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2018 Utah Legislative Changes affecting Default Mortgage Servicing

Posted By USFN, Tuesday, September 11, 2018
Updated: Friday, September 7, 2018

September 11, 2018

by Brigham J. Lundberg
Lundberg & Associates, PC – USFN Member (Utah)

The 2018 Utah legislature passed a few bills affecting Utah mortgage servicing, liens, and evictions. The effective date for these bills was May 8, 2018. House Bill 108, SAFE Act Exemptions, amended the Utah Residential Mortgage Practices and Licensing Act (RMPLA). House Bill 168, Political Subdivision Lien Authority, made minor changes and clarifications regarding the lien rights and priority of municipalities for recurring and non-recurring charges. Senate Bill 159, Forcible Entry and Detainer, made important changes to Utah eviction actions, personal property evictions, and the rights of the respective parties therein. Senate Bill 188, Uniform Unsworn Declarations Act, codified the Act detailing the limits and addressing the validity of the use of unsworn declarations in certain situations. Finally, while not passed in this legislative session, two potentially impactful bills (regarding statutory notice via publication, and the statute of limitations for foreclosures) were introduced, and defeated, which may be indicative of future legislation to be brought.

SAFE Act Exemptions
House Bill 108 amends the Utah RMPLA, primarily to define terms and to exempt certain nonprofit corporations from the RMPLA’s provisions. The amended version of the RMPLA now includes a definition for “balloon payment,” which is defined as a required payment in a mortgage transaction that: (i) results in a greater reduction in the principal of the mortgage than a regular installment payment; and (ii) is made during, or at the end, of the loan’s term.

Additionally, the amended RMPLA now exempts from its provisions a nonprofit corporation that, in addition to the other criteria already set forth in the RMPLA, (i) is exempt from paying federal income taxes; (ii) has as the nonprofit corporation’s primary purpose serving the public by helping low-income individuals and families build, repair, or purchase housing; (iii) does not require, under the terms of the mortgage, a balloon payment; and (iv) to perform loan originator activities, uses only unpaid volunteers or employees whose compensation is not based on the number or size of the mortgage transactions that the employees originate. Similarly, an employee or volunteer for a nonprofit corporation is exempt from the RMPLA’s provisions while working within the scope of the nonprofit corporation’s business, provided that such nonprofit corporation either meets the criteria above, or is a community development financial institution.

Political Subdivision Lien Authority
House Bill 168 clarifies that no lien rights exist for direct recurring (i.e., monthly) charges for goods and services (e.g., garbage collection) provided by local political subdivisions (municipalities). That is, these types of liens are provided no lien status or priority at all. Additionally, this bill grants lien rights to municipalities for some non-recurring charges, but the municipality must file actual liens for those amounts, and such liens will have priority based on filing date. Generally speaking, these liens should not cause any priority issues with foreclosures as they follow the rule of “first in time, first in right” and will be recorded and appear as actual liens on a foreclosure title report.

Finally, House Bill 168 clarifies that if charges levied by a municipality are statutorily authorized to be on the tax notice, then they are allowed to be certified and become part of the property taxes. Such charges would take priority over consensual liens, just as property taxes do now. There is no requirement for a separate notice of lien for these items, as they simply show up on the property tax notice after being certified to the treasurer. Please note that, in the 2018 legislative session, no categories of charges were added to the “statutorily authorized” category that did not already have statutory authorization. (The legislature could make future changes, but did not do so with this bill.)

Ultimately, House Bill 168 should not cause any changes to a trustee’s previous approach to nonjudicial foreclosures and lien priority in the state of Utah.

Forcible Entry and Detainer
Senate Bill 159 modifies the Utah statute governing forcible entry and detainer, which is relied upon in prosecuting post-foreclosure eviction actions. The bill expands the options for providing service of a notice to quit, specifically for situations in which a tenant “controls” a property but may not actually reside or work there. The bill also permits the court to schedule an initial occupancy hearing before a substitute judge, instead of the assigned judge, to expedite the eviction process.

While previously the judge had discretion to award costs and reasonable attorney fees to the prevailing party, this bill makes the award of such fees and costs mandatory. Finally, with respect to personal property evictions, this bill defines the term “abandonment,” and amends the statutory notification process for abandoned personal property. Of note, where it previously expressly authorized the removal of only the eviction defendant’s abandoned personal property, this bill amends the statute to state that any abandoned personal property remaining in or on the premises may be removed pursuant to the statutory removal process.

Uniform Unsworn Declarations Act
Senate Bill 188 enacts the Uniform Unsworn Declarations Act, including defining its relevant terms, providing the applicability of the act, addressing the validity of unsworn declarations, addressing a declaration’s required medium, and outlining the form of an unsworn declaration. The bill also repeals provisions related to unsworn declaration in lieu of affidavit and the Utah Uniform Unsworn Foreign Declarations Act. The provisions of this act do not apply to documents that are recorded pursuant to Utah’s nonjudicial foreclosure statute, but will most likely affect the ability of process servers, sheriffs, constables, and private investigators to utilize unsworn declarations in lieu of sworn affidavits, in some situations.

Defeated Legislation
Two pieces of proposed legislation pertaining to the mortgage default industry that were not enacted, but may return in future legislative sessions, include: House Bill 301, Legal Notice Amendments; and House Bill 384, Trust Deeds and Statute of Limitations. Both bills garnered some support among legislators but, ultimately, could not muster enough votes to be enacted. However, these bills should be viewed as informative as to potential future legislative efforts.

House Bill 301 sought to exempt certain entities (principally, municipal governments) from requirements to provide legal notice via publication when such notice could be given in another suitable manner (e.g., personal service). The bill, meant to save municipalities on high publication costs, was ultimately too controversial — as the vague language in the bill left the determination of adequate notice to the sender — and some legislators feared it would lead to increased litigation and a lack of transparency on the part of municipal governments. Others feared it might erode notice by publication provisions in the nonjudicial foreclosure statute. As some point in the future, it is anticipated that a challenge will be made to the necessity of continuing to use newspaper publications as a required form of notice in Utah nonjudicial foreclosure actions.

House Bill 384 was an effort by plaintiffs’ attorneys to legislatively undo the precedent of statute of limitations case law in Utah. Currently, the case law in Utah is favorable to lenders and servicers in allowing some leeway with respect to avoiding statute of limitations issues and completing foreclosure actions. It is unclear whether such legislation should be expected in future years as the legislation’s sponsor (and really its only ardent supporter) retired from the House at the conclusion of the 2018 legislative session.

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September e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."


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