 13, 2014

 

by Joseph A. Camillo, Jr. and Brett Edmunds
Shechtman Halperin Savage, LLP – USFN Member (Rhode Island)

On July 8, 2014, the governor of Rhode Island signed legislation that amended Chapter 34-18 of the General Laws, entitled “Residential Landlord and Tenant Act.” Specifically, the Act revised § 34-18-20/§ 34-18-23 and added § 34-18-38.1 as well as § 34-18-38.2, which took effect upon passage and applies to premises containing four or fewer dwelling units. The legislation is silent as to whether it is to be applied prospectively on properties foreclosed after July 8, 2014, or retroactively. The new law dramatically changes the process of evicting “bona fide” tenants who occupy foreclosed properties, and extends the notice-to-quit period for former mortgagors who “hold-over” after the foreclosure.

The new section requires foreclosing owners to post a notice to the tenants advising of the change of ownership, and providing the contact information for the new owner or its property manager within 30 days of the foreclosure. The notice must advise the tenants where rent can be sent, and that a “request for occupancy form” must be submitted to the property manager to remain on the premises. The form shall be provided as part of the notice and be “substantially similar” to the HUD occupancy request form. The notice shall be posted at a prominent location of the building, slid under the door of each unit, and mailed via first-class mail.

Unlike the prior law, § 34-18-38.2 limits a foreclosing owner’s right to possession in a bona fide tenant eviction to the following reasons: (1) where a tenant failed to submit the “request for occupancy form” within 30 days; (2) where the owner has “just cause” [including, but not limited to, the tenant’s failure to pay rent, refusal to grant access, and material violation of the lease]; (3) where there is a binding purchase and sales agreement with a third party for the property; and (4) where HUD has denied the occupants’ request for an occupied conveyance, if the case involved a FHA-insured mortgage.

The new law also impacts the procedure for evicting former mortgagors, and non-bona fide tenants who occupy the property after a foreclosure sale. The new law dictates that non-bona fide tenant evictions must be brought under the Residential Landlord and Tenant Act, specifically § 34-18-37, which grants former mortgagors the right to a “full rental period” notice to quit.

In addition to the changes to the post-foreclosure eviction process, the new law also requires the mortgagee to provide each bona fide tenant with notice that the property is subject to a foreclosure, with the date, time, and place of the sale; the address and telephone number of the Rhode Island Housing Help and United Way 2-1-1 center; include a reminder to pay rent and a statement that it is not an eviction notice. The notice may be addressed to “Occupant,” and mailed to each dwelling unit. The notice is to be mailed first-class mail at least one business day prior to first publication of the notice. A form meeting these requirements was promulgated by the Department of Business Regulation; see Appendix A (Form 34-27-7) within Banking Regulation 5. Failure to provide the notice does not affect the validity of the foreclosure, but it may be a defense to the ability to evict a bona fide tenant, post-foreclosure.

© Copyright 2014 USFN. All rights reserved.
October e-Update

This post has not been tagged.

Share |
Permalink
 

New York: When a Lender is Sued (or not) for Injury at the Mortgaged Premises

Posted By USFN, Monday, October 13, 2014
Updated: Tuesday, October 13, 2015

October 13, 2014

 

by Bruce J. Bergman
Berkman, Henoch, Peterson & Peddy, P.C. – USFN Member (New York)

The title suggests what seems to be an odd notion, but mortgage lenders and servicers can confirm that they are sued on occasion by someone claiming: either to have been injured at the mortgaged property, or to have suffered damage to adjoining property resulting from conditions at the mortgaged property. That the lender or servicer, typically, need not worry about losing such a claim is tangentially confirmed by a new case, Koch v. Drayer Marine Corporation, 118 A.D.3d 1300, 988 N.Y.S.2d 233 (4th Dept. 2014). Nonetheless, there might yet be cause for concern — so perhaps a dual lesson here.

It should be observed that if a lender has become a mortgagee-in-possession (although that is a right rarely invoked), it might then indeed be liable for injuries at the property. That aside, the law has always been clear (albeit somewhat obscure) that a lender would need to have exercised some degree of care, custody, and control over the property to be liable for torts. This is generally not applicable to a mere mortgage holder. [For a more expansive review of this concept with case citations, attention is invited to 1 Bergman on New York Mortgage Foreclosures, § 2.24[9], LexisNexis Matthew Bender (rev. 2014.)]

While the Koch case isn’t the precise fact pattern, it does aptly underscore the critical point. In the case, the property involved was a marina. A man sued the borrower/owner of the property, claiming he was injured with a plank that collapsed while he was fishing from the dock. The owner, who was in foreclosure, contended that the “Judgment of Foreclosure and Sale” in the foreclosure action extinguished ownership so that it could not be liable.

The court disagreed: a judgment does not divest title; only the foreclosure sale does. However, the borrower/owner showed that shortly after the foreclosure was begun, she and her staff put the boats in storage, and thereafter never had any further contact with the premises. In addition, the foreclosing bank denied access to the owner to remove the boats from storage for the summer season, barred the owner from sending rental renewals to customers, and hired another marina operator to take over. This established that the borrower/owner no longer possessed, maintained, or controlled the marina.

The applicable principle of law is that “an out-of-possession title holder lacking control over the property is not liable for injuries occurring thereon.” It is this maxim that protects a lender who is merely the holder of a mortgage, and not in possession. I will leave you with these two points: (1) A lender or servicer without care, custody, and control of mortgaged premises is not liable for injuries occurring there; (2) Watch out for the consequences if the lender or servicer does exercise that care, custody, and control — and, at the very least, insurance will be needed to protect against injury claims.

© Copyright 2014 USFN. All rights reserved.
October e-Update

This post has not been tagged.

Share |
Permalink
 

iPhone6 is Here

Posted By USFN, Monday, October 13, 2014
Updated: Tuesday, October 13, 2015

October 13, 2014

 

by Shawn J. Burke, Director, LoanSphere Sales Engineering
ServiceLink, A Black Knight Financial Services Company – USFN Associate Member
Chair, USFN Technology Committee

The iPhone 6 launch event happened on September 19, 2014. Are you upgrading? During a USFN Technology Committee meeting, the question was debated: whether or not to upgrade?

For the first time, the iPhone is available in two models with two different screen sizes. The new models, measured diagonally, are the 4.7-inch iPhone 6 and the 5.5-inch iPhone 6 Plus. It looks like Apple is getting into the “Phablet” game (phablet: a phone so big it’s almost a tablet). Therein lies an initial concern: could 5.5 inches, or even 4.7 inches (.7 larger than 5s) be too big for the average phone user?

Here are some facts and comparisons from the iPhone 6 launch event:

  • Retina HD display, ion-strengthened glass, ultra-thin backlight
  • 8MP Camera, faster autofocus, extended Lens, optical stabilization (i6 Plus)
  • 64-bit support, 50% better energy efficiency, 25% faster, 13% smaller over A7 processor
  • Increased LTE speeds (on the go) and WiFi (wireless at home or fixed location)
  • Apple Pay to replace classic credit cards and transactions
  • Apple Watch accessory for iPhone 6
  • iPhone 6 available in 16GB/64GB/128GB models for $199/$299/$399
  • iPhone 6 Plus available in 16GB/64GB/128GB models for $299/$399/$499
  • iOS 8, launched September 17 (expected release date for iOS 8.1 is Oct. 20)


Upgrading doesn’t seem like a requirement for everyone. In the Technology Committee’s roundtable discussion, there was one user with a 4s who was ready to upgrade, while another member is choosing to wait-and-see. These two views are probably representative of the split among the public. Some must have the latest and greatest; while for others, it’s a matter of getting value.

Next question: do you use a screen protector or a case? An armored case? With the more durable glass and casing of the new phones, you might like going au naturel.

Watch out for that data though. Arieso reports that between the iPhone 3 and iPhone 4s, users’ data consumption doubles. If trends continue, re-evaluating data plans might have to be a necessity. Those with “grandfathered” unlimited plans will be very happy, indeed!

Finally, if you do decide to upgrade, don’t forget to wipe your current phone. Don’t rely on the store or anyone else to protect you. Both Android and iPhone offer a factory data reset option. Third-party providers also have utilities that can rid your phone of personal information, and protect it with a security level matching the Department of Defense.

© Copyright 2014 USFN. All rights reserved.
October e-Update

This post has not been tagged.

Share |
Permalink
 

Iowa: Statute of Limitation Clarification

Posted By USFN, Monday, October 13, 2014
Updated: Tuesday, October 13, 2015

October 13, 2014

 

by Benjamin W. Hopkins
Petosa, Petosa & Boecker, L.L.P. – USFN Member (Iowa)

On September 17, 2014, the Iowa Court of Appeals released a decision resolving a long, simmering issue concerning the state’s foreclosure judgment statute of limitation. In Kobal v. Wells Fargo Bank, N.A., Iowa Ct. App. No. 13-1926, the court unequivocally concluded that the two-year statute of limitation in Iowa Code Section 615.1 applies only to the foreclosure judgment, not the underlying mortgage.

The case involved a foreclosure judgment entered in 2008. An execution sale was not held within the two-year limitation period and, thereafter, the mortgagor filed an action to quiet title. The mortgagor contended the provision in section 615.1 that “After the expiration of … two years from … entry of judgment … all liens shall be extinguished,” rendered both the judgment and the underlying mortgage unenforceable. The court disagreed, finding such an interpretation wholly inconsistent with the language and context of Iowa Chapter 615.

The mortgagor has filed a petition for rehearing and, in any case, the issue will not be fully resolved until the Iowa Supreme Court weighs in on the matter. In the meantime, Kobal offers some comfort that engaging in loss mitigation efforts, after entry of a foreclosure judgment, will not expose the investor to risk that — should two years pass — its collateral will be lost.

© Copyright 2014 USFN. All rights reserved.
October e-Update

This post has not been tagged.

Share |
Permalink
 

Florida: Statute of Limitations and Statute of Repose

Posted By USFN, Monday, October 13, 2014
Updated: Tuesday, October 13, 2015

October 13, 2014

 

by Robert Schneider
Ronald R. Wolfe & Associates, P.L. – USFN Member (Florida)

As has been detailed recently, Florida courts have made clear that when a bank dismisses its first foreclosure case, a subsequent foreclosure case filed more than five years after the initial acceleration of the loan is not necessarily time-barred (See, e.g., Florida: Appellate Court Clarifies Statute of Limitations for Mortgage Foreclosures, by Roger Bear in the June 2014 USFN e-Update, highlighting U.S. Bank Nat. Ass’n v. Bartram, 2014 WL 1632138 (Apr. 25, 2014)). A recent decision out of the Middle District of Florida (Matos v. Bank of New York, 2014 WL 3734578 July 25, 2014) goes one step further in explaining what is considered a new, actionable default, and in clarifying when a mortgage foreclosure will be forever time-barred.

Matos involved a quiet title claim brought by the borrower against Bank of New York. In Matos, the subject mortgage lien was first accelerated for failure to make an October 1, 2007 payment, resulting in a foreclosure action being filed. The foreclosure case concerning the October 1, 2007 default was ultimately dismissed in 2010. By January 2014, the borrower claimed that the plaintiff no longer had an existing mortgage lien, asserting that the five-year statute of limitations effectively eliminated the lien.

As the court in Matos explained, however, the five-year statute of limitations in Florida Statutes § 95.11(2)(c) is no more than a “shield” to be used as an affirmative defense, should a lender try to collect on a debt greater than five years old (e.g., trying to collect past-due payments for the years 2007 and 2008 when filing an action for foreclosure in 2014, more than five years after those payments were due). The court emphasized that the statute of repose, as set forth in Florida Statute § 95.281(1)(b), is the “sword” and the applicable reference for determining the extinguishment of a mortgage lien altogether, such that no foreclosure action could be brought again against the borrower (e.g., in Matos, the 30-year mortgage that originated in 2006 would be a valid lien until 2041 — five years from the maturity date).

While Matos does not create new law, it does provide further guidance, along the lines of that contained in Bartram, to banks in accelerating loans where the initial default date is older than five years. The Matos court held that where “it is undisputed that a borrower has failed to make any payments in the last five years,” a bank can “sue for those defaults and accelerate the note and mortgage again.” From a practical perspective, though, lenders should consider sending notices of intent to accelerate for default dates that are not already five years old (perhaps four and one-half years old), allowing for the thirty-day cure period to expire and, ultimately, for the foreclosure action on the new default to be filed by a date that is less than five years from the date of default. Otherwise, defenses will undoubtedly be raised that by the time the second foreclosure action is filed, the default date is more than five years old and, thus, time-barred.

© Copyright 2014 USFN. All rights reserved.
October e-Update

This post has not been tagged.

Share |
Permalink
 

Eighth Circuit Joins Majority of Circuits in Lien-Strip Ruling

Posted By USFN, Monday, October 13, 2014
Updated: Tuesday, October 13, 2015

October 13, 2014

 

by Orin J. Kipp
Wilford, Geske & Cook, P.A. – USFN Member (Michigan)

While many circuits have previously ruled on the ability of a Chapter 13 debtor to strip the lien of a wholly unsecured junior creditor, the Eighth Circuit had yet to officially join the majority. It had come close, in In re Fisette, 455 B.R. 177 (B.A.P. 8th Cir. 2011), when the Minnesota trustee appealed a BAP ruling allowing such treatment. However, the Eighth Circuit did not rule on the lien-strip issue in Fisette due to procedural deficiencies in the matter. As such, the Circuit remained in limbo regarding this hot topic because of the non-binding nature of the BAP decision in Fisette. More recently, the issue has been adjudicated with finality, as In re Schmidt was decided in late August (No. 13-2447).

Case Background: In 2012, the Schmidts filed a Chapter 13 bankruptcy petition. In November 2012, they filed a motion to value seeking: (1) a determination that there was no equity in their home to support a third priority mortgage; (2) that the mortgagee’s lien be reclassified as a non-priority unsecured claim; and (3) that the lien be avoided upon successful completion of their Chapter 13 plan. The bankruptcy court, relying on Fisette, ruled in favor of the debtors. The mortgagee appealed to the District Court, which affirmed. An appeal to the Eighth Circuit followed.

The Eighth Circuit focused on the interplay between 11 U.S.C. 506(a)(1) and 11 U.S.C. 1322(b)(2), ruling that under Bankruptcy Code section 506(a)(1), a creditor’s under-secured claim is treated as a secured claim up to the value of the creditor’s interest in the collateral. The excess debt is treated as an unsecured claim. Moving then to section 1322(b)(2), the court opined that the dividing line drawn by this section runs between the lienholder whose security interest in the homestead property has some “value,” and the lienholder whose security interest is valueless. The Circuit distinguished the Supreme Court’s decision in Nobleman v. American Savings Bank, 508 U.S. 324 (1993), in that the creditor’s claim in Nobleman was partially secured, and the focus was based on whether section 1322 allows bifurcation of a partially secured claim and stripping the lien from the unsecured portion of that claim. In Schmidt, however, the creditor’s claim was wholly unsecured. As such, the Eighth Circuit held that, based upon the wholly unsecured nature of the creditor’s claim, the anti-modification language contained in section 1322 did not apply and the lien could be stripped upon successful completion of the Chapter 13 plan.

While this decision is not entirely a surprise, as each circuit that has addressed the issue has reached the same conclusion, it nonetheless provides yet another hurdle for lenders and servicers to overcome in bankruptcy proceedings. It is important for lienholders to vigilantly monitor bankruptcy cases in order to be prepared to timely oppose such a motion if there is a question as to the value of the property and the amount of equity, if any. (The Eighth Circuit is comprised of Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.)

© Copyright 2014 USFN. All rights reserved.
October e-Update

This post has not been tagged.

Share |
Permalink
 

Connecticut: Subsequent Lienholders

Posted By USFN, Monday, October 13, 2014
Updated: Tuesday, October 13, 2015

October 13, 2014

 

by Jane Torcia
Bendett & McHugh, PC – USFN Member (Connecticut, Maine, Vermont)

Recently, the Connecticut Appellate Court reversed a superior court’s ruling that had been entered in favor of the plaintiff-mortgagee. Bombero v. Trumbull on the Green, LLC , Case No. AC 35690 (Aug. 19, 2014). The appellate court based its decision on the defendant’s contention that the plaintiff’s mortgage interest had been extinguished by a previous foreclosure of a prior mortgage, which had been brought by a mortgagee with a first position mortgage interest.

It was undisputed at the superior court level that the plaintiff’s mortgage had no value at the time of the prior foreclosure action — and that said mortgage would have been foreclosed out. Nonetheless, the superior court reasoned that the plaintiff should be permitted to foreclose, in light of the prior mortgagee’s failure to name the plaintiff as a defendant (by virtue of the plaintiff’s subsequent lien) in the prior foreclosure action.

Indeed, as contemplated by Connecticut law, the prior mortgagee was afforded the opportunity to initiate an “omitted party action” under Connecticut General Statutes §49-301, which would have cured the previous omission of the plaintiff mortgagee from the prior mortgage foreclosure. Moreover, the superior court found that the prior mortgagee had actual knowledge of the plaintiff’s lien at the time it took title to the property. However, the appellate court found that the plaintiff-mortgagee should not be permitted to foreclose, despite omission of the plaintiff from the prior mortgage foreclosure, and in spite of the prior mortgagee’s failure to initiate an omitted party action. In so holding, the appellate court relied upon several Connecticut appellate and supreme court decisions, basing its opinion almost exclusively upon the notion of balancing the equities of the parties, as well as principles of logic and common sense in stating that “[i]t is also a basic principle of law that common sense is not to be left at the courtroom door.” Id. at 370.

Accordingly, if a prior mortgagee fails to name a subsequent mortgagee or lienholder in its foreclosure action, the subsequent mortgagee or lienholder cannot receive a windfall by commencing its own foreclosure action, provided that no equity would have existed for said party.


1 Connecticut General Statutes § 49-30 allows a plaintiff to bring a separate foreclosure action against any party or parties “owning any interest in or holding an encumbrance on such real estate subsequent or subordinate to such mortgage or lien [which] has been omitted or has not been foreclosed of such interest … Such omission or failure to properly foreclose such party or parties may be completely cured and cleared by deed or foreclosure or other proper legal proceedings to which only the necessary parties shall be the party acquiring such foreclosure title…and the party or parties thus not foreclosed, or their respective successors in title.”

© Copyright 2014 USFN. All rights reserved.
October e-Update

This post has not been tagged.

Share |
Permalink
 

Connecticut: BAPCPA and the Absolute Priority Rule in Ch. 11 Cases

Posted By USFN, Monday, October 13, 2014
Updated: Tuesday, October 13, 2015

October 13, 2014

 

by Linda J. St. Pierre
Hunt Leibert — USFN Member (Connecticut)

The U.S. Bankruptcy Court for the District of Connecticut has ruled on an issue of first impression that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) did not eliminate the absolute priority rule in individual Chapter 11 cases. The recent decision stems from a contested confirmation of a single Chapter 11 plan of reorganization in two separate, but jointly-administered, Chapter 11 bankruptcy cases: In re Lucarelli, Case No. 13-30350, and In re Lucarelli’s Executive Answering Service, LLC, (LEAS), Case No. 13-30443.

In the individual case, the debtors sought to retain ownership interests in LEAS, while unsecured creditors would not be paid in full. Confirmation of the individual case was met with an objection by one of the unsecured creditors who was not being paid in full under the plan, asserting a violation of the absolute priority rule. Unless unsecured creditors were paid in full, the absolute priority rule would effectively prevent confirmation of the individual case.

The court followed the analysis taken in In re Maharaj, 681 F.3d at 560, and said that it “must determine the meaning of the Congressional language ‘property included in the estate under section 1115’ found in § 1129(b)(2)(B)(ii) and ‘property of the estate includes, in addition to the property specified in section 541’ found in 1115.” The court’s review wavered on whether the court should adopt, what has otherwise become known as, the “narrow view” or, alternatively, opt for the “broad view.”

Having determined that the statutes held ambiguous, competing interpretations, and having further noted that the canon of statutory construction is a presumption against implied repeal, the court chose to take the narrow view (given adoption of the broad view would amount to an implied repeal of the absolute priority rule in individual Chapter 11 cases). The court stated that “the ambiguity of the statutes, the established canon disfavoring implied repeal, and the lack of any useful legislative history” left no alternative but to adopt the narrow view. Effectively, this view holds that the absolute priority rule applies in individual Chapter 11 cases. Consequently, an individual debtor whose liabilities exceed the Chapter 13 debt limits, and whose creditors will not consent to less than full payment of their claims, is required to undergo the functional equivalent of a liquidation.

In its final remarks, the court in Lucarelli noted that the adoption of the narrow view would serve to make Chapter 11 reorganization far less attractive to individual debtors and would make confirmation of a nonconsensual plan virtually impossible.

The Lucarelli decision provides a powerful tool to many creditors in individual Chapter 11 cases. Servicers should consult with their local counsel to determine whether a plan objection based upon an absolute priority rule violation is viable.

Editor’s Note: The author’s firm was appearing counsel in the Lucarelli case.

© Copyright 2014 USFN. All rights reserved.
October e-Update

This post has not been tagged.

Share |
Permalink
 
Page 16 of 26
 |<   <<   <  11  |  12  |  13  |  14  |  15  |  16  |  17  |  18  |  19  |  20  |  21  >   >>   >| 
Membership Software Powered by YourMembership  ::  Legal