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Massachusetts Division Of Banks Issues New Expectations for Lenders

Posted By USFN, Monday, March 30, 2020
Updated: Thursday, April 9, 2020

by Joseph A. Camillo, Jr., Esq.                         
Brock and Scott, PLLC
USFN Member (AL, CT, FL, GA, MA, MD, ME, MI, NC, NH, OH, RI, SC, TN, VA, VT)

On March 25, 2020, the Division of Banks issued a message to all financial institutions outlining its expectations of lenders/servicers/credit unions to alleviate the adverse impact of COVID-19 on those mortgage borrowers who demonstrate that they are not able to make timely payments due to financial hardship resulting from the effects of COVID-19. The Division fully expects that institutions will implement all reasonable and necessary change to provide relief to those adversely impacted borrowers during this state of emergency, and continuing thereafter, as necessary. 

These actions include, but are not limited to: 

 

  • Postponing foreclosures for 60 days; 
  • Forbearing mortgage payments for 60 or more days from their due dates; 
  • Waiving late payment fees and any online payment fees for a period of 60 days; 
  • Refraining from reporting late payments to credit rating agencies for 60 days; 
  • Offering borrowers an additional 60-day grace period to complete trial loan modifications, and ensuring that late payments during the COVID-19 pandemic do not affect their ability to obtain permanent loan modifications; 
  • Ensuring that borrowers do not experience a disruption of service if the mortgage servicer closes its office, including making available other avenues for borrowers to continue to manage their accounts and to make inquiries; and 
  • Proactively reaching out to borrowers to explain the above-listed assistance being offered. 

 

The Division emphasizes that reasonable and prudent efforts by institutions during this outbreak to assist these borrowers given these unusual and extreme circumstances are consistent with safe and sound banking practices as well as in the public interest, and will not be subject to examiner criticism.

A link to the full copy of the message is https://www.mass.gov/doc/march-25-dob-message-to-industry-regarding-mortgage-loan-borrowers-impacted-by-covid-19/download


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COVID-19 Industry Announcements and Headlines

Posted By USFN, Wednesday, March 18, 2020
Updated: 3 hours ago
Below is a list of industry announcements and headlines related to the current COVID-19 situation. Information will be added and updated as new information becomes available. Please submit any information to jloy@usfn.org

CLE
MCLE announcements regarding COVID-19 corornavirus - CLEreg - 4/6/20
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Industry Education
Affinity Virtual Symposium: Navigating Your New Normal - Affinity Consulting - 4/7/20
Click here

National Foreclosure Announcements
Bill Banning Collection During Major Disasters Introduced in U.S. Senate - insideARM - 3/25/20 
Click here

Freddie Mac, Fannie Mae move to protect renters from eviction during coronavirus crisis - HousingWire - 3/23/20 

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Los Angeles, New York City are latest cities to pause evictions - HousingWire - 3/18/20 
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Fannie Mae, Freddie Mac, HUD suspending all foreclosures and evictions - HousingWire - 3/18/20
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Foreclosure and Eviction Moratorium in connection with the Presidentially-Declared COVID-19 National Emergency - U.S. Department of Housing and Urban Development - 3/18/20
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Temporary servicing guidance related to COVID-19 - Freddie Mac - 3/18/20
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Impact of COVID-19 on Servicing - Fannie Mae - 3/18/20
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Temporary Servicing Requirements Realted to COVID-19 - Freddie Mac via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/18/20
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State Foreclosure Announcements
County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/10/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/9/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/8/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/7/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/6/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/3/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/2/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/1/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/31/20
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Massachusetts Division Of Banks Issues New Expectations for Lenders - Brock and Scott, PLLC - 3/30/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/27/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/26/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/25/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/24/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/23/20
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Emergency Relief for New Yorkers Who Can Demonstrate Financial Hardship as a Result of COVID-19 - New York State Department of Financial Services via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/24/20
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New Hampshire Governor Issues Emergency Order Temporarily Prohibiting Foreclosure and Eviction Actions - Brock and Scott, PLLC - 3/18/20
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Kansas Statewide Foreclosure and Eviction Moratorium - Millsap & Singer, LLC - 3/18/20
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County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/18/20
Click here


USFN Member Firm Announcements
GSE Guidance Related to CARES Act - Scott and Corley, P.A. - 4/10/20
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South Carolina Supreme Court Update - Scott and Corley, P.A. - 4/6/20
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South Carolina Supreme Court Update - Scott and Corley, P.A. - 4/2/20
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South Carolina Bankruptcy Interim Procedures to Mitigate Effects of COVID-19 (Chapter 13 Cases) - Scott and Corley, P.A. - 4/2/20
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CARES Act Details - Scott and Corley, P.A. - 3/30/20
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COVID-19 South Carolina Update - Scott and Corley, P.A. - 3/25/20
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COVID 19 Relief in New York - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/24/20
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Maryland Court Update in Response to Covid-19 - Rosenberg & Associates, LLC - 3/23/2020

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COVID-19 and South Carolina Loss Mitigation Assistance and Compliance - Scott and Corley, P.A. - 3/23/20
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New York- Statute of Limitations - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/23/20
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Maryland Court Update in Response to Covid-19 - Rosenberg & Associates, LLC - 3/19/2020
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Court Updates in Response to Covid-19 - Rosenberg & Associates, LLC - 3/16/2020
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Covid-19 Memo to Clients - Rosenberg & Associates, LLC - 3/13/2020
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South Carolina Regulatory Update - COVID-19 - Scott and Corley, P.A. - 3/19/20
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Court Announcements
COVID-19 Related Information - United States Bankruptcy Court, District of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/8/20
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COVID-19 Related Information - United States Bankruptcy Court for the Middle District of Pennsylvania via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/6/20
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Second Supplemental Order – Supreme Court of Pennsylvania Western District via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/3/20
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Moderations to Court Operations – Supreme Court of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/1/20
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Omnibus Order Notice to the Bar – Supreme Court of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/1/20
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Standing Order 2020-04 – United States Bankruptcy Court, District of Massachusetts via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/1/20
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Order Temporarily Suspending Requirement to Obtain Original Signatures from Debtors for Electronic Filings – United States Bankruptcy Court, District of Connecticut via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/23/20

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Administrative Order from the New York Chief Administrative Judge - via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/23/20
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Suspension of Maryland Foreclosures and Evictions During the COVID-19 Emergency - Court of Appeals of Maryland via Rosenberg & Associates, LLC - 3/19/2020
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Oklahoma Court Status - Oklahoma State Courts Network via Baer Timberlake PC - 3/19/20
Click here
 
New Mexico court information -  State Bar of New Mexico via Tiffany & Bosco, P.A.
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Emergency Order No. 1 Regarding Circuit Court of the First Circuit, State of Hawaii – via Leu Okuda & Doi - 3/18/20
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Emergency Order No. 3 Regarding Circuit Court of the First Circuit, State of Hawaii - via Leu Okuda & Doi - 3/18/20
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Emergency Order No. 1 Regarding Circuit Court of the Second Circuit, State of Hawaii – via Leu Okuda & Doi - 3/18/20
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Emergency Order No. 1 Regarding Circuit Court of the Fifth Circuit, State of Hawaii - via Leu Okuda & Doi - 3/18/20
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Emergency Order No. 1 Regarding Circuit Court of the Third Circuit, State of Hawaii  - via Leu Okuda & Doi -3/18/20
Click here

Pennsylvania court and county operations - The Unified Judicial System of Pennsylvania - 3/18/20
Click here

Superior Court of the District of Columbia Order - Rosenberg & Associates, LLC - 3/16/2020
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COVID-19 Virginia Local Court Information - Rosenberg & Associates, LLC - 3/16/2020
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Administrative Order on Statewide Closing of the Maryland Courts to the Public Due to the COVID-19 Emergency - Rosenberg & Associates, LLC - 3/13/2020
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New Hampshire Governor Issues Emergency Order Temporarily Prohibiting Foreclosure and Eviction Actions

Posted By USFN, Wednesday, March 18, 2020

by Joseph A. Camillo, Jr., Esq.                         
Brock and Scott, PLLC
USFN Member (AL, CT, FL, GA, MA, MD, ME, ME, MI, NC, NH, OH, RI, SC, TN, VA, VT)

Today March 17, 2020 Governor Christopher T. Sununu issued Emergency Order #4 (“Order#4”) (https://www.governor.nh.gov/news-media/press-2020/documents/emergency-order-4.pdf) pursuant to Executive Order 2020-04 (“Order 2020-04”) (https://www.governor.nh.gov/news-media/orders-2020/documents/2020-04.pdf) implementing a temporary prohibition on evictions and foreclosures in the state of New Hampshire.

For foreclosures, all judicial and non-judicial foreclosure actions under RSA 479 or any other applicable law, rule or regulation are prohibited for duration of the State of Emergency declared in Executive Order 2020-04. 

For evictions, Order#4 specifically states that no eviction proceedings shall be initiated, order issued or enforced for the duration of the State of Emergency declared in Executive Order 2020-04.  Any violation of Oder#4 by a landlord, as defined by RSA 540-A:1 shall be considered a prohibited act under and a violation of RSA 540-A:3 subject to the remedies contained in RSA 540-A:4. The definition of “Landlord”  in 540-A:1 is as follows: "Landlord" means an owner, lessor or agent thereof who rents or leases residential premises including manufactured housing or space in a manufactured housing park to another person.”  Although the definition is silent as to bank-owned, former mortgagor scenarios, a conventional analysis of Order#4 in its totality would suggest it applies to all eviction proceedings for restricted and unrestricted property.


It is important to note, that no provision of Order#4 shall relieve an individual of their obligations to pay rent, make mortgage payments, or any other obligation which an individual may have under a tenancy or mortgage.  The Attorney General shall have the authority to enforce the provisions of Order#4 through any methods provided by current law.

Because the duration of the State of Emergency is undetermined, and to avoid any claims of violating Order#4, New Hampshire foreclosure sales and publications should be cancelled effective immediately as well as any eviction proceedings pursuant to court directives.  Clients are advised to immediately place all files on holds as we await further guidance.

You can direct questions on specific state notices and orders, along with related portfolio and loan level inquiries to clientrelations@brockandscott.com

 

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February 2020 Member Moves + News

Posted By USFN, Monday, March 2, 2020



Michigan Governor Gretchen Whitmer appointed Brian P. Henry, Chief Legal Officer for Orlans PC (USFN Member - DC, DE, MA, MD, MI, NH, RI, VA) to serve on the Electronic Recoding Commission, for a term commencing February 7, 2020 and expiring January 1, 2022.   This Commission ensures that that the practices and e-recording technologies used by county registers of deeds within and Michigan are compatible with best practices. The Commission also ensures that Michigan register of deeds utilize e-recording technologies and processes that will be compatible with other states.

Brian was also appointed to serve on the State Bar of Michigan Land Title Standards Committee. This Committee reviews and updates the Michigan Title Standards which provide guidance regarding property issues and conveyances all across the State of Michigan.

Brian has over 38 years’ experience as a real estate and title lawyer. He advises clients about property transfers and title curative matters.

Copyright © 2020 USFN. All rights reserved.

 

Tags:  Brian P. Henry  Michigan  Orlans PC 

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South Carolina Supreme Courts Uses Equity Method to Determine Whether Foreclosure Sale "Shocks the Conscience"

Posted By USFN, Tuesday, February 18, 2020

by John S. Kay, Esq.
Hutchens Law Firm
USFN Member (SC)

In May 2018, the readership was informed of an opinion issued by the South Carolina Court of Appeals (
South Carolina: Court of Appeals uses "Debt Method" to Determine whether Foreclosure Sale Price "Shocks the Conscience"), where the Court held that the Debt Method was the appropriate method to use in determining whether a successful bid at a foreclosure sale was grossly inadequate in amount as to “shock the conscience,” thus requiring the sale to be overturned. In Winrose Homeowners’ Association, Inc. and Regime Solutions LLC v. Hale, (Op. No. 5549 S.C. April 4, 2018) the Court of Appeals applying the Debt Method, affirmed the trial court’s decision that the bid entered by a third-party bidder at a homeowners’ association foreclosure sale did not shock the conscience and upheld the judicial foreclosure sale.       

The South Carolina Supreme Court granted the homeowners’ petition for a writ of certiorari in the case, and reversed the decision of the South Carolina Court of Appeals. In Winrose Homeowners’ Association, Inc. and Regime Solutions LLC, v. Devery A. Hale and Tina T. Hale, (Op. 27934 S.C. December 18, 2019), the South Carolina Supreme Court declined to use the Debt Method utilized by the Court of Appeals and instead used the Equity Method.

Historically, South Carolina courts will not set aside a judicial sale except under certain limited circumstances. One of these circumstances is when a judicial sale price is so grossly inadequate as to shock the conscience. In Winrose, the homeowners association for the neighborhood pursued a foreclosure action against the homeowners (Hale) for non-payment of association dues. The HOA foreclosure was subject to a senior mortgage in the amount of $66,004.00 and the HOA and the homeowners had previously agreed that the fair market value of the property was $128,000.00. Thus, the Hales had an equity cushion in the property of approximately $62,000.00.  At the homeowners association foreclosure sale, a third party, Regime Solutions, LLC, purchased the property with a successful bid of only $3,036.00. The Hales argued that the Court should use the Equity Method and compare the successful bid at the foreclosure sale of $3,036.00 to the existing equity in the property of $62,000.00. Using this method, the Hales argued that the sales price was so low when compared to the amount of equity in the property that the third-party bid did shock the conscience and requested that the sale be overturned.

The third-party bidder argued that the outstanding mortgage balance due to the senior mortgage should be added to the successful bid to calculate the bid price to be considered by the Court. This method of calculation is known as the Debt Method. Under this method, any senior encumbrance that the purchaser at a sale would need to pay in order to obtain clear title must be included in the bid determination. The third party purchased the property subject to the senior mortgage with a balance of $66,004.00.  The lower court had determined that the correct calculation was to combine the successful bid of $3,036.00 with the senior mortgage balance of $66,004.00 to create what the Court called an “effective sale price.” This calculation resulted in a bid of $69,040.00 for the property which was 54% of the fair market value of $128,000.00. Based upon this “Debt Method” of calculating the effective sale price, the trial court and the Court of Appeals found that the bid price at the foreclosure sale did not shock the conscience. 

The Court of Appeals noted that there had been no previous cases in South Carolina which established a preferred method when the facts involved a senior mortgage encumbrance.  The Hales argued that the Equity Method was the method the Court should adopt because under this method, the sales bid was only 4.89% of the equity. The calculation using the Debt Method espoused by the third-party bidder resulted in a sales bid that was 54% of the fair market value of $128,000.00.  The Court of Appeals adopted the Debt Method as the more reasonable method, because the bidder in the case at hand would still be required to satisfy the senior encumbrance prior to obtaining the property free and clear of liens.

The Supreme Court reversed the Court of Appeals based upon facts in the case. Generally, a judicial foreclosure sale will not be set aside unless (1) the price was so grossly adequate as to shock the conscience of the court; or (2) an inadequate - but not grossly inadequate – price at the sale is accompanied by other circumstances from which the court may infer fraud has been committed.

The Supreme Court noted that South Carolina courts have never established a bright-line rule for what percentage of the sale price must be met with respect to the actual value of the property in order to shock the conscience of the court. However, the Court indicated that “only when judicial sales are for less that [10%] of a property’s actual value have our courts consistently held the discrepancy to shock the conscience of the court.” Winrose, citing Bloody Point Prop. Owners Ass’n, Inc. v. Ashton, 410 S.C. 62, 70 762 S.E. 2d 729, 734 (Ct. App. 2014).   

The Debt Method of calculation takes into consideration the amount of debt a foreclosure purchaser must incur before obtaining free-and-clear title to the property. This was the method used by the Court of Appeals because the homeowners’ association was foreclosing its lien subject to a senior mortgage on the property. However, the Supreme Court noted that the business model utilized by third party bidder was to never pay the senior mortgage on the properties it purchased at foreclosure sales and to either allow the senior mortgage to foreclose, or to quit-claim the property back to the original owners for a large sum. At the same time, the original homeowners had kept their mortgage current and remained current throughout the appeals process.

The Court explained that in cases where there is a senior mortgage that would remain a lien on the property after the foreclosure sale, the Debt Method would be used. However, the Court specifically rejected an across the board application of the Debt Method in cases where the facts are similar to the case at hand where the third party made no attempt to pay the senior lien.  Utilizing the Equity Method, the third party bidder’s bid covered only 4.9% of the value of the foreclosed property, which was much less than the 10% threshold amount South Carolina courts have used in the past. The Supreme Court then concluded that the foreclosure bid was grossly inadequate and was insufficient enough to shock the conscience of the Court. It is clear from the Court’s opinion that the conduct of the third party bidder was a primary factor in the decision. The Court also counseled that a foreclosure proceeding is a serious event and expressed displeasure that it was being utilized as a business model by the third party bidder for the purpose of exploiting property owners. 

In the end, the Court expressed misgivings about the foreclosure proceedings in the case, including the fact that the homeowners had not been provided notice of the final hearing and the foreclosure sale, but did not address it specifically as the notice issue was not raised on appeal. The South Carolina law does not require notice of the final foreclosure hearing and sale to be sent to defendants that are in default; however, most of the judges that hear foreclosure cases require such notice to be provided to all parties to the court action. In cases involving foreclosures by junior lien holders in South Carolina, the foreclosing party and any third party bidders need to make certain that their bid at sale complies with the Debt Method in the event the bidder does not plan on paying the debt owed to the senior lien holder.

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United States Supreme Court Rules on Statute of Limitations for FDCPA Claims

Posted By USFN, Monday, February 17, 2020

by Melinda J Maune, Esq.
Martin Leigh PC
USFN Member (KS, MO)

On December 10, 2019, the United States Supreme Court  (“Supreme Court”) affirmed a Third Circuit decision and held absent the application of an equitable doctrine, the statute of limitations begins to run when the alleged Fair Debt Collections Practice Act (“FDCPA”) violation occurs, not when the violation is discovered.  Justice Thomas authored the 8-1 decision in Rotkiske v Klemm ,140 S.Ct. 355 (2019).

In 2009 Klemm & Associates (“Klemm”) sued Petitioner Kevin Rotkiske (“Rotkiske”) for payment on his credit card debt. At an address where Rotkiske no longer resided, someone other than Rotkiske accepted service.   Unaware of the service or the lawsuit, Rotkiske failed to respond and a default judgment was entered against him. Rotkiske claims he first became aware of the default judgment against him in 2014 after his home mortgage application was denied due to the judgment against him.

In June 2015, less than one year after discovering the default judgment, Rotkiske filed suit against Klemm for violating the FDCPA by wrongfully obtaining a default judgment by improper service. Rotkiske urged the court to apply the discovery rule to the statute of limitations period with the beginning of the one-year period to begin on the date he knew of should have of the FDCPA.  In the alternative, his amended complaint argued equitable tolling excused his otherwise untimely filing.  Klemm moved to dismiss the Rotkiske’s suit on basis that the FDCPA’s one-year statute of limitations under 15 U.S.C. 1692k(d) had expired.

The District Court rejected Rotkiske’s argument and dismissed the FDCPA claim as time-barred and ruled that 1692k(d) contained no extension of time to discover the claim. The Third Circuit affirmed the District Court and the occurrence rule, requiring the statute of limitations to begin on the date the violation occurred as opposed to the date of discovery.

In determining that the statute of limitations under the FDCPA begins on the date of the violation, the Supreme Court reviewed the plain language of the statute and found the language of 15 U.S.C. 1692k(d) to be unambiguous and that the statute clearly set the date of the violation as the event that starts the statute of limitations. Judge Thomas declined to take an expansive approach and include a general discovery rule to the FDCPA, noting judicial supplementation was particularly inappropriate when Congress had shown it knew how to adopt the omitted language or provision.

At the time the FDCPA was adopted, Congress had enacted other statutes with provisions for a discovery rule. The Justices therefore reasoned that the absence of such provision in the FDCPA meant that Congress knowingly omitted the discovery of a claim from the FDCPA’s statute of limitations. Justice Thomas’ opinion noted that the role of the Court was simply to enforce the value judgments made by Congress.

The Supreme Court’s opinion was narrow and did not address whether Rotkiske may have had an equity based or fraud specific discovery rule defense to the untimely filing of his lawsuit. The majority of the Supreme Court ruled that Rotkiske failed to preserve that issue on appeal to the Third Circuit nor raised it in his petition for certiorari.  By failing to address whether the text of 1692k(d) permits the application of equitable doctrine, it appears the court has left the door open for future FDCPA litigants to plead for this exception in FDCPA cases.   In short, this brief opinion may be a limited victory for debt collectors.


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Tenants’ Standing in Foreclosures in Kansas

Posted By USFN, Monday, February 17, 2020

by Blair Gisi, Esq. 
SouthLaw, P.C. 
USFN Member (IA, KS, MO, NE)

A pro se mother and daughter recently challenged a foreclosure in the Kansas Court of Appeals that, in part, resulted in clarification of the rights of a tenant/occupant of a property subject to the foreclosure.

Citimortgage, Inc. v. Scott-Jacobs, 2019 Kan. App. Unpub. LEXIS 863 (Ct. App. Dec. 27, 2019) was an appeal brought by a borrower and her daughter appealing the district court’s awarding of an in rem summary judgment to Citimortgage and claiming the district court erred by entering judgment in favor of Citimortgage and erred again by dismissing the appellants’ counterclaims

Angela Connell, daughter and occupant of the property, joined her mother, Maejean Scott-Jacobs, and her husband (who passed away while the litigation was pending), the original borrowers, in contesting the foreclosure.  Angela was not on the loan in any capacity, yet moved the district court for dismissal of the foreclosure action and filed an “Answer, New Matter, and Counterclaims.”  After addressing several procedural issues (including telling Connell she could not represent her parents in court as a nonlawyer and Scott-Jacobs subsequently affirming Connell’s pleadings), the district court ultimately entered an order dismissing the Connell’s counterclaims for lack of standing, dismissing Scott-Jacobs’ counterclaims for failing to state a claim upon which relief could be granted, and granting Citimortgage’s motion for summary judgment.

The first issue the Court of Appeals analyzed was whether it was an error to dismiss the counterclaims.  Upon review of the district court’s dismissal of Connell’s counterclaims, the dismissal was found appropriate since Connell lacked privity to the contracts at issue and was not a qualified third-party beneficiary. Connell was not a party to either the Note or Mortgage and had was unable to meet her burden of showing the existence of some provision in the contract that operated to her benefit, therefore, the Court of Appeals found her “seek[ing] to enforce alleged rights Maejean has under the note and mortgage” and the dismissal of counterclaims to be correct. 

Of particular note, the Court of Appeals found that even though Connell was later named a party in the foreclosure due to her occupancy of the property, she still lacked standing:

 

Kansas law requires that tenants and occupants of property subject to foreclosure must be included in the foreclosure action ‘to ensure that a tenant may not have his or her leasehold interest in property automatically forfeited without the due process right of a day in court.’  However, Angela has not asserted a leasehold in the property; thus, she is without standing to raise her counterclaims and cross-claims.

 

Scott-Jacobs at *10 quoting Citizens Bank & Trust v. Brothers Constr. & Mfg., Inc., 18 Kan. App. 2d 704, 709, 859 P.2d 394 (1993).

This ruling serves as an important reminder to assess fully the interest held and the standing of a party contesting the foreclosure when that party is not a borrower.

Also of interest, the Court took a staunch position on the “liberal construction of pro se pleadings” dismissing Scott-Jacobs’ counterclaims for failure to comply with K.S.A. 2018 Supp. 60-208(a) and elaborating on the importance of Kansas Supreme Court Rule 141 to a Motion for Summary Judgment as well as each element necessary to grant a lender summary judgment in a foreclosure action.

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HSBC v. Karlen – A Cautionary Reminder in Pleading a Loan Modification

Posted By USFN, Monday, February 17, 2020

by Joseph Dunaj, Esq.
McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY)

The Connecticut Appellate Court issued an opinion in January which should serve as a cautionary reminder to foreclosing plaintiffs and counsel whenever a modified note is foreclosed.  In the case of HSBC Bank, USA, Nat’l Ass’n v. Karlen, 195 Conn. App. 170 (2020), the Appellate Court was faced with an appeal challenging the trial court’s rendering of summary judgment in favor of the Plaintiff.  The Plaintiff pled in its complaint that it was the holder of a Note and assignee of a Mortgage originally executed in 2006.  The Plaintiff further pled that the Note was affected by a Loan Modification that was executed in 2010. The Defendants filed an answer and a disclosure of defenses denying the allegations in the complaint.

In response to the answer, the Plaintiff filed a Motion for Summary Judgment.  The Motion for Summary Judgment was supported by an Affidavit executed by the loan servicer, which averred that the Plaintiff was the holder of the Note and assignee of the Mortgage, that the Defendants were in default for failure to make payments under the Note and Mortgage, and that a notice of default had been sent.  Copies of the Note, Mortgage, Assignment of Mortgage, and default letter were attested to and attached to the Affidavit.  However, the Plaintiff’s Affidavit did not mention the Loan Modification, nor was a copy of the Loan Modification attached.  The Defendant did not file an opposition to the Motion for Summary Judgment.  The trial court granted the Plaintiff’s Motion for Summary Judgment and entered a judgment of strict foreclosure, from which the Defendants appealed.

On appeal, the Defendants contended that, although they did not oppose the Motion for Summary Judgment, the court improperly granted the Motion because the Plaintiff failed to meet its burden.  The Appellate Court ruled in favor of the Defendants.  In order to obtain summary judgment in a foreclosure case, the Court reiterated that a Plaintiff must establish its prima facie case before it is entitled to summary judgment.  The Plaintiff’s Affidavit failed to contain any averment that the Note was modified, the terms of the modified Note (including a copy), or that the Defendants defaulted pursuant to the terms of the modified Note.  The facts concerning the Loan Modification were held to be part of the Plaintiff’s prima facie case, and the failure to produce any evidence regarding the Loan Modification meant that the trial court had no evidentiary basis to determine whether the Defendants were in default under the modified Note.  The Appellate Court reversed and remanded the case back to the trial court for further proceedings.

Karlen highlights the importance of preparation regarding a foreclosure case.  This fact is especially crucial given the vast number of modified loans that default.  Plaintiffs and Counsel should ensure that any loan modifications are properly reviewed for their impact on the foreclosure case, that the pleadings and affidavits properly reflect the existence of any modifications, and that copies of any loan modifications are provided as evidence, whether in seeking summary judgment, a standard judgment hearing, or a trial.

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Keep Your Receipts: Illinois Requires Proof of Delivery for Certified Mail

Posted By USFN, Monday, February 17, 2020

by Phil Schroeder, Esq. and Marcos Posada, Esq.
McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY)

Fannie Mae/Freddie Mac uniform mortgages are so ubiquitous that many in the servicing industry have certain provisions committed to memory.  For example, paragraph 22 requires that notice be sent to the borrower prior to acceleration and enumerates the content of such notice (the “Notice of Acceleration”).  In defense to foreclosure, borrowers often cite to paragraph 22 and claim no such Notice of Acceleration was given.

In response to this defense, a foreclosing plaintiff will often provide an affidavit attaching the Notice of Acceleration and attesting that the Notice of Acceleration was mailed in accordance with its usual and customary business practices. The affidavit relies on Paragraph 15 of the uniform mortgage, which states that any notice given to the borrower in connection with the mortgage is “deemed to be given to the borrower when mailed by first class mail or when actually delivered to Borrower’s notice address if sent by other means.” 

Typically, the filing of the mailing affidavit successfully rebuts the defense that the notice was not given and allows the foreclosing plaintiff to prevail on summary judgment.  However, a recent decision in the Illinois Appellate Court has given new life to this defense. 

In Deutsche Bank v. Roongseang 2019 IL App (1st) 180948 (opinion filed December 2, 2019), Illinois’ First District Appellate Court held that where a Notice of Acceleration is sent via certified mail, there is no presumption of delivery.  The appellate court scrutinized the language of paragraph 15 and found that notices sent via first class mail are deemed to be given upon mailing.  However, where a notice is mailed via certified mail it is considered to be “by other means” as provided for in paragraph 15.  Accordingly, proof of actual delivery was required in order to establish that a paragraph 22 Notice of Acceleration was given.  In Roongseang, the trial court’s entry of judgment was reversed and it was remanded because the plaintiff failed to produce the return receipt from the certified mailing which gave rise to an issue of fact as to whether the Notice of Acceleration was actually given, i.e. whether notice was actually received by the borrowers. 

The opinion in Roongseang also narrowed or undercut recent Illinois case law that had a chilling effect on the ability to raise a successful defense based on the failure to give the paragraph 22 Notice of Acceleration.  In Bank of New York Mellon v. Wojcik, 2019 IL App (1st) 180845, the Appellate Court found that a Notice of Acceleration defense in a foreclosure action was forfeited where there was a general denial that all required notices were duly and properly sent.  Wojcik, at ¶21 (stating that “courts have repeatedly recognized that a mere general denial of the performance of the conditions precedent of a contract in a party’s responsive pleading, without allegations of specific facts, results in forfeiture of the issue of the performance of the conditions precedent of a contract”).  In Roongseang, the court narrowed the application of Wojik by finding the allegation that the notice was not sent is sufficient to plead a notice of acceleration defense.  Roongseang also undercut the holding in CitiMortgage, Inc. v. Bukowski, 2015 IL App (1st) 140780 which held that the failure to perform the condition precedent of sending notice pursuant to the mortgage is not an affirmative defense.  However, in Roongseang, the Notice of Acceleration defense was raised as an affirmative defense and allowed to proceed as such.   The opinion also quickly rejected any argument about substantial compliance or harmless error without much analysis or acknowledging a recent opinion, U.S. Bank N.A. v. Gold, 2019 IL App (2d) 180451 in the adjoining Second District of Illinois which held that where a notice of acceleration is technically defective under the terms of the mortgage, it will not provide a defense to foreclosure where there is no prejudice suffered by the defendant.

The issue in Roongseang was an matter of first impression in Illinois which could lead to additional challenges invoking the paragraph 22 notice of acceleration defense.  The production of the signed return receipt showing actual delivery of the Notice of Acceleration should be sufficient to prove compliance with paragraph 22, if the Notice was sent via certified mail.  The additional evidentiary requirements in contested litigation and burden of record keeping may outweigh any benefits of certified mailing.  If notice is sent certified or by other means, a servicer should keep its receipts.

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Connecticut Appellate Court Ruling Shows Effects of Higher Court Decision

Posted By USFN, Monday, February 17, 2020

by Robert J. Wichowski, Esq.
Bendett & McHugh
USFN Member (CT, MA, ME, NH, RI, VT)

The Connecticut Appellate Court, in HSBC Bank USA, National Association, Trustee v. Leslie I Nathan, applied the Connecticut Supreme Court’s holding in United States Bank National Assn. v Blowers[1] and reversed the judgment of the trial court.  In so doing, the Appellate Court held that the trial court’s striking and elimination of the borrower’s counterclaims and defenses was improper despite the fact that the mortgagors’ disputes in the case concerned only actions that occurred after foreclosure had commenced in 2015[2].

Prior to the Blowers decision, valid defenses and counterclaims to mortgage foreclosures in Connecticut could, with the exception of a few specifically enumerated defenses, only be related to the making, validity or enforcement of the note or mortgage and such disputes could not concern conduct that occurred after the foreclosure action had commenced.  The Blowers decision eliminated that restriction and, since foreclosures are equitable actions, allowed additional challenges to foreclosures.  Such defenses and claims may now include allegations of harm that occur during the pendency of the foreclosure action when such conduct is alleged to have materially added to the debt and substantially prevents the mortgagor from curing the default.  The Connecticut Supreme Court further held that such rights to challenge the foreclosure do not end until the foreclosure action is concluded, which potentially would allow challenges to foreclosures after judgment enters.

In this case, the mortgagor alleged that the mortgagee did not accept payments after the default and did not send witnesses to the court annexed mediation program hearings who were knowledgeable about the loan and as such, the mortgagee made it impossible for the mortgagor to cure the default and consequently ate away at the mortgagors’ equity in the property by increasing the debt.  The court held that since the mortgagors’ alleged defenses and claims against the Plaintiff were comprised of actions that the mortgagee undertook which increased the underlying debt and prevented the mortgagor from curing the default, under Blowers, those defenses and claims were improperly stricken.   The Appellate Court did specifically state that they are not deciding whether or not the defendant’s claims would ultimately be successful, only that the claims are legally sufficient and were improperly stricken.

This case shows the effect of the Blowers case in Connecticut and illustrates that foreclosures in Connecticut will be subject to more frequent and extensive litigation related to conduct during the foreclosure.


[2] There was a prior foreclosure action that was commenced in 2010 and procedurally dismissed due to inactivity in 2013, prior to the filing of this restarted foreclosure.

 

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United States District Court Finds No Lender Property Preservation Duty Following Default

Posted By USFN, Monday, February 17, 2020

by Nicole M. FitzGerald, Esq.
Bendett & McHugh, P.C.
USFN Member (CT, ME, VT)

In a recent ruling, the United States Court of Appeals for the Second Circuit affirmed that a lender has no duty to safeguard a property following a default; rather the borrower does. According to the Court ruling in Malick v. JP Morgan Chase Bank, N.A., et al., 2019 WL 6724402 (2019), a lender and its property preservation company did not owe the borrower/mortgagor a duty to act to prevent theft or damage to his property.

After obtaining a mortgage in June of 2007, which was subsequently acquired by JP Morgan Chase Bank, N.A. (the “Lender”), the borrower/mortgagor (“Malick”) defaulted approximately a year later.  Shortly thereafter, the property became unoccupied due to Malick’s (unrelated) incarceration.  While the property was vacant, the Lender, through its property preservation company, changed the locks and otherwise attempted to secure the property due to the vacancy, neglect and theft.

After Malick sued the Lender and the property preservation company for conversion, negligence, and violations of the Connecticut Fair Debt Collection Practices Act and the Connecticut Unfair Trade Practices Act, the Second Circuit affirmed the lower court’s ruling dismissing all of Malick’s claims. 

The Court found that the mortgage expressly placed a duty on Malick to maintain the property, directly quoting the mortgage: “Whether or not Borrower is residing in the Property, Borrower shall maintain the Property in order to prevent the Property from deteriorating or decreasing in value due to its condition.”  Further, the mortgage provided that “although the Lender may take action [to protect, secure, and repair the Property], Lender does not have to do so and is not under any duty or obligation to do so.” (emphasis added).

The Court also affirmed the lower court’s ruling that Malick had failed to comply with the covenants and agreements in the mortgage and had “abandoned” the property which therefore entitled the Lender to “do and pay for whatever is reasonable and appropriate” to protect its interest in the Property, including “protecting and/or assessing the value of the Property, and securing and/or repairing the Property.”

In the increasing climate of vacant properties and priority blight liens, this is a small victory for lenders. 

 

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New York’s Highest Court Considers Statute of Limitations

Posted By USFN, Tuesday, February 4, 2020
Updated: Monday, February 3, 2020


by Richard P. Haber, Esq.
McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY)


Since the financial crisis, servicers and their counsel have struggled with statute of limitations (“SOL”) challenges in New York. Longer timelines, frequently dismissed cases, and tougher proof standards – even in uncontested cases – have created a toxic mix that can lead to total lien loss. Even worse, inconsistent and sometimes contradictory application of the law by different trial and appellate courts has led to confusion and uncertainty. The same fact pattern might yield different results in Brooklyn than it would a mile away in Manhattan because they are subject to different governing appellate divisions even though both are part of New York City. But relief may be on the way, or at least perhaps some clarity and consistency, because the Court of Appeals (New York’s highest court) has one SOL case before it on the merits and a second case seeking permission to appeal.

The case already pending is Freedom Mtge. Corp. v. Engel, 163 A.D.3d 631 (2d Dep’t 2018), lv. app. granted 103 N.Y.S.3d 12 (APL-2019-00114). At issue in Engel is whether a lender who exercises the right to accelerate through the initiation of foreclosure may revoke that election by voluntarily discontinuing the action at a later date. The Appellate Division, Second Department, found that a lender cannot, by discontinuance alone, revoke the election to accelerate a mortgage debt.

Offering no explanation or reasoning, the Second Department held that “the plaintiff’s execution of the January 23, 2013 stipulation did not, in itself, constitute an affirmative act to revoke its election to accelerate, since, inter alia, the stipulation was silent on the issue of the revocation of the election to accelerate, and did not otherwise indicate that the plaintiff would accept installment payments from the defendant.” 163 A.D.3d at 633.

But this conclusion is not consistent with precedent from the Court of Appeals that goes back well over a hundred years. Addressing the legal effect of the voluntary discontinuance of a prior foreclosure in Loeb v. Willis, 100 N.Y. 231 (1885), the Court of Appeals said “[t]he foreclosure action was discontinued and all the proceedings therein thus annulled…By the discontinuance of the action the further proceedings in the action are arrested not only, but what has been done therein is also annulled, so that the action is as if it never had been.” 100 N.Y. at 235.

The legal principle of annulment through discontinuance has been reiterated in subsequent decisions. For example, in Yonkers Fur Dressing Co. v. Royal Ins. Co., 247 N.Y. 435, 444 (1928), the Court of Appeals affirmed that cases that are discontinued are “as if they had never begun.” And, in Brown v. Cleveland Trust Co., 233 N.Y. 399, 406 (1922), the Court noted that “no adjudication” in a discontinued action “b[inds] anyone.”

Given that a significant number of cases with SOL implications involve earlier foreclosures that were voluntarily discontinued, it would go a long way in the industry’s battle with the SOL if the Court reverses Engel and holds that a voluntary discontinuance annuls a prior election to accelerate.

While Engel deals with de-acceleration, there is another case that the Court will potentially consider that deals with whether the mere filing of a foreclosure complaint serves to accelerate the entire debt in the first place. In a trial court decision issued in the Spring of 2017, Nationstar Mortgage, LLC v. MacPherson, 56 Misc. 3d 339 (Supreme Court, Suffolk County, April 3, 2017), the Court held that the terms of the mortgage contract govern acceleration, and when the mortgage is drawn on the Freddie/Fannie Uniform Instrument, acceleration could not actually be accomplished until a final judgment of foreclosure is entered. This is because under paragraph 19 of the Freddie/Fannie Uniform Instrument, the borrower retains the right to reinstate the loan until judgment is entered. The Court held that “the lender bargained away its right to demand payment in full simply upon a default in an installment payment or the commencement of an action and has afforded the borrower greater protections than that set forth in the statutory form of an acceleration clause under Real Property Law § 258 or under the holding [of prior controlling New York law regarding acceleration].”

The Court reasoned that the loan could not be deemed accelerated, so long as the right to reinstate exists and that “the mortgage remains, in essence, an installment contract until a judgment is entered.” In other words, the loan could not be deemed accelerated until the right to reinstate was extinguished. “Under the express wording of the mortgage document, plaintiff has no right to reject the borrower’s payment of arrears in order to reinstate the mortgage, until a judgment is entered.” As a result, “plaintiff does not have a legal right to require payment in full with the simple filing of a foreclosure action.”

Because the vast majority of old, dismissed foreclosure cases involve Freddie/Fannie Uniform Mortgage Instruments, with dismissals that occurred pre-judgment, many potential SOL problems could be solved by the MacPherson argument. But, the utility of the case was short-lived – less than two years – because on March 13, 2019, the Appellate Division, Second Department, abrogated the decision in its opinion in Bank of New York Mellon v. Dieudonne, 171 A.D.3d 34 (NY App. Div. Second Dept., March 13, 2019).

In Dieudonne, the Court determined that the lender’s right to accelerate is independent of the borrower’s right to reinstate. The Court held that “[c]ontrary to the plaintiff’s contention, the reinstatement provision in paragraph 19 of the mortgage did not prevent it from validly accelerating the mortgage debt.” Even though “[t]hat provision effectively gives the borrower the contractual option to de-accelerate the mortgage when certain conditions are met” the lapsing of that right is not a condition precedent to acceleration. Rather, the conditions required for acceleration are all set forth in paragraph 22 of the mortgage and the “reinstatement provision in paragraph 19 of the mortgage was not referenced in, or included among, those conditions listed in paragraph 22.” The Court further observed that the reinstatement provision in paragraph 19 does not include any language indicating that it serves as a condition precedent to the plaintiff's right to accelerate the outstanding debt, but instead, “the language of paragraph 19 indicates that the plaintiff’s right to accelerate the entire debt may be exercised before the defendant’s rights under the reinstatement provision in paragraph 19 are exercised or extinguished.”

As a result, the Court concluded that acceleration occurs with the filing of the earlier foreclosure complaint, irrespective of the borrower’s right to reinstate until the entry of judgment. In reaching this conclusion, the Court specifically referenced MacPherson, along with four post-MacPherson decisions that followed its logic and stated: “[t]o the extent that decisional law interpreting the same contractual language holds otherwise, it should not be followed.” As a result, the MacPherson argument (that acceleration does not occur until the entry of judgment) is an arrow that has been lost from the industry’s SOL quiver – at least for now.

Bank of America (the servicer of the Dieudonne loan) recently filed a motion for permission to appeal with the Court of Appeals. USFN has filed a motion for permission to file an amicus brief in support of Bank of America’s petition and hopes that the Court will take the Dieudonne case, consider it together with Engel, and provide a decision addressing acceleration, de-acceleration and policy issues involving SOL. Separately, USFN will be moving for permission to file an amicus brief in support of Freedom Mortgage in the Engel case.

 

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Winter USFN Report

 

Tags:  amicus brief  Bank of New York Mellon v. Dieudonne  Freedom Mtge. Corp. v. Engel  statute of limitations 

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Trap for the Unwary: It’s a Crime for Mortgage Lenders & Servicers to Not Keep Certified Borrowers "Safe at Home"

Posted By USFN, Tuesday, February 4, 2020
Updated: Monday, February 3, 2020


by Brian Liebo, Esq. and Kevin Dobie, Esq.  
Usset, Weingarden & Liebo, PLLP
USFN Member (MN)

There are an ever-increasing number of people participating in programs across the country that protect the identities of certain borrowers. Unwary mortgage lenders and servicers can find themselves subject to criminal and civil penalties in certain states if they run afoul of the related laws. One such program is Minnesota’s “Safe at Home” project. 

Minnesota’s project, governed by Minnesota Statutes Chapter 5B and Minnesota Rules Chapter 8290, along with approximately 38 other states across the United States,  can provide home, work and school address confidentiality for people who fear for their safety for survivors of, among other things, domestic violence, sexual assault, or stalking. In Minnesota alone, there are over 3,000 program participants and the program is administered by the Office of the Minnesota Secretary of State.

When someone enrolls in Safe at Home, the state assigns a post office box address that the participant uses as a legal address for all purposes. Since all Safe at Home participants share the same assigned post office box, the participants are differentiated by a designated “lot number” that is unique to each participant. This lot number is not to be confused with those “lot numbers” typically contained in real property legal descriptions. The participant does not pick up their mail from that post office box. Instead, Safe at Home staff forward the first-class mail to the participant’s real residential address.  

The state certifies participants for the Safe at Home program in renewable terms of four years. Participants can lose the certification by changing their legal identity without advance notice or by using false information in conjunction with the certification. Also, certification can be lost if the mail forwarded by the Safe at Home office is returned as “undeliverable.” This latter issue is often relevant in mortgage default situations where a borrower abandons the home.

Impact of the Safe at Home Program on Mortgage Lenders and Servicers
A participant must disclose the address of the home to mortgage loan originators.  The participant will provide the lender with a Safe at Home program form, which will require the lender to conceal the mortgage record and will prohibit the sharing of their location information without signed consent from the participant.  The lender must also only use the participant’s assigned post office box address for mailed correspondence. For loans other than a home loan, such as vehicle loans or unsecured personal loans, a Safe at Home participant cannot be required to disclose their home address.

It is the responsibility of participating borrowers to affirmatively notify their lenders and servicers of their Safe at Home program participation and provide their assigned Safe at Home post office box address. If a lender or servicer wishes to contact the Safe at Home office to verify a borrower’s program participation, they must provide the potential participant’s name and lot number or name and date of birth. Thereafter, if a lender or servicer must disclose the name and address of the borrower participant to sell or service-transfer the loan, the lender must obtain the prior written consent of the participant and provide the name and contact information of the transferee to the participant, so that the participant may give the transferee the Safe at Home program notice. 

Safe at Home participants cannot, however, protect their information in property records retroactively. This means that if an individual purchases a property and obtains a mortgage without the required Safe at Home program procedures, the Safe at Home program will not apply. The Safe at Home office will not provide the required forms to individuals trying to enter the program after purchasing a home or when trying to refinance a mortgage that was not part of the program.

Once properly notified, the mortgage servicer or lender must accept a participant’s Safe at Home address as the person’s actual address of residence, school address, and as their address of employment. When mailing to a Safe at Home participant, the sender must always include the participant’s name and lot number.

A Safe at Home participant cannot be required to disclose his or her home address for financial account records. Thus, financial institutions must not require a participant to disclose his or her home address in order to be Customer Identification Program (CIP) compliant. For CIP compliance, instead of the participant’s home or business address, the financial institution is required to use a non-public, designated street address by the Office of the Minnesota Secretary of State, which can be obtained by calling (651) 201-1399.

If a mortgage servicer must serve a participant with legal process, the Office of the Minnesota Secretary of State acts as the agent for service of process for all program participants. In order for the Safe at Home office to accept service of process on behalf of a participant, the service documents must also include the participant’s name and lot number. This aspect presents an interesting issue for conducting nonjudicial foreclosures in Minnesota. The nonjudicial foreclosure statute in Minnesota requires that all “occupants” of the property be properly served with the foreclosure notices, in contrast to just all “borrowers.” Thus, service on the Secretary of State alone may be insufficient. Also, the foreclosure notices that are published and served would need to be limited as well to protect the Safe at Home borrower. Accordingly, it may be wise in such cases to proceed by judicial foreclosure, or carefully consider how the non-judicial foreclosure statutes can be complied with while also meeting the Safe at Home requirements.

Similarly, if a mortgage servicer or REO entity pursues an eviction action following foreclosure proceedings, they will want to ensure Safe at Home borrower or tenant occupants are protected from having their locations disclosed during the pendency of such an action. In various jurisdictions, it may be best to identify the case defendants as “John Doe and Mary Roe,” where acceptable to the courts, to maintain the required protections for program participants.

As a reminder, the Safe at Home participant is required to give private companies a special notice they obtain from the Safe at Home office. Receipt of the notice prohibits the private companies from sharing the participant’s name and location information with anyone unless the participant provides a prior written consent for a specific disclosure purpose. A violation of any of the provisions of the notice constitutes a misdemeanor punishable by imprisonment with a maximum time of 90 days, a fine up to $1,000, or both. 

As a practice pointer, it is critical that lenders and servicers have procedures in place to immediately identify Safe at Home participants, conceal and protect the participants’ location information system-wide, and ensure all future mailings are sent to the proper Safe at Home address. According to the Minnesota program administrator, a mortgage servicer is prohibited from even disclosing a participating borrower’s protected information to the servicer’s own agents and contractors. 

To comply with this legislation, a mortgage servicer should not share both the name and physical address of a program participant together to any third parties, absent written consent. For example, if a mortgage servicer wants a property inspection performed, the mortgage servicer should direct its vendor to inspect the physical address, without providing the name of the protected borrower to the agent conducting the inspection, unless written consent was provided by the Safe at Home participant expressly permitting the specific disclosure.

Finally, lenders and servicers will also want to coordinate with experienced, local counsel to help ensure full compliance with these types of laws through all aspects of servicing the mortgage loan.

Copyright © 2020 USFN. All rights reserved.

 

Winter USFN Report

 

Tags:  Minnesota Rules Chapter 8290  Minnesota Statutes Chapter 5B  Safe at Home 

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Decoding DiNaples: The Third Circuit Court of Appeals Analyzes the Use of QR Codes on Envelopes

Posted By USFN, Tuesday, February 4, 2020
Updated: Monday, February 3, 2020


by Lisa A. Lee, Esq.

KML Law Group, P.C.

USFN Member (PA, NJ)

 

Ah, “A Christmas Story.” It’s a classic. No matter what holiday you celebrate near the end of each year, you’ve likely seen it. Who can forget Ralphie’s epic quest to drink enough Ovaltine to earn his Little Orphan Annie Secret Society decoder pin? His anticipation when it finally arrives? (“Honors and benefits, already at the age of nine!”) And the crushing letdown when he finally decodes the message? (“’Be sure to drink your Ovaltine?’ A crummy commercial?!?”)

Times have certainly changed since Ralphie was growing up in the 1940s. Now “decoding” the information contained in a symbol, such as a quick response (“QR”) code, is simple as long as you have a smartphone. Progress is a wonderful thing, and anyone involved in a business that deals with a high volume of returned mail knows that having an automated system for sorting and routing that mail is important to an efficient operation. However, progress can sometimes come with heightened compliance risk, as was illustrated by the recent opinion of the U.S. Court of Appeals for the Third Circuit in the case of DiNaples v. MRS BPO, LLC, 934 F.3d 275 (3d Cir. 2019).

Before we get into the facts of DiNaples, a little history is in order. 

Rewind to 2014, when the Third Circuit was faced with a case in which a debt collector sent a collection letter to a consumer using an envelope with a clear window. The window was large enough to reveal several pieces of information printed on the letter inside, including both the consumer’s internal account number with the debt collector, and a QR code that, when scanned, revealed both the account number and the monetary amount of the debt. The case was Douglass v. Convergent Outsourcing, 765 F.3d 299 (3d Cir. 2014), the holding of which seems axiomatic today. The Douglass Court found that revealing the personally identifiable information of the consumer in a way that was visible from the outside of the envelope violated the Fair Debt Collection Practices Act (“FDCPA”), specifically 15 U.S.C. §1692f, which prohibits a debt collector from using any “unfair or unconscionable” means to collect a debt, including:

[u]sing any language or symbol, other than the debt collector's address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business. 15 U.S.C. §1692f(8).

Notably, the Douglass Court declined to affirm the District Court’s reasoning that the information revealed by the debt collector met a “benign language exception” to §1692f(8).  The benign language exception evolved, and was embraced by the court below, because the plain language of §1692f(8) allows only for the inclusion of the debt collector’s address, and possibly its business name (if that name does not signal that debt collection is the nature of the business), on an envelope. Because more information is obviously necessary in order to send the mail at all, an exception for other “benign” language and symbols developed to prevent an absurd result from a literal reading of the statute. Id. at 302-303. This exception was meant to capture the use of language and symbols that did not serve to either 1) reveal the purpose of the letter as debt collection, or to 2) “humiliate, threaten or manipulate” the recipient. Id. at 301. Other courts of appeals had found such an exception for innocuous language on the face of an envelope, such as the phrase “Priority Letter.” See, Goswami v. American Collections Enterprise, Inc., 377 F.3d 488 (5th Cir.2004). 


In Douglass, however, the Court found that because the consumer’s account number was not “benign” as a threshold matter, they would not entertain the larger question whether such an exception was warranted as a general rule. In the Court’s eyes, the account number was a piece of information that, when revealed to third parties, could expose the consumer’s financial difficulties. Therefore, its revelation violated a core concept of the FDCPA, the prohibition on “invasion of privacy.” Id. at 303. Interestingly, the plaintiff in Douglass had declined to pursue her argument that inclusion of the QR code on the envelope violated the FDCPA. Because this issue had been abandoned, the Douglass Court did not address it at all, paving the way for the DiNaples case, which was first filed in the U.S. District Court for the Western District of Pennsylvania the following year in 2015.

The facts of the DiNaples case are simple. The debt collector sent DiNaples a collection letter in an envelope that contained a QR code printed on the outside. When scanned, the QR code revealed a string of numbers that included DiNaples’ internal account number with the debt collector.  DiNaples, 934 F.3d at 277. DiNaples filed a class action lawsuit alleging that inclusion of the QR code on the envelope violated §1692f(8) of the FDCPA. The District Court granted summary judgment in favor of DiNaples on the issue of liability, and the debt collector appealed.

On appeal, the Third Circuit starts out by confirming that DiNaples had standing to sue because she had suffered a “concrete” injury when the QR code embedded with her internal account number was revealed on the outside of the envelope. The Court notes in its analysis that disclosure of private information embedded in a QR code that “anyone could easily scan and read,” raises core invasion of privacy concerns. Id. at 280. Therefore, it was not necessary for DiNaples to show anything other than the revelation of her private information in order for her to establish standing to sue. Id. at 280.

Moving on, the Court turns to a discussion of the particular conduct of the debt collector, likening it to the conduct of the debt collector in the Douglass case. Id. at 281. The debt collector in DiNaples attempted to argue that Douglass was distinguishable because the QR code, unlike the account number at issue in Douglass, was “facially neutral” and did not reveal any information unless it was scanned by a third party, in effect arguing that a benign language exception should apply. Id. at 282. The DiNaples Court was not persuaded, having previously noted that the District Court had found that a QR code could be scanned by “any teenager with a smartphone app,” and that use of the code was not materially different that simply printing the account number on the envelope. Id. at 282. 

The debt collector in DiNaples also argued that, even if its conduct violated the FDCPA, it should be able to avail itself of the bona fide error defense contained in 15 U.S.C. §1692k(c). That section provides that a debt collector cannot be held liable for a “violation that was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” Id. at §1692k(c). The Court looked to the Supreme Court’s holding in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich L.P.A., 559 U.S. 573, 130 S.Ct. 1605, 176 L.Ed.2d 519 (2010), for the proposition that “the bona fide error defense in §1692k(c) does not apply to a violation of the FDCPA resulting from a debt collector’s incorrect interpretation of the requirements of that statute.” Id. at 604–05, 130 S.Ct. 1605, and went on to find that the conduct in DiNaples was not protected as a bona fide error because the debt collector intentionally printed the QR code on the envelope. The facts that the debt collector was well intentioned and did not believe that it was violating the FDCPA did not change the analysis that the conduct resulted from a mistake of law, rather than from a mistake of fact. Id. at 282.

The DiNaples opinion serves as a cautionary tale, and as a reminder for all who are compliance minded that what’s on the outside of an envelope is just as important as what’s on the inside.


Copyright © 2020 USFN. All rights reserved.

 

Winter USFN Report

  

Tags:  Douglass v. Convergent Outsourcing  quick response (“QR”) code  technology 

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California Governor Signs Statewide Rent Control Bill

Posted By USFN, Tuesday, February 4, 2020
Updated: Monday, February 3, 2020


by Kayo Manson-Tompkins, Esq.

The Wolf Firm

USFN Member (CA, ID, OR, WA)


California has painstaking rent control and eviction control ordinances in cities such as Los Angeles, Santa Monica, San Francisco, Oakland, and Berkeley, to name a few. Historically, however, in reality there have only been a few cities with rent control ordinances. Therefore, for most of California the standard process for post-foreclosure evictions has been used. The California legislature introduced and passed Assembly Bill 1482 designed to establish statewide rent control and despite opposition from landlords and mortgage servicers, the Governor signed the bill, which became effective January 1, 2020.

The primary purpose of this bill was to prevent landlords throughout the state from arbitrarily raising rental amounts. This Bill caps rental increases to 5% plus inflation, or 10%, whichever is lower. The Act will sunset January 1, 2030.

New Civil Code Sections 1946.2 and 1947.12 became effective January 1, 2020. These sections prohibit property owners from terminating a lease of a tenant who has been occupying the property for 12 months, without “just cause” and the “cause” must be stated within the notice. Additionally, there is a new requirement that a notice of violation and opportunity to cure must be served before the notice of termination, for those instances where the violation is curable. Furthermore, a no-fault “just cause” eviction will require relocation assistance of at least the equivalent of one month’s rent. If the relocation is not paid, the notice of termination will be declared void. These provisions cannot be waived by the tenant, and if an attempt is made to do so, the waiver of rights provision will be declared void. It is important to note that despite the “statewide” provisions there is nothing to prevent existing local rent control and eviction control ordinances from having a higher level of protection for their tenants.  

Pursuant to the California Constitution (Cal Const, Art. XI § 7), California rent control and eviction control provisions are a valid exercise of a city’s police power within that city’s own jurisdiction. More specifically it states that “a county or city may make and enforce within its limits all local, police, sanitary and other ordinances and regulations not in conflict with general laws”. The scope of this police power is subject to displacement by general state law where the charter or ordinance purports to regulate a field fully occupied by state law. (Birkenfeld v. Berkeley, (1976) 17 Cal. 3d 129).

California has 482 cities and for those cities that do not currently have a rent or eviction control ordinance, they may opt to simply abide by the provisions of the newly enacted statutes. Cities may however, if they want additional requirements, to create their own “rent control” ordinance or a “just cause” eviction ordinance. The question remains what existing ordinance(s) will become the template for drafting their ordinance. Property owners can only hope that the majority of cities will either elect to simply follow the limited provisions of Civil Code Sections 1946.2 and 1947.12 or alternatively create uniform more limited ordinances, as opposed to mirroring the rigorous existing ordinances in Los Angeles, Santa Monica, San Francisco, Oakland, and Berkeley, by way of example.  

Servicers should ensure that they have procedures in place s to determine who is occupying the property as soon after the foreclosure sale as possible. Furthermore, it is imperative that the eviction attorney be notified of whether there are tenants in the property, as the type of occupancy will require different notices, as well as a relocation fee in order to remove tenants from the premises.

This article is not intended to be an extensive or exhaustive review of all the nuances of either rent control or just cause eviction control ordinances, but rather an introductory overview of what the new statewide rent control statutes provide and how it affects the ability of a servicer to proceed with a normal post-foreclosure eviction.


Copyright © 2020 USFN. All rights reserved.

 

Winter USFN Report

 

Tags:  Assembly Bill 1482  California  REO/Eviction 

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Associations and Receiverships: Will the Mortgagee Be Required to Pay?

Posted By USFN, Tuesday, February 4, 2020
Updated: Monday, February 3, 2020


by Jane E. Bond, Esq. and Matthew Morton, Esq.

McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY)

 

Receivership and homeowners’ associations are strange bedfellows.  Instead of filing an action to collect assessments, associations are turning towards receivership actions.  A receivership action allows a receiver to be appointed to manage and rent the property out with such funds used to recoup expenses and assessments along with an equitable lien for any expenses or assessments not recovered from the rental of the property. 

 

In Florida, this process is authorized by Fla. Stat. §720.3085(1)(e), (8)(a) and (8)(f) and further requires the association to serve and provide the lender with a copy of the petition before obtaining an order granting same if the lender is going to be responsible for any amounts associated with the receivership.

 

This issue played out in Fannie Mae v. JKM Servs., LLC, 256 So. 3d 961 (Fla. 3d DCA 2018).  In JKM, the association filed an action for a receiver for units subject to foreclosure actions or soon-to-be-filed foreclosure actions.  Id. at 964. The court granted the petition and appointed JKM Services as the receiver on behalf of the association.  Id. Subsequently, the lender completed their foreclosure action, was the successful bidder at the foreclosure sale and acquired title to a property under this receivership.  Id. at 965.  The receiver never notified the lenders of the receivership and, even after foreclosure was filed, never asserted its existence in the foreclosure action.  Id.

 

The lender sought the safe harbor amount due to the association.  Id. Instead of receiving the safe harbor amount, the lender received an amount from the receiver which included multiple years of past due assessments, receiver’s fees and attorneys’ fees, among other expenses.  Id.  The lender filed a motion to intervene in the receivership to limit amounts to safe harbor, which was denied.  Id.  In reversing, the court held that the lender was not a party to the initial petition for receivership nor were they noticed of same until such time as they became owner of the property.  As such, the court in JKM held that the lender did not become liable or responsible for the fees or any amounts beyond the safe harbor amount. Id. 969.

 

In light of the rationale of JKM, it is important that any lender served with such a petition take immediate action to oppose and prevent the entry of an order of receivership.  The question becomes how should a lender protect its interest?

First, the lender should review whether the mortgage includes a clause regarding the appointment of a receiver or assignment of rents.  If either exists, they should be asserted in opposition to any petition. Second, the lender should review the loan and, if appropriate, move forward with foreclosure.  Lastly, the lender should review whether the property is vacant or occupied by someone other than the borrowers as Fla. Stat. §702.10 allows a court to order mortgage payments be deposited monthly with the clerk of court until judgment is entered. 

 

If it appears that the court will appoint a receiver, a lender should assert in opposition that any receivership be granted for a limited duration, that any expenses above a specified amount be approved by the court before being incurred and that monthly statements be filed with the court reflecting how monies received are applied. 

 

In summary, receivership actions have become a tool used by associations to try to benefit from those properties, but it only becomes an effective tool if the lender is noticed and fails to take action to address same.  As such, any attempt to obtain a receivership should be addressed timely to avoid the imposition of a receivership.

Copyright © 2020 USFN. All rights reserved.

 

Winter USFN Report

 

Tags:  Florida  Foreclosure - HOA  Receiverships 

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Clarifying 'Usual Place of Abode' in SCRA Collection Cases

Posted By USFN, Tuesday, February 4, 2020
Updated: Monday, February 3, 2020


by Blair Gisi, ESQ. 
SouthLaw, P.C. 
USFN Member (IA, KS, MO, NE)

In overturning the default judgment granted against the debtor in Coastal Credit, LLC v. McNair, 446 P.3d 495 (Kan. Ct. App. 2019), the Kansas Court of Appeals has recently made an important ruling regarding service of process on active military debtors.

The debtor in McNair was in active status in the Army and stationed in Africa when the financing contract he had entered into to purchase a car went into default.  After the default, the creditor repossessed the car, sold it, and then filed a limited action against the debtor to pursue the remaining deficiency.

While the debtor was stationed in Africa, his family was living in Manhattan, KS and in February 2014, the process server executed service upon the debtor’s family at the “usual place of abode” per the process server’s field notes.  It was also noted that that the debtor was in the military and stationed in Africa until June 2014.

The debtor failed to respond or appear to any of the subsequent pleadings and hearings and after complying with the relevant Servicemembers Civil Relief Act (SCRA) requirements, default judgment was granted against the debtor in August 2015.  When the debtor noticed his wages being garnished in October 2017, he sought to set aside the judgment and disgorge the garnished funds.

To support his motion, the debtor argued that the service was ineffective since the debtor was not served at his “usual place of abode” as defined by Coleman v. Wilson, 1995 Kan. App. Unpub. LEXIS 932 (Ct. App. Dec. 1, 1995).  In that case, this court held that a military service person's usual place of abode is where the person lives, eats, sleeps, and works at the time of the attempted service.  However, the district court denied debtor’s motion on the grounds that service on the debtor’s wife at their Manhattan, Kansas residence as the usual place of abode and that the service was valid.  Debtor timely appealed that ruling.

Focusing on the “usual place of abode” argument, which comes from Kan. Stat. Ann. § 61-3003, the Court of Appeals overturned the district court. 

The Court of Appeals began its analysis with the legislative intent of K.S.A. 2018 Supp. 77-201 which provides:

Usual place of residence' and 'usual place of abode,' when applied to the service of any process or notice, means the place usually occupied by a person. If a person has no family, or does not have family with the person, the person's office or place of business or, if the person has no place of business, the room or place where the person usually sleeps shall be construed to be the person's place of residence or abode.

Finding that the legislative intent of the statute was clear and unambiguous, the Court of Appeals applied the statute to mean that the debtor’s usual place of abode in this situation was “the room or place where he usually slept,” which at the time, was in Africa.  The Court of Appeals went on to further state that a person’s usual place of abode may be determined on a case-by-case basis and had the debtor been on vacation or brief business trip to Africa, for instance, then the Manhattan would have constituted his usual place of abode.  Here, the active military deployment to Africa for six months was enough to shift his usual place of abode from his family’s residence to Africa.

The Court of Appeals also made an interesting distinction between a family’s usual place of abode the debtor’s usual place of abode in finding that that there was ineffective service on the debtor, stating that they are not necessarily the same and that the family’s usual place of abode does not control the debtor’s usual place of abode.

When attempting service on an active military debtor, the McNair case serves as an outline for both the scrutiny the debt collector may face in obtaining a default judgment as well as the additional steps that may be necessary in ensuring the judgment can withstand that scrutiny.

Copyright © 2020 USFN. All rights reserved.

Winter USFN Report

 

Tags:  Bankruptcy  Kansas  Servicemembers Civil Relief Act (SCRA) 

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December 2019 Member Moves + News

Posted By USFN, Thursday, January 16, 2020

 

Lerner, Sampson & Rothfuss (USFN Member – KY, OH) was in the holiday giving spirt and collected four large bins of non-perishable food and personal care items for the Freestore Foodbank, 4 large bags of toys for the Marine Toys for Tots Foundation, $600 in monetary donations and also again sponsored five children from Child Focus.



Shelby NusralaMartin Leigh PC (USFN Member – KS, MO) is proud to announce that our Director of Administration, Shelby Nusrala, received her Certified Legal Manager (“CLM®”) designation on November 4, 2019.  Obtaining the CLM credential is a significant achievement that requires a mastery of the essential knowledge, skills, and abilities of a professional legal manager in the areas of human resource management, organizational development, financial management, business management, legal industry, technology, operations, communications, and self-management. 

To earn a CLM, candidates must apply their professional experience, complete educational coursework, and pass a comprehensive exam that covers all areas of legal management.  In 2018, Shelby received her Professional in Human Resources (PHR®) certification.  Ms. Nusrala is an integral part of MLPC’s day-to-day operations and passing these two exams exemplifies her ongoing commitment to growth both personally and professionally.  Congratulations Shelby!


Copyright © 2020 USFN. All rights reserved.

 

Tags:  Certified Legal Manager  Lerner  Martin Leigh PC  Sampson & Rothfuss  Shelby Nusrala 

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USFN Publications Year in Review – 2019

Posted By USFN, Wednesday, January 8, 2020

by James Pocklington, Publications Committee Chair                         
McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY)

and Jessica Rice, Publications Committee Vice Chair 
Trott Law, P.C.        
USFN Member (MI, MN)

2019 was an active year, with events ranging from organizational changes at USFN to landmark legal decisions like Obduskey v. McCarthy & Holthus LLP. Below are links to content that was published in USFN publications throughout the year, categorized by jurisdiction and subject matter.

 

Foreclosure/General

Bankruptcy

REO

Legislative/Regulatory

National

Supreme Court Grants Certiorari in FDCPA Statute of Limitation Case 3/25/19

Obduskey v. McCarthy & Holthus LLP Supreme Court Decision a Win for the Industry 3/27/19

USFN Briefing Follow-up: Obduskey v. McCarthy Holthus LLP 4/15/19

Federal Court Clarifies Mortgage Servicer Responsibilities after Loan Transfers 4/15/19

Recent U.S. Supreme Court Decision to Have Significant Industry Impact 5/8/19

Controlling What You Can When Managing a Natural Disaster Event 7/17/19

U.S. Supreme Court Sets Legal Standard for Violations of Bankruptcy Discharge Order 7/8/19

USFN Briefing Follow-up: Bankruptcy 10/14/19

USFN Briefing Follow-up: REO/Eviction 6/17/19

July 2019 USFN Briefing Follow-up: REO/Eviction 8/12/19

CFPB: Year in Review & Advance 5/13/19

Freddie Mac Adjusts Approved Attorney Fees 6/17/19

 

 

First Circuit

U.S. First Circuit Court of Appeals Allows Integrated Business Record Exception to Hearsay 6/17/19

Chase v Thompson Prior Holding Vacated by First Circuit Court of Appeals 7/31/19

 

 

 

Third Circuit

Recent Cases Help to Interpret the Fair Debt Collection Practices Act 5/8/19

 

 

 

Fifth Circuit

Fifth District Court Holds Bank Entitled to Designate Corporate Representative for Deposition 7/16/19

Fifth Circuit Clarifies Servicer’s Loss Mitigation Obligations 7/16/19

 

 

 

Sixth Circuit

Recent Cases Help to Interpret the Fair Debt Collection Practices Act 5/8/19

 

 

 

Seventh Circuit

Recent Cases Help to Interpret the Fair Debt Collection Practices Act 5/8/19

 

 

 

Eight Circuit

Federal Court Clarifies Mortgage Servicer Responsibilities after Loan Transfers 4/25/19

 

 

 

Eleventh Circuit

 

Eleventh Circuit Court of Appeals Maintains Mortgage Statements Don't Violate Bankruptcy Code 10/10/19

 

 

Arizona

United States District Court for the District of Arizona Rules a Notice of Intent to Accelerate May Decelerate the Loan

3/25/19

 

 

 

California

California Supreme Court Limits Application of the State’s Anti-Deficiency Statute 7/15/19

California 5th Appellate District Reverses an Award of Attorney’s Fees Following Granting of Temporary Restraining Order 12/18/19

 

California Eviction Timelines Changing 10/15/19

California State Military and Veterans Code Updated 3/25/19

Central District of California Loan Modification Management Pilot Program Streamlines Review Process 12/18/19

California to Allocate $331 Million to Provide Legal Assistance to Renters and Homeowners 12/18/19

 

Connecticut

Appellate Court Rules Originating Lender Not Liable for Alleged Bad Acts by Mortgage Broker 4/15/19

Connecticut Supreme Court Reversal Will Affect Foreclosure Disputes 8/12/19

Connecticut Appellate Enforced Mortgage Where Witness Not Present at Closing 10/15/19

Trial Court Decision on Standing, Laches, Unclean Hands Upheld on Appeal 10/21/19

Awarding Committee for Sale’s Fees and Costs Does Not Violate Automatic Stay 12/18/19

Connecticut Case Addresses Bankruptcy Stay’s Impact on Judgments of Strict Foreclosure 12/18/19

Crumbling Foundation in Connecticut and Appraiser Liability 12/18/19

Awarding Committee for Sale’s Fees and Costs Does Not Violate Automatic Stay 12/18/19

Connecticut Case Addresses Bankruptcy Stay’s Impact on Judgments of Strict Foreclosure 12/18/19

July 2019 USFN Briefing Follow-up: REO/Eviction 8/12/19

 

Georgia

 

 

July 2019 USFN Briefing Follow-up: REO/Eviction 8/12/19

 

Illinois

Illinois Court Finds General Denial as Admission Condition Precedent 7/17/19

 

July 2019 USFN Briefing Follow-up: REO/Eviction 8/12/19

 

Kansas

Reverse Mortgage Redemption in Kansas 8/12/19

 

Total Debt Bids in Kansas 10/10/19

 

 

 

Maryland

I Can Name That Tune in One (Lost) Note 8/12/19

 

 

Important Changes to the Enforceability of Maryland Tax Liens 8/12/19

Michigan

If Mortgage Debt is Not Paid in Full, Funds Beyond Mortgagee’s Bid are Not Surplus Proceeds 6/18/19

 

 

 

Nebraska

 

 

USFN Briefing Follow-up: REO/Eviction 6/1719

 

New Hampshire

 

 

 

New Hampshire Bill Proposes Change in Foreclosure Process from Nonjudicial to Judicial 6/17/19

New Jersey

New Jersey: Appellate Court Finds Lost Notes May Be Enforced Even if Not in Possession When Lost 5/20/19

 

 

New Jersey Enacts Nine Bills Affecting Residential Foreclosure Process 7/15/19

New York

New York Court of Appeals Considering Two Key Statute of Limitations Cases 12/18/19

 

 

New York Announces Creation of Consumer Protection and Financial Enforcement Division 7/15/19

North Carolina

In re George: Innocence Won 3/25/19

Status of Title Post FC Sale in North Carolina – You Better Get It Right the First Time! 5/20/19

North Carolina: Lost Notes Can Be Used in Power of Sale Foreclosure When Present Holder Lost Note 5/20/19

 

 

 

Ohio

Adoptive Business Records in Ohio’s Courtrooms 6/17/19

 

 

 

Ohio Senate, House Bills Focus on Lending Industries, Notaries 5/20/19

Ohio Legislature Enacts New Requirements for Mortgage Servicers 5/20/19

Oklahoma

Oklahoma Recognizes Priority of Mortgage Over HOA Liens 10/15/19

 

 

Oklahoma Amends Statute Regarding Sheriff’s Appraisals 10/15/19

Oregon

 

 

Tips for Oregon REO Property Owners in Navigating the New Landlord-Tenant Terrain 8/12/19

 

Rhode Island

Rhode Island Federal Court Ruling Could Change GSE Nonjudicial Foreclosure Process Across the Country 4/15/19

 

 

 

South Carolina

South Carolina: Lender’s Loan Application Process Did Not Violate Attorney Preference Statute 5/20/19

 

 

 

South Carolina House Bill 3243 Streamlines Filing Fees for Real Estate Documents 10/15/19

South Carolina Legislature Authorizes Department of Revenue to File Tax Liens Statewide with an Online Database System 4/15/19

South Carolina Enacts Servicemembers Civil Relief Act 6/17/19

Vermont

 

Pretty Penny to Pay for Violating Rule 3002.1(c) 10/15/19

 

 

Washington

Could Your Loan be at Risk? 10/15/19

 

 

 

 

Copyright © 2020 USFN. All rights reserved.

 

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Central District of California Loan Modification Management Pilot Program Streamlines Review Process

Posted By USFN, Wednesday, December 18, 2019



by Joseph C. Delmotte, Esq. and Gilbert R. Yabes, Esq.
Aldridge Pite, LLP
USFN Member (CA, GA, HI, ID, NY, OR, UT, WA)

Over the past several years, a growing number of districts across the country have identified an opportunity to provide an additional avenue for borrowers to pursue their loss mitigation options under the supervision of the bankruptcy courts resulting in the creation of numerous programs. Although the broad purpose of these loss mitigation programs is the same and there are similarities in the way they’re structured and implemented by the bankruptcy courts, there are also a number of differences amongst the programs. The states and districts which recently adopted such programs have had the benefit of observing more long-standing programs to determine what works and what does not in order to implement more functional and efficient programs.

The United States Bankruptcy Court for the Central District of California is one of the recent districts to implement a court supervised loss mitigation program and in so doing; it has incorporated several distinct features which offer the potential for an improved, more streamlined review process.  As indicated by its name, the Loan Modification Management Pilot Program (“LMM Program”) is currently only a pilot program with a small number of selected judges participating though the program recently expanded to include several additional judges. According to the LMM Program procedures, the goal of the program is to facilitate communication and the exchange of information in a confidential setting and to encourage the parties to finalize a feasible and beneficial agreement under the supervision of the Bankruptcy Court for the Central District of California.

One of the primary distinguishing characteristics of the LMM Program is the role of the program manager. The person in this role is both experienced in bankruptcy loss mitigation and actively involved from the commencement of the program in facilitating the exchange of information and documentation between the parties to ensure the process moves forward in an expeditious manner. Furthermore, unlike many other districts which appoint a mediator at the outset and permit multiple mediation hearings, the LMM Program does not appoint a mediator unless mediation is requested at the completion of the review process which likely results in fewer required mediation hearings.

The LMM Program also utilizes mandatory forms for its motions and orders which simplifies the process required to commence and terminate the LMM Program, as well as the process for obtaining court approval to enter into a finalized loan modification agreement. All of these factors combine to make the LMM Program one of the most efficient and user-friendly court supervised loss mitigation programs available.

Given their popularity and unique ability to provide a transparent yet confidential forum to conduct the loss mitigation review process under the supervision of the bankruptcy courts, loss mitigation programs similar to the LMM Program in the Central District of California will likely continue to expand to other districts and states across the country. Furthermore, if the LMM Program is any indication, bankruptcy courts interested in adopting similar loss mitigation programs in the future will have a strong vantage point to design better, more efficient processes based on their ability to analyze and review the successful features of currently existing programs. 
 


Copyright © 2019 USFN. All rights reserved.

December e-Update

 

Tags:  Bankruptcy  Loan Modification Management Pilot Program  United States Bankruptcy Court for the Central Dis 

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New York Court of Appeals Considering Two Key Statute of Limitations Cases

Posted By USFN, Wednesday, December 18, 2019


by Richard P. Haber, Esq.
McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY)

New York’s Court of Appeals (highest court) is currently considering two statute of limitations (“SOL”) cases relating to mortgage foreclosures, providing hope that 2020 will be the year that servicers and their counsel finally get some relief, or at least clarity and predictability. 


In Freedom Mtge. Corp. v. Engel, 163 A.D.3d 631 (2d Dep’t 2018), lv. app. granted 103 N.Y.S.3d 12 (APL-2019-00114), which the Court has already agreed to consider on the merits, the issue is whether a lender who exercises the right to accelerate by initiating foreclosure may revoke that election by voluntarily discontinuing the foreclosure action at a later date. The Appellate Division, Second Department found that a lender cannot, by discontinuance alone, revoke the election to accelerate a mortgage debt. However, this is inconsistent with prior New York decisions holding that the discontinuance of a case renders all allegations null and void, as if never made. There is no logical reason why the election to accelerate made in a complaint should not be deemed revoked when all other allegations are voided by the discontinuance.

In Bank of New York Mellon v. Dieudonne, 171 A.D.3d 34 (NY App. Div. Second Dept., March 13, 2019), the servicer has asked the Court of Appeals for permission to appeal from a ruling that rejected a line of cases standing for the proposition that a mortgage drawn on the Fannie Mae/Freddie Mac Uniform Instrument could not be deemed accelerated until the entry of final judgment (i.e., when the borrower loses the contractual right to cure arrears and reinstate the installment contract). In Dieudonne, the Appellate Division, Second Department, held that the lender’s right to accelerate is independent of the borrower’s right to reinstate. The Court held that “[c]ontrary to the plaintiff’s contention, the reinstatement provision in paragraph 19 of the mortgage did not prevent it from validly accelerating the mortgage debt.” Even though “[t]hat provision effectively gives the borrower the contractual option to de-accelerate the mortgage when certain conditions are met”, the lapsing of that right is not a condition precedent to acceleration.

USFN will be moving for permission to file an amicus brief in support of Freedom Mortgage in the Engel case, and has already filed a motion for permission to file an amicus brief in support of the servicer’s motion in Dieudonne. In the brief filed with its motion, USFN argued several policy reasons why SOL reform is needed as it pertains to mortgage foreclosures in New York. Among the reform suggestions offered to the Court by USFN are that Engel and Dieudonne should both be reversed. While these reversals would not necessarily be a cure-all for SOL challenges in New York, they would certainly go a long way to removing the time bar that prevents the foreclosure of many loans today. Stay tuned for updates in the coming months!

Copyright © 2019 USFN. All rights reserved.

December e-Update

 

Tags:  amicus brief  Bank of New York Mellon v. Dieudonne  foreclosure  Freedom Mtge. Corp. v. Engel  New York Court of Appeals 

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California 5th Appellate District Reverses an Award of Attorney’s Fees Following Granting of Temporary Restraining Order

Posted By USFN, Wednesday, December 18, 2019



by Kayo Manson-Tompkins, Esq.
The Wolf Firm
USFN Member (CA)

One provision of the California Homeowner Bill of Rights (“HBOR”) awards a borrower attorney’s fees and costs for violating HBOR.  See Civil Code section 2924.12.  If a foreclosure sale has not taken place, a borrower can file an action and seek to enjoin the sale due to a material violation of the HBOR statutes. 

Typically, the borrower will seek a temporary restraining order (“TRO”) and will provide only one day's notice that he/she will be going into court to seek the TRO.  Since there is little prior notice, and/or often counsel is unable to obtain authorization to appear at the TRO hearing, the court grants the TRO.  The court schedules an order to show cause (OSC) hearing for approximately 15 days in the future.  It is at this hearing that the parties have an opportunity to present to the court the arguments and evidence as to whether a preliminary injunction should be granted by the court.

In Lana Hardie v. Nationstar Mortgage LLC (2019), 32 Cal. App. 5th 714, Hardie filed an ex parte application for a TRO and requested fees and costs within the body of the memorandum of points and authorities.  Although there was a discussion during the hearing that the court was only granting a TRO and not awarding fees and costs, the actual form order awarded $3,500.00.  Nationstar Mortgage immediately filed an appeal.

The trial court had a lengthy discussion on whether it was appropriate to grant fees and costs at the TRO stage.  It looked first to the statute itself.  Section 2924.12 states:

 

 “A court may award a prevailing borrower reasonable attorney’s fees and costs in an action brought pursuant to this section.  A borrower shall be deemed to have prevailed for purposes of this subdivision if the borrower obtained injunctive relief or was awarded damages pursuant to this section.”

 

The court stated that the plain meaning of the statute is to award fees and costs to a borrower who obtained “injunctive relief.”  The statute does not distinguish between temporary, preliminary or permanent, so under this plain meaning, the attorney's fees are authorized.  Therefore, section 2924.12 authorizes a court, "in its discretion", to award fees and costs to a prevailing party who obtains a TRO.  However, the appellate court reversed the lower court's ruling, based on a procedural issue as the request for the TRO was not adequately noticed.

The importance of the Hardie decision is to send a clear message that one cannot ignore an ex parte hearing for entry of a TRO.  The risk of an award of attorney fees is very real.  It is important to remember that some orders are issued on a court form which includes fees and costs, regardless of whether it was properly requested.   As a result, irrespective of whether or not the ex parte papers notice a request for fees and costs, steps should always be taken to appear at all TRO hearings.

Copyright © 2019 USFN. All rights reserved.

December e-Update

 

Tags:  California  California Homeowner Bill of Rights  Lana Hardie v. Nationstar Mortgage LLC 

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California to Allocate $331 Million to Provide Legal Assistance to Renters and Homeowners

Posted By USFN, Wednesday, December 18, 2019



by Kayo Manson-Tompkins, Esq.

The Wolf Firm

USFN Member (CA)

 

As part of the National Mortgage Settlement entered into in 2012, funds were allocated to the states to assist with the housing crisis and California was allotted over $400 million.  The State Legislature enacted Gov. Code 12531, which provided that funds could be used to offset general fund expenditures for the 2011-2014 fiscal years.  In 2014, the National Asian American Coalition filed a suit against the Governor, Director of Finance, and the State Controller seeking the return of the funds.   

The Court of Appeals in 2018 held that $331 million was to be returned and directed Governor Newsom to return the funds for its intended purpose.  During the 2019 legislative session, Senate Bill 113 was approved by the governor and will take effect immediately.

As a result of this bill, $331 million will be deposited into a trust for non-profit organizations to provide legal assistance to homeowners to prevent a foreclosure, defend an eviction, or to aid housing counselors in other housing related situations.  The ultimate goal will be to provide an ongoing source of funds to legal aid organizations to assist renters and homeowners.

Copyright © 2019 USFN. All rights reserved.

December e-Update

 

Tags:  California  California Senate Bill 113  National Mortgage Settlement 

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Awarding Committee for Sale’s Fees and Costs Does Not Violate Automatic Stay

Posted By USFN, Wednesday, December 18, 2019


by Kevin Galin, Esq.
Bendett & McHugh, P.C.
USFN Member (CT, MA, ME, NH, RI, VT)

 

The Connecticut Supreme Court recently visited the question of whether state courts have jurisdiction to extend the automatic stay provisions of 11 U.S.C. § 362 (a) (1) to motions by those court appointed attorneys that administer foreclosure sales (called “committees for sale” or “committees” in Connecticut foreclosure practice. The committees perform duties similar to auctioneers) to recover fees and expenses from non-debtor foreclosure plaintiffs.  In a decision stemming from a writ of error filed by the committee for sale, the Court held that an award of a committee’s fees and costs during a bankruptcy stay does not violate the applicable provisions of the Bankruptcy Code.

In U.S. Bank, N.A. as Trustee v. Jacquelyn N. Crawford et.al, 333 Conn. 183 (2019), the trial court entered a judgment of foreclosure by sale, and pursuant to Connecticut practice, appointed a committee to conduct the sale. After the sale had been conducted but prior to the sale approval, the defendant-mortgagor filed for Chapter 13 bankruptcy protection, automatically staying the proceedings. The committee nonetheless filed a motion pursuant to Connecticut General Statute § 49-25,[1] which sought to recover fees and expenses incurred prior to the filing of the bankruptcy petition in preparing and conducting the sale.

The trial court considered itself bound by Equity One, Inc. v. Shivers, 150 Conn. App. 745 (2014), a prior Connecticut Appellate Court decision which held that such motions for award of committee’s fees were prohibited from being awarded as violative of the automatic bankruptcy stay provisions of 11 U.S.C. § 362 .  In doing so, the Appellate Court in Shivers held that even though the committee’s motion did not directly affect the defendant, since these fees and costs would be able to be sought by plaintiff at the conclusion of the case, such a motion was subject to the stay.  Relying upon Shivers, the trial court here denied the committee’s motion. The committee’s writ of error followed.

In Crawford, the Connecticut Supreme Court overrules Shivers to the extent that Shivers held that state courts have jurisdiction to extend the automatic stay provisions to proceedings against non-debtors, in particular, the committee for sale appointed in a foreclosure action. The Court first visits the issue of whether or not the denial of the committee’s motion for an award of attorney’s fees is a reviewable issue, which the Court finds that it is.[2] The Court then acknowledges that while the writ of error was rendered moot during the pendency of the writ of error, in that the automatic stay was terminated by virtue of the defendant-mortgagor’s bankruptcy case being dismissed, the claim is reviewable under the capable of repetition, yet evading review exception to the mootness doctrine. 

In doing so, the Court describes this issue to be one that is “of some public importance” as a committee for sale functions as an arm of the court in a judicial sale and that under the Shivers holding, attorneys may be more reluctant to serve as sale committees if they run the risk of being rendered unable to recover their fees and expenses promptly, and without having to seek a judgment from the bankruptcy court, if the debtor declares bankruptcy.

Crawford reinforces the significance of the public policy served by resolving foreclosures expeditiously and further emphasizes the importance of the sale committee’s role in doing so.   It also highlights the relationship between federal bankruptcy proceedings and state court foreclosure actions, clarifies the responsibility of a mortgage servicer to pay committee of sale fees and expenses, notwithstanding a pending bankruptcy of a defendant, and now puts Connecticut state law with respect to this issue in line with most of the holdings of the Bankruptcy Courts for the District of Connecticut. Although there is a split of authority amongst Connecticut’s Bankruptcy courts on the payment of fees and costs during a bankruptcy, further challenges on this issue in Bankruptcy Courts are expected.



[1] General Statutes § 49-25 provides in relevant part: ‘‘[I]f for any reason the sale does not take place, the expense of the sale and appraisal or appraisals shall be paid by the plaintiff and be taxed with the costs of the case. . . .’’

[2] Justice McDonald’s dissenting opinion, with whom Justices Mullins and Kahn join, while conceding that the Shivers decision is inconsistent with the conclusions reached by several federal bankruptcy courts, disagrees with the majority result insofar as the majority finds that the denial of a motion for an award of committee’s fees is an immediately appealable order and therefore the substantive issue should not be reached.

Copyright © 2019 USFN. All rights reserved.

December e-Update


Tags:  Connecticut Supreme Court  Foreclosure  U.S. Bank N.A. as Trustee v. Jacquelyn N. Crawford 

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Connecticut Case Addresses Bankruptcy Stay’s Impact on Judgments of Strict Foreclosure

Posted By USFN, Wednesday, December 18, 2019



by Joseph Dunaj, Esq
McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY)


In the case of Seminole Realty, LLC v. Sekretaev, 192 Conn. App. 405 (2019), the Connecticut Appellate Court has released an important opinion concerning the intersection of federal bankruptcy law and judgments of strict foreclosure; specifically, the effect of a bankruptcy court order imposing a stay on a pending law day.  In Seminole Realty, a judgment of strict foreclosure had initially entered in 2014, with a law day being set.  The defendant, however, engaged in a scheme to delay the foreclosure by filing multiple bankruptcy petitions to gain the benefit of the automatic bankruptcy stay under 11 U.S.C. § 362(a).  In 2018, the foreclosing plaintiff obtained an order of in rem relief under 11 U.S.C. § 362(d)(4), so that any further petition filed within two years would not impose a stay on the foreclosure.  The plaintiff then filed a Motion to Reset the law days. 

Prior to the scheduled hearing, the defendant filed another Chapter 13 Bankruptcy Petition, which did not impose a stay because of the in rem relief order.  At the hearing on the Motion to Reset, the court scheduled a law day of August 15, 2018.  On July 10, 2018, the bankruptcy court entered an order suspending the prior in rem relief order.  On September 18, 2018, the bankruptcy court then vacated its July order.  The foreclosing plaintiff then applied for an execution for ejectment, to gain possession of the premises, which was issued on November 29, 2018, from which the defendant appealed, claiming that the law days became ineffective upon the bankruptcy court’s July 10th order imposing a stay, and thus title never vested in the plaintiff.

Prior to 2002, the general presumption in Connecticut was that a law day in a judgment of strict foreclosure was indefinitely stayed by a bankruptcy petition 11 U.S.C. § 362(a).  Citicorp Mortgage v. Mehta, 39 Conn. App. 822, 824 (1995).  That changed with the Second Circuit decision of Canney v. Merchs. Bank (In re Canney), 284 F.3d 362 (2nd Cir. 2002).  In In re Canney, the Second Circuit held that because a strict foreclosure was merely a time limitation on a particular action (the time to redeem), and not a positive act to enforce a judgment, the limited stay of 11 U.S.C. § 108(b) applied instead.  In Provident Bank v. Lewitt, 84 Conn. App. 204 (2004), the Connecticut Appellate Court adopted the holding of In re Canney, and held that a judgment of strict foreclosure is subject to 11 U.S.C. § 108(b), and the filing of a bankruptcy petition serves to only extend a law day 60 days, rather than stay the law days indefinitely. 

The state legislature adopted Conn. Gen. Stat. § 49-15(b) in response to In re Canney and Lewitt.  Under that statute, when a mortgagor files a bankruptcy petition under any title of the Bankruptcy Code, the judgment of strict foreclosure is automatically opened by operation of law, but only as to the law days, with the other terms of the judgment remaining in place.  The effect of the statute is to prevent the passage of the law days upon the filing of a bankruptcy petition and avoid the result of In re Canney & Lewitt.  At that time (pre-BAPCPA), all bankruptcy petitions imposed a stay, and while efforts have been made to correct the now-outdated statute, the state legislature has been slow to act.

In Seminole Realty, the issue before the Appellate Court was the impact of the bankruptcy court’s July 10th order on the pending law day.  The Appellate Court held that Conn. Gen. Stat. § 49-15(b) only applies upon the filing of a bankruptcy petition, and only applies when a petition is filed after a court sets a law day pursuant to a judgment of strict foreclosure.  Further, the Appellate Court held that when the statute does not apply, the prior case law of In re Canney and Lewitt applies.  The Appellate Court found that when the bankruptcy court imposed a stay on July 10th, the law day was automatically extended 60 days under 11 U.S.C. § 108(b), and when the defendant failed to redeem by the expiration of his law day, title vested absolutely to the Plaintiff.

The Appellate Court’s holding in Seminole Realty has potentially broad implications.  As stated above, the court has re-affirmed the validity of the prior case law, when the strictures of Conn. Gen. Stat. § 49-15(b) do not expressly apply.  A foreclosing plaintiff would be mindful to review Seminole Realty and whether or not its holding would be beneficial to argue, especially in an aged foreclosure case with multiple bankruptcy filings.  Further, the Appellate Court in Seminole Realty, by highlighting some of the shortcomings of Conn. Gen. Stat. § 49-15(b), appears to either show its willingness to address the statute in future cases or seeks to invite the legislature to further amend the statute.  Surely, time will show how the statute will further evolve.

 

Copyright © 2019 USFN. All rights reserved.

December e-Update

 

Tags:  Bankruptcy  Connecticut  Connecticut Appellate Court  Foreclosure  Seminole Realty LLC v. Sekretaev 

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