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July 2020 Member Moves + News

Posted By USFN, Monday, August 3, 2020


Scott & Corley, PA (USFN Member - SC), is pleased to announce that Reginald “Reggie” P. Corley has been selected as one of twenty-eight Midlands-area business leaders — 14 “established community stalwarts” and 14 “hard-charging game-changers” — have been selected as members of the Columbia Regional Business Report’s second class of Icons and Phenoms.

The Columbia Regional Business Report is honoring a pair of groups making an impact on the area business scene: Icons - “the respected pillars who have established standards of business and civic excellence”; and Phenoms - “the motivated go-getters who are getting things done in new and exciting ways.” This year’s honorees span a wide range of industry, from construction pioneers to city leaders to nonprofit champions.

Award recipients, nominated by Columbia Regional Business Report readers and selected by a panel of judges, will be recognized at a virtual/online event on August 5, 2020. 

Reggie is rated AV Preeminent from Martindale-Hubbell and is a repeat selection to Best Lawyers in America in the field of Mortgage Banking Foreclosure Law, and Super Lawyers in the field of Creditor Debtor Rights. He is a 2018 recipient of the South Carolina Lawyers Weekly Leadership in Law award and is a Riley Diversity Leadership Fellow within the diversity leadership program at Furman University.  Reggie is a current member of the Furman University Alumni Board of Directors, as well as being a current board member of the Palmetto Land Title Association (PLTA).

 

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Washington State Governor Inslee Extends Eviction Moratorium Through October 15, 2020

Posted By USFN, Monday, July 27, 2020

by Wendy Lee, Esq.
McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY, OR, TX, WA)

On July 24, Washington State Governor Jay Inslee formally extended the COVID-19 housing proclamations made earlier in the year, and updated guidance related to some of the reopening plans made within the state.  The announcement most relevant to the default servicing and REO industry is contained within proclamation 20-19.3, which extended proclamations 20-05 (state of emergency) and extended the statewide moratorium on evictions, contained within 20-19.2, through October 15, 2020. 


This proclamation and extension specifically prohibit:

  • Servicing, enforcing, or threatening to serve or enforce any notice requiring a resident to vacate.The only exceptions being:
    • if the property owner attaches an affidavit attesting that the action is necessary to respond to a significant and immediate risk to health, safety, or property of others;
    • if tenant is provided 60 days written notice that owner intends to occupy as personal residence or sell the property;
    • THERE IS NO EXCEPTION FOR NON-FEDERALLY BACKED MORTGAGES.
  • Charging late fees for non-payment of rent if the non-payment or late payment occurred on or after February 29, 2020 (the date of the  state of emergency).

  • Treating unpaid rent as enforceable debt when non-payment is a result of the COVID-19 outbreak and occurred after February 29, 2020.The only exception is:
    • If the owner demonstrates by a preponderance of the evidence that the resident was offered, and refused or failed to comply with, a re-payment plan that was reasonable based on the individual financial, health and other circumstances of that resident.
  • Increasing the rate of rent for any dwelling or parcel of land occupied as a dwelling and also for commercial rental property if the tenant was materially impacted by COVID-19.For individuals this applies if the individual was personally impacted and unable to work.For businesses if they were deemed non-essential or lost staff or customers due to COVID-19.

 

Mortgage servicers and investors should consider this action checklist to ensure compliance with the Washington state proclamation:


Review any pre and post sale foreclosure notices and discontinue sending any that might be interpreted as threatening to serve, seek, or enforce any eviction order or right that might accrue as a result of a foreclosure.  This applies to all non-federally backed mortgage foreclosures.


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Maine Legislature Passes Bill Affecting Residential Foreclosure, Property Preservations

Posted By USFN, Thursday, July 23, 2020
by James Garnet
Brock and Scott, PLLC
USFN Member (AL, CT, FL, GA, MA, MD, ME, ME, MI, NC, NH, OH, RI, SC, TN, VA, VT)

The Maine Legislature recently passed a bill that will have an impact on the residential foreclosure and property preservation processes (An Act to Preserve the Value of Abandoned Properties by Allowing Entry by Mortgagees – H.P. 1407 – L.D. 1963). This bill was signed by the Governor on March 18, 2020 and will take effect on June 16, 2020.

The stated purpose of this bill is to assist communities and financial institutions when a property becomes abandoned by the owner. In reality, the bill makes it more difficult for financial institutions to secure a property or take any ameliorative actions to prevent further deterioration.

Most mortgages contain a provision that allows a mortgagee to enter a property to make repairs, change locks, replace or board up doors and windows, drain water from the pipes or rectify any code violations or dangerous conditions. This new law, however, will place additional burdens upon mortgagees and mortgage loan servicers who have commenced a foreclosure action before they can take any of the aforementioned actions.

After commencement of an action for foreclosure, a mortgage loan servicer is required to file an affidavit with the court attesting to the abandonment of the property before any property preservation efforts that require entry on to the property may be commenced.

The bill sets forth the criteria that may be used to make a determination of abandonment and further sets forth what must be included in the affidavit and who may attest to those facts. The court will not make a determination of abandonment or take any further action on the filed affidavit.

The bill further imposes notice and record maintenance requirements upon the mortgage loan servicer. The notice must be posted on the front door of the property and the bill specifies what information is required to be included in the notice. Records of entry must be maintained by the servicer or its designee for at least four years. The bill also provides for penalties against servicers for any violations.

Text of the full bill may be found here: https://www.usfn.org/resource/resmgr/misc_images/BrockScott_MEHP1407_4_15_20.pdf

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Spring 2020 USFN Report

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The Impact of COVID-19 on Evictions in the Pacific Northwest

Posted By USFN, Thursday, July 23, 2020
by Cara J. Richter, Esq.
The Wolf Firm, A Law Corporation
USFN Member (CA, ID, OR, WA)

As early as February, the Pacific Northwest region of the country, including the states of Washington, Oregon, and Idaho, established measures to respond to the growing Coronavirus (COVID-19) pandemic.  Each state implemented its own equivalent of a stay-home/stay-healthy order, with a special carve-out for those business operations providing essential services to the public.   While none of the states has independently banned foreclosures of residential trust deeds, they have each taken steps, in some cases significant ones, to curtail involuntary displacement of people during the COVID-19 pandemic.  

In Washington, Governor Jay Inslee signed a proclamation whereby he instituted a broad statewide prohibition against evicting occupants of residential dwellings and commercial rental properties.  The prohibition, which is effective until June 4, 2020, applies to landlords, property owners, property managers and law enforcement alike.  It strictly forbids any action, whether actual or by threat, to recover possession of property unless it can be established that there is a significant and immediate risk to the health or safety of others.  The prohibited actions include, but are not limited to, issuing a notice to vacate, seeking or enforcing agreements to vacate, as well as filing an unlawful detainer action.  Indeed, a plain reading of the proclamation would seem to suggest that even negotiating a cash-for-keys agreement could be interpreted as a prohibited activity in Washington.  

Kate Brown, the governor of Oregon, took similar steps to curtail involuntary displacement of Oregonians by declaring a state of emergency and signing an executive order imposing a temporary moratorium on both residential and commercial evictions.  Oregon’s eviction moratorium remains in effect until June 30, 2020 unless otherwise extended or terminated by the governor.   Interestingly, the executive order explicitly states that it does not apply to the termination of residential rental agreements for causes other than nonpayment of rent.  This means that a post-foreclosure REO eviction of a former owner-occupant is theoretically permissible in Oregon, as opposed to Washington, since in the post-foreclosure scenario there would no rental agreement to terminate, nor the cause for nonpayment of rent.  

Idaho’s governor, Brad Little, has yet to issue a statewide moratorium on evictions.  On May 4, Idaho’s Supreme Court stepped in and signed an order approving and adopting the Statement of Landlord Regarding Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) Eviction Moratorium (Statement of Landlord). The Statement of Landlord requires the landlord, property manager and/or property owner to declare, under penalty of perjury, that they have complied with the CARES Act eviction moratorium.  Under the terms of the Order, which was amended on May 5, 2020, for any eviction action initiated between May 4, 2020 and July 25, 2020, the Statement of Landlord must be filed in conjunction with the underlying complaint.  The Idaho Supreme Court also authorized statewide use and distribution, through individual court websites, of an Answer to Complaint – CARES Act form.  This specific form, designed for Idaho residents who have been negatively affected by COVID-19, can be filed by an occupant in response to an eviction complaint.   

Depending on how the COVID-19 pandemic evolves in the months to come, the states within the Pacific Northwest may establish additional measures to address the crisis.  It is therefore critical, from a compliance and best practice perspective, to consult with local counsel prior to initiating any eviction action.  

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Spring 2020 USFN Report

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June 2020 Member Moves + News

Posted By USFN, Monday, July 6, 2020

 

McCalla Raymer Leibert Pierce, LLC (USFN Member - AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY, OR, TX, WA) (“MRLP”), one of the largest and most respected default firms in the country, is continuing to expand its industry footprint, launching new offices in Washington, Oregon and Texas.

Ms. Wendy Lee, the newest addition to the management team will assume the role of Managing Partner of Oregon and Washington Foreclosure and Litigation Practice.  Ms. Lee brings over 17 years of experience and default servicing knowledge to the MRLP family.  Marty Stone, the Managing Partner and CEO of MRLP said, “We are honored to have Wendy join our team.  As we have carefully decided to grow our firm for the future, we have been open to strategic talent and partnerships with industry leaders.  Wendy has been a friend of the firm for many years and we have always experienced a close relationship and common mindset in responding to the industry’s changes.  We feel that Wendy is a perfect match for the MRLP family.”

Ms. Lee commented, “Despite all the negative news and impact of the pandemic and the state of emergency, this opportunity is a welcome change and a tremendous opportunity to extend the MRLP positive and diverse culture in the default servicing space in the Pacific Northwest.  Building a new foreclosure practice, on a state-of-the-art case management workflow system, supported by one of the longest tenured firms in the industry, will allow us to help clients in the most efficient manner possible when the moratorium lifts.”

Furthermore, MRLP is proud to announce it will now offer its full complement of legal services throughout Texas from its Dallas “Uptown” office.  Mrs. Melody Jones Rickels, the managing partner of MRLP’s non-judicial states, and one of the most respected and recognized women in mortgage servicing, said, “Today, executives and business leaders of banks and non-bank servicers have increasingly made Dallas their center of operations in the US.  I am thrilled at the opportunity to expand into the Lone Star state.  MRLP has a history of successful, responsible expansion.  Texas will be no different.  We look forward to providing exceptional service to our clients in Texas.”

McCalla Raymer Leibert Pierce, LLC’s offices are located in Roswell, GA; Birmingham, AL; Chicago, IL; Dallas, TX; Hartford, CT; Fort Lauderdale, FL; Iselin, NJ; Las Vegas, NV; Long Beach, CA; Orlando, FL; Jackson, MS; New York City, NY; Portland, ME; Portland, Oregon and Bellevue, Washington[1]

 

[1] McCalla Raymer Liebert Pierce, LLP will be the corporate entity operating law firm practices in Washington State and Oregon.

 


 

Orlans (USFN Member - DC, DE, MA, MD, MI, NH, RI, VA) announced that Founder & Executive Chair Linda Orlans was named an award winner of the inaugural #NEXTPowerhouseAward honoring the most influential women in the mortgage industry. The winners are celebrated for being technologically innovative, sharing new ideas and pushing the limits to keep their companies and the industry moving forward.

Linda has been recognized for numerous accomplishments throughout her career. A few highlights include becoming the first woman Chair of the Board of Trustees, Michigan State University College of Law, the inclusion of Orlans PC as a member of the National Association of Minority and Women Owned Law Firms (NAMWOLF)—a highly selective organization of minority and women-owned law firms, being a current member of the United States Supreme Court Bar and the State Bar of Michigan, and the co-founder of Women Executives in Banking (WEB) an organization dedicated to furthering the personal and professional growth of women executives in the banking industry.

A self-made business leader, attorney, pioneer, philanthropist, and influencer, Linda Orlans has built multiple businesses with innovation and compassion at the center. Throughout her career, she has revolutionized the real estate and legal worlds. Well before it was common, Linda introduced the flat fee model and a paperless workflow process that incorporated electronic records into her law practice. Her companies have also been early adopters of time and money saving technology like Remote Online Notarization and eTITLE’s eZTRACKER and eZESCROW, resulting in a better customer experience. As an early adopter of lean methodology and technology, she implemented Lean Six Sigma training for her entire staff resulting in increased process efficiencies and a five-star customer experience.

Linda is an active philanthropist in the community and has established a social responsibility across her companies – actively helping the underserved, as well as championing gender equality.

“I am thrilled to receive this award It is an honor to be recognized with such an esteemed group of successful career driven women e ach of whom strive s to make a positive impact in our companies, communities and the industry," said Orlans.

Orlans also announced that Julie Moran, Senior Executive Counsel, was named an award winner of the inaugural #NEXTPowerhouseAward honoring the most influential women in the mortgage industry. The winners are celebrated for being technologically innovative, sharing new ideas and pushing the limits to keep their companies and the industry moving forward.

Julie is an innovator and trailblazer in the mortgage and legal industries. She began her career as an attorney at a Boston law firm concentrating in transactional real estate. She developed a mortgage banking practice that became one of the largest sources of firm and client growth. As a partner at the firm, she had the privilege of working with some of the nation’s largest banks and loan servicers. Julie was elected as the firm’s first female managing partner at a time when there was only one other female managing partner in Boston.

In 2005, she co-founded WEB (Women Executives in Banking) with fellow industry executives Linda Orlans, also of Orlans PC and Miriam Moore of Servicelink. WEB helps women advance their careers through education, coaching and peer support.

In 2007, Julie joined with Linda Orlans to launch Orlans Moran PC, a 100% women-owned law firm where she oversaw operations as well as the legal and regulatory compliance practice. Under Linda and Julie’s innovative leadership, the firm quadrupled its market share and number of clients by applying Lean Six Sigma concepts to the foreclosure legal process.

Julie is an industry leader and has served on a number of regulatory task forces on mortgage banking issues. She is co-chair of the Legal Issues Committee of the USFN, co-chair of the Financial Services Pac of the National Association of Minority and Women Owned Law Firms (NAMWOLF) and member of the Board of Directors of the MA Real Estate Bar Association. Julie is a frequent author of topical articles of interest to the industry and a speaker on regulatory compliance and current legal issues at both local and national conferences.

“I am honored to receive this esteemed award from an organization that is focused on advancing women in their careers and professional growth," said Moran.

 

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Navigating the Virtual Courtroom

Posted By USFN, Thursday, June 18, 2020
Updated: Wednesday, June 17, 2020

 

by Kip J. Bilderback, Esq.
Millsap & Singer, LLC
USFN Member (KS, KY, MO)

In this time of COVID-19, we continue to see a “new normal” arise to allow our professional work to continue while maintaining as much safety and social distance as possible. E-filing has long been utilized by many courts, and, as an industry, we seem comfortable in utilizing that technology with good internal execution processes in place to assure the quality of the filings. What had not heretofore been utilized as frequently is remote hearings, by telephone or by video.

Regardless of whether the hearing will be video or telephonic, some important considerations should be made. First, understand the protocol your court will be utilizing. Will you call in and be put in a “waiting room” until the judge is ready? Will the court initiate the call? Do you have special software you need to use? If you are dealing with additional technology, you may wish to test out those systems in advance of the meeting. Second, make sure your pleadings and exhibits are in order, properly labeled and appropriately shared with opposing parties and the court. As with all things, you should include everything you need, but be careful not to overdo the documentation in that many people will be handling those documents in line with your argument.

Third if you are a witness or you are using a witness, be sure that you are both “on the same page” with regard to the aforementioned items. Fourth, consider from where you will be attending the hearing. If you are at home, are you in a segregated area to minimize possible interruption by your “work from home colleagues” – dogs, cats, children, spouses or significant others.

With specific regard to telephone conferences, one should be aware that an inability to see removes certain social cues we take for granted. You cannot see whether the judge is annoyed with the length of your argument.

You cannot see a witness’s reaction to a question you may have asked. Consequently, it is important to be vigilant and clear in your communications, using vocal tonality more thoroughly. Also, to avoid confusion or “talking over” another, one should be very courteous to others, making sure no one is speaking before you speak. You may also wish to signal verbally as you complete your portion of a discussion, allowing others the opportunity then to speak. Last, you should try to stay in one place during the entire hearing. Recently the Supreme Court of the United States held oral arguments virtually. At one point in the proceedings, the sound of a toilet flushing was clearly heard in the stream. https://www.npr.org/2020/05/09/852650790/top-5-moments-from-the-supremecourts-1st-week-of-livestreamingarguments

With specific regard to telephone conferences, you should be aware of your surroundings, your lighting and the picture you present in the video frame. Do you want to send a “professional” message by being in front of an attractive bookcase of legal books? Do you want to be in a neutral background, such as in front of an office wall without distractions? Is the light better in one room, or can you put a light on you? If you are in a dark room, you may look more like someone in the witness protection program than an attorney. Be sure to dress in accordance with normal court requirements, including bottoms. It will help keep the feeling of professionalism throughout the proceeding. Last, realize that, in many situations, your video will be in front of everyone at the hearing. Unlike a courtroom, where you might roll your eyes a bit or turn to your client to say something and can hope not everyone will notice, your face will show everything at all times.

Again, as we progress in this world of the “new normal,” we will find more ways to be productive remotely, and in many cases, the well prepared may be even more successful than others.

 

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Spring USFN Report

 

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FHFA Issues Second Moratorium Extension

Posted By USFN, Wednesday, June 17, 2020

The Federal Housing Finance Agency (FHFA) announced Wednesday that Fannie Mae and Freddie Mac will be extending their moratorium on foreclosures and evictions until at least August 31. This is the second time the FHFA has extended the expiration date, after announcing in May that the moratorium would expire on June 30.

The U.S. Department of Housing and Urban Development (HUD) also issued Mortgagee Letter 2020-19, which stated the moratorium applied to “all FHA Title II Single Family forward and Home Equity Conversion Mortgage (reverse) mortgage programs except for FHA- insured mortgages secured by vacant or abandoned properties.”

The move is a continuation of a directive from the FHFA, in which Fannie Mae and Freddie Mac were originally instructed on March 18 to suspend foreclosures and evictions for at least 60 days. The FHFA had enacted the first moratorium in response to the national emergency that was declared on March 13 by President Trump due to the COVID-19 outbreak.

 

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D.C. Superior Court Decision Shows Progress Against Super-Priority Condominium Lien Claims

Posted By USFN, Monday, June 15, 2020

by Gene Kendricke Sanchez, Esq.

Rosenberg & Associates, LLC
USFN Member (DC, MD, VA)

 

Decisions in recent years by the District of Columbia Court of Appeals have tipped the scales in favor of condominium liens over mortgage liens where both liens attach to a property. First, in Chase Plaza Condo. Ass'n v. JP Morgan Chase Bank, N.A., the Court of Appeals held that D.C. condominium foreclosure statutes gave condominium liens a “super-priority” that, when exercised, extinguished even a first-priority mortgage lien. Building on that decision, the Court of Appeals held, in Liu v. U.S. Bank, N.A., that a condo could not willingly waive its super-priority lien in favor of a first-priority mortgage lien. However, a recent decision in D.C. Superior Court, Wells Fargo Bank, N.A., v. Hyun Uk Lee, et al., 2017 CA 007966 R(RP) (D.C. Cir. Feb. 27, 2020), shows one way that the lower court is balancing the equities in favor of mortgage lienholders.

In Lee, the property owners encumbered the subject property with a mortgage lien in 2005. In 2010, the condominium association initiated a foreclosure action for unpaid condominium assessments and recorded a notice of foreclosure sale for the property. At the condominium foreclosure sale that same year, the association bought the property. However, it did not immediately execute its deed. In 2017, Wells Fargo, the beneficiary of the mortgage lien, filed a judicial foreclosure action against the mortgagors in D.C. Superior Court. Two years later, a court-appointed trustee sold the property at foreclosure auction to a third-party. It was only after Wells Fargo’s foreclosure auction that the association finally executed and recorded its foreclosure deed from the 2010 sale. The association then intervened in Wells Fargo’s foreclosure action and filed a counter-claim to quiet title, claiming that the 2010 sale extinguished Wells Fargo’s mortgage lien.

On summary judgment the Court ruled against the association, finding that the quiet title claim was barred by laches. Laches is the legal principle that a claim is barred when the claimant causes an unreasonable delay in bringing its action and the delay causes prejudice on the defendant. Here, the Court found it unreasonable that the association waited over nine years from the 2010 sale to execute and record its deed, especially when the purchase contract had a 30 day settlement requirement.

Further, the association not only waited until after Wells Fargo had filed a foreclosure lawsuit, but waited until after the foreclosure auction took place. The Court was unconvinced by the association’s argument that its recorded notice of foreclosure sale was sufficient notice of ownership to Wells Fargo and that Wells Fargo should have contacted the association to learn about its ownership interest. The Court reasoned that regardless of Wells Fargo’s inaction in contacting the association, D.C. law is clear that only a recorded deed after a condominium foreclosure sale can serve as proof of ownership. The Court also found that the association’s delay prejudiced Wells Fargo, which had incurred costs to maintain the property and pursue its foreclosure action. The Court also found that the delay by the association prejudiced the third-party purchaser at the mortgage foreclosure auction because the purchaser had no notice of the condominium association’s ownership.

The take-away from Lee is that laches is working as an effective defense for mortgage lienholders when faced with a quiet title claim stemming from a super-priority condominium lien. Lee has not gone through appellate review and, therefore, is not binding in D.C. However, it is a positive sign for mortgage lien holders facing aged claims from condo sale purchasers that the lower court is balancing the equities and fairly considering the time, effort, and expense, of enforcing a mortgage lien.

Finally, while the result in Lee provides a remedy for past condo foreclosure sales, it is very clear that current and future condo sales can and will extinguish even a first-priority mortgage lien. Therefore, it is still very important to monitor and take appropriate action when condominium dues fall in arrears in the District of Columbia.

 

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Changes to Florida Surplus Fund Statute: Claim It or Lose It

Posted By USFN, Monday, June 15, 2020

by Nicholas J. Vanhook, Esq. and Jane E. Bond, Esq.
McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY)

Ever since the United States housing market collapse in 2008, when a lender instituted a foreclosure action and obtained a Final Judgment of Foreclosure, the foreclosure sales process was relatively straight forward in Florida.  The property was listed for sale at a public auction, Certificate of Title was issued to highest bidder, typically the lender for a nominal amount, and the property was placed in that lenders book of Real Estate Owned (REO) until it was eventually marketed and sold to the general public.  The primary reason this process was so straightforward was based on one simple fact: The Final Judgment of Foreclosure was for an amount substantially more than what the property was worth.  Since the lender received a credit bid at the foreclosure sale for the value of its judgment, third-party purchasers were rarely the highest bidders at the public auction.   The logic behind this standard course of events is simple.  Why would a third party pay more for a property than what it was worth?  Simply put, they wouldn’t. 

Fast forward over a decade and the process is becoming less standard.  Once again, the reason is based on one simple fact: Property values have not only stabilized over the past decade but have increased to a level that the Final Judgment of Foreclosure obtained by a lender is often for an amount less than the property’s value.  Therefore, those third-party purchasers, who were nowhere to be found ten years ago, are now competitively bidding at foreclosure sales, and the winning bid is often thousands of dollars more than the Final Judgment of Foreclosure.  These surplus funds are then held by the Clerk of Court, pursuant to 45.032, Fla. Stat. until a court order is entered determining how the funds should be distributed.

Once foreclosure sales resume in Florida after the COVID-19 moratorium, this will continue as a very small percentages of Florida homes are underwater. Residential properties are in demand with few being available on the market. Unless there is a significant decline in property values, third party purchasers will continue to bid at foreclosure sales resulting in surplus funds.

In this current era of surplus funds becoming the norm as opposed to the exception, the question is, who is entitled to these funds and what is the proper procedure to ensure they are obtained?  It is well established under Florida law, that any surplus remaining after a foreclosure sale should be paid to the junior lienholders based on their priority as it relates the foreclosed property.  Only after junior liens have been satisfied, can the prior homeowner receive any surplus funds.  General Bank, F.S.B. v. Westbrooke Pointe, Inc., 548 So. 2d 736 (Fla. 3d D.C.A. 1989). 

So, when does a junior lienholder need to file a claim with the court to ensure it does not waive rights to the surplus funds being held by the Circuit Court Clerk?  Simply, within one year of the foreclosure sale. On July 1, 2019, Fla. Stat. 45.032 was amended eliminating the “surplus trustee” and changing the amount of time to file a claim. The surplus trustee was the person appointed by the County Clerk to seek out the prior homeowner, if no surplus claim was filed by any party within the 60 days.  This surplus trustee had one year from the date it was appointed to locate the prior homeowner before those funds were deemed unclaimed property.  Now, the statute simplifies this process by taking away the surplus trustee and stating, any surplus remaining with the Clerk one year after the foreclosure sale is deemed unclaimed property.  From the plain language of 45.032, Fla. Stat., junior lienholders now have up to one year from the foreclosure sale to make a claim for surplus funds.  This is more time than the 60 days which is beneficial to the inferior lien holders giving them additional time to hire an attorney and file a claim.

Many junior lienholders refer the case to counsel as soon as the senior lienholder files their foreclosure. This is the best practice, to allow for monitoring the case through the senior lienholder foreclosure. Counsel appears, answers the complaint, and obtains all pleadings ensuring the inferior lien is protected and any claims for surplus are made. The most prudent course of action is for junior lienholders to make a surplus claim as soon as possible after the foreclosure sale, as other junior lienholders and/or the borrower may also be filing a claim and setting the surplus distribution for hearing prior to the new one-year claim period. If no claim is made within a year, the claim may be lost when the clerk reports the funds as unclaimed property.
 

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Minnesota Appellate Court Doubles Down on Strict Compliance

Posted By USFN, Monday, June 15, 2020

by Paul A. Weingarden, Esq. & Kevin T. Dobie, Esq.
Usset, Weingarden & Liebo PLLP
USFN Member (MN)

 

In navigating the rocky shores of nonjudicial foreclosures, the recent decision in Larsen v. Wells Fargo Bank, No. A19-0952, 2020 WL 1129880 (Minn. App. 2020), has just made life a bit more difficult for practitioners: the Minnesota Court of Appeals vacated a foreclosure sale after finding that the lender gave the mortgagor too much time to redeem.

 

Ever since the landmark decisions of Jackson v. MERS, 770 N.W.2d 487 (Minn. 2009) and Ruiz v. 1st Fid. Loan Servicing, 829 N.W.2d 53 (Minn. 2013), the Minnesota Supreme Court has held that lenders and practitioners of Minnesota foreclosures must strictly comply with the requirements of the nonjudicial foreclosure process or risk avoidance of a sale.  In the case of minor irregularities, based on precedent, many hoped that mortgagors might have to show a modicum of prejudice before courts reach the drastic conclusion to avoid an otherwise proper sale.  In Larsen, a recent unpublished opinion, the Minnesota Court of Appeals reversed a trial court and ruled that where the foreclosing lender published a redemption period double that to which the mortgagor was legally entitled, despite no prejudice to the mortgagor, the nonjudicial sale was void.

 

The facts in the case are fairly straightforward. After defaulting on her mortgage loan, Wells Fargo commenced a nonjudicial foreclosure proceeding.  When the title search revealed a junior mortgage in favor of the United States, Wells Fargo's counsel drafted and published a foreclosure sale notice advertising a 12-month redemption period, six months longer than the period the mortgagor was otherwise entitled by Minnesota statutes.  In our state, most properties are entitled to a six-month redemption, with 12 months being reserved for agricultural properties, much older mortgages, and those loans with steep equity.

 

Wells Fargo's counsel took this action relying on 28 U.S.C. § 2410(c), which provides for a one-year redemption period for the United States from a foreclosure sale in judicial proceedings and felt the longer period was required to avoid redemption issues caused by giving 6 months to the mortgagor. The county sheriff ultimately sold the property to Wells Fargo at a nonjudicial sheriff’s sale subject to the 12-month redemption period. The mortgagor sued, alleging the sale was invalid because she received a longer redemption period than allowed by statute, i.e., Wells Fargo gave her an additional six months to possibly redeem from the sale and to stay in her home before the foreclosure purchaser could commence an eviction proceeding. The trial court determined that Wells Fargo’s actions were valid and dismissed the case. The mortgagor appealed.

 

In reversing the trial court decision, the appellate court decided that 11 U.S.C. § 2410 did not mandate a change from six to 12 months for either the notice or the sale.  The court noted that the statutory provision establishing the six-month redemption period in Minnesota statutes 580.23 and required in the publication under Minnesota statutes 580.04(a)(6) applied to the mortgagor’s rights, not to those of junior lienholders. The court followed with a review of the strict compliance standard in Jackson v. MERS and Ruiz v. 1st Fid. Loan Servicing governing nonjudicial mortgage foreclosures and explained that although the mortgagor received a longer period of time to remain in the home and perhaps redeem, Minnesota law mandates strict compliance with the applicable foreclosure statutes. The court ultimately held the foreclosure sale was void because Wells Fargo gave her too much time to redeem, noting that the mechanics of redemption by junior liens after 6 months was known to any redeeming creditors or could be fixed by legislative amendment if truly needed.

 

Usset, Weingarden & Liebo has always foreclosed nonjudicially using the six-month redemption period despite the existence of a junior mortgage in favor of the United States, and the United States has not objected or asserted a right to a one-year redemption period.  Although not explicitly stated in 11 U.S.C. § 2410, the text of that statute clearly implies that the 12-month redemption period applies to foreclosures by judicial action, but a judicial action is not required.  Where the United States has a junior mortgage and the lender commences a judicial foreclosure, the lender may name the United States as a defendant and the United States is entitled to a 12-month redemption. But the choice of forum is permissive and where a lender forecloses under state nonjudicial foreclosure statutes, the United States is not guaranteed the 12-month redemption period. Instead, state law applies. See U.S. vs. Brosnan, 363 U.S. 237 (1960).

 

Finally, in Larsen, the court did not find persuasive Wells Fargo’s argument that the sale was valid because the mortgagor was not prejudiced by the longer redemption, despite cases holding otherwise, e.g., Wells Fargo v. Terres, 2008 WL 3287817 (Minn. App 2008) (amending sheriff’s certificate where no prejudice to mortgagor); Young v. Penn Mutual Life, 265 N.W. 278 (Minn. 1936)(overstated amount due by $116.55 not prejudicial to mortgagor and sale was valid). Decisions like Larsen serve as a reminder that lenders and their counsel will be subject to ever more scrutiny and the phrase “Get it Right" will be with us for the foreseeable future.  Lenders and Minnesota attorneys are advised to follow the strict compliance standard of Minnesota Statute 580 on each file or risk a void sale. 
 

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Oklahoma Foreclosure Judgments Subject to Dormancy Statute

Posted By USFN, Monday, June 15, 2020

by Kim Pogue Jenkins, Esq.

Baer & Timberlake, P.C.

USFN Member (OK)

 

The Supreme Court of Oklahoma has issued an opinion holding that foreclosure judgments are subject to Oklahoma’s five-year dormancy statute. In HUB Partners XXVI, Ltd. V. Barnett, 453 P.3d 489 (2019), the Court also held that the defendant’s payments made during a Chapter 13 bankruptcy do not toll or extend the dormancy statute.

 

Facts of the Case
Plaintiff/Appellant HUB Partners XXVI, Ltd. (“HUB”) obtained a foreclosure judgment against Defendant/Appellee Thomas Barnett (“Barnett”) on February 24, 2011 in the District Court of Oklahoma County, Case No. CJ-2010-6158. HUB timely issued Execution on its judgment, but Barnett filed a Chapter 13 bankruptcy on March 4, 2011, thereby staying the foreclosure action. HUB received and applied payments from the Bankruptcy Trustee until the Chapter 13 case was dismissed by the Bankruptcy Court on July 13, 2016, for Barnett’s failure to make plan payments.

 

HUB then issued its Alias Execution on the foreclosure judgment on August 19, 2016, and its Second Alias Execution September 22, 2016. The real property was sold at Sheriff’s Auction on December 1, 2016, but Barnett filed his motion to release the judgment and to vacate the Sheriff’s Sale on November 30, 2016. In his motion, Barnett contended that the judgment rendered on February 24, 2011, was unenforceable under Oklahoma’s dormancy statute, 12 O.S. §735.

 

In its response, HUB first argued that Barnett made payments on the judgment through the Chapter 13 Plan, and each of those payments extended the statute of limitations. The final payment made by the Bankruptcy Trustee was on August 1, 2016, so HUB claimed the five-year statute of limitations began on that date. HUB also maintained that the bankruptcy stay tolled the statutory period, relying on Lee v. Epperson, 32 P.2d 309 (1934), which states:

 

“Where the character of legal proceedings is such that the law restrains one of the parties from exercising a legal remedy against another, the running of the statute of limitations applicable to the remedy is postponed, or if it has commenced to run, is suspended, during the time the restraint incident to the proceedings continues.”

 

HUB also claimed that it timely issued its Alias Execution pursuant to 11 U.S.C. §108(c)(2). This provision of the Bankruptcy Code provides that if the statute of limitations had not expired prior to the bankruptcy filing, then it would not expire until “30 days after notice of the termination or expiration of the stay. . .” Although HUB issued its execution 31 days after the Bankruptcy Court sent notice of the dismissal of the case, HUB maintained that the Federal Rules of Civil Procedure allowed it an additional three days, thereby making its Alias Execution a timely issuance under the dormancy statute.

Finally, HUB argued that the dormancy statute did not apply to foreclosure judgments, per Methvin v. Am. Sav. & Loan Ass’n of Anadarko, Okl., 151 P.2d 370 (1044).

The trial court ruled that the foreclosure judgment was dormant under 12 O.S. §735, that the bankruptcy stay did not toll the statute of limitations, and that HUB missed the 30-day extension under 11 U.S.C. §108(2).  The trial court also ruled that the note and mortgage merged into the judgment. HUB timely appealed these rulings, and the Supreme Court of Oklahoma granted certiorari. The two issues considered by the Court were (i) whether the foreclosure judgment was dormant; and (ii) whether the mortgage merged with the foreclosure judgment.

Foreclosure Judgments are Subject to the Dormancy Statute
12 O.S. §735 reads as follows:

 

A.    A judgment shall become unenforceable and of no effect if, within five (5) years after the date of filing of any judgment that now is or may hereafter be filed in any court of record in this state:

(1)   Execution is not issued by the court clerk and filed with the county clerk as provided in Section 759 of this title;

(2)   A notice of renewal of judgment substantially in the form prescribed by the Administrative Directors of the Courts is not filed with the court clerk;

(3)   A garnishment summons is not issued by the court clerk; or

(4)   A certified copy of a notice of income assignment is not sent to a payor of the judgment creditor.

The statute only provides for two exceptions: judgments against municipalities and child support judgments.

Previously the Oklahoma Supreme Court held that a foreclosure judgment did not expire under the statute. See Methvin, above, and Anderson v. Barr, 62 P.2d 1242 (1936). In its de novo analysis of the issue, the Court in this case defined a foreclosure judgment as “the order determining the amount due and ordering the sale to satisfy the mortgage lien.” Since foreclosure judgments do not fall under the two excepted categories, the Court reasoned that foreclosure judgments are within the scope of the statute. In support of this reasoning the Court cited North v. Haning, 229 P.2d 574 (1950), which held that a judgment foreclosing a special assessment lien was subject to the dormancy statute. Extending North to the foreclosure of a mortgage, this Court held, “HUB’s foreclosure judgment is dormant.”

The Court also rejected HUB’s argument that payments applied through the Chapter 13 plan extended the limitation period, quoting Chandler-Frates & Reitz v. Kostich, 630 P.2d 1287 (1081), “(i)n the absence of a statute to the contrary a partial payment will not prevent the running of a dormancy statute.” The Court also noted that the legislature did not carve out an exception to the statute for partial payments, and concluded its analysis of this issue by holding, “We conclude HUB’s payments under the bankruptcy plan did not prevent the dormancy period from running.”

Mortgage does not Merge into Foreclosure Judgment
After deciding that the foreclosure judgment was dormant, the Court went on to analyze whether the subject mortgage merged into the dormant judgment. The Court addressed this question in Anderson and Methvin, cited above. In Anderson the Court examined the very nature of a mortgagee’s rights, finding that “he has a property right in the premises, the value of which is in proportion to the amount which the mortgage bears to the value of the property.” The foreclosure judgment was described as “no more than a direction that the interest and rights of all parties be sold; it is the sale that changes any such rights or interests. A mortgage lien is not merged into a decree of foreclosure, nor is it extinguished by the mere rendition of a decree of foreclosure. It is extinguished only by a sale.” This understanding that the mortgage does not merge into the Court confirmed the judgment in Methvin, stating “a mortgage lien on realty is not merged nor extinguished by a foreclosure decree or judgment.”  In keeping with these prior rulings, here the Court again held that “the mortgage lien did not merge into HUB’s foreclosure judgment.”


In summary, the Court in this case held as follows:

 

“The dormancy statute extinguished HUB’s foreclosure judgment. However, the foreclosure judgment did not extinguish the mortgage lien. The lien can only be extinguished by a sale and application of the proceeds to the judgment, which has not yet occurred. . . . We hold that the dormancy statute does not operate to invalidate the mortgage, which continues to secure the obligation owed by Barnett to HUB; the district court erred in finding that the mortgage merged into the dormant judgment. HUB may prosecute a new action for a judgment based upon its mortgage lien.”

HUB has, with leave of Court, filed its Second Amended Petition in the foreclosure. Oklahoma attorneys and lenders will want to monitor as this case progresses through the District Court.

 

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Washington DC Enacts Additional COVID-19 Emergency Legislation

Posted By USFN, Monday, June 15, 2020

by James Clarke, Esq.

Orlans PC

USFN Member (DC, DE, MA, MD, MI, NH, RI, VA)

On May 5, in response to the COVID-19 crisis, Washington, District of Columbia passed emergency legislation relative to foreclosures of mortgages and condominium liens. Bill 23-0743 is titled “Foreclosure Moratorium Emergency Amendment Act of 2020, approved by the mayor on May 27, 2020 as Act 23-0318. The law is effective upon approval by the mayor but expires 90 days after enactment or August 25, 2020.  

The legislation amends the D.C. Official Code §42-815 and creates a moratorium on initiating or conducting a judicial foreclosure or foreclosure under power of sale (nonjudicial) of a “residential mortgage” while a public health emergency is in effect or for sixty days thereafter. While the current state of emergency has been extended to July 24, the legislation ceases to have effect after August 25.

The legislation also prohibits initiating or conducting the foreclosure of a condominium lien on a residential unit while a public health emergency is in effect or for 60 days thereafter. The moratorium excludes vacant and tenant occupied condominiums.

Click here for copies of the legislation:
https://lims.dccouncil.us/downloads/LIMS/44604/Signed_Act/B23-0743-Signed_Act.pdf

 

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Fannie Mae, Freddie Mac Announce Moratorium Extensions

Posted By USFN, Friday, May 15, 2020

Fannie Mae and Freddie Mac both announced today that they will be extending a moratorium on foreclosures and evictions through June 30.

In their announcement, Freddie Mac stated that servicers “…must suspend all foreclosure actions, including foreclosure sales, through June 30, 2020. This includes initiation of any judicial or non-judicial foreclosure process, move for foreclosure judgment or order of sale. This foreclosure suspension does not apply to Mortgages on properties that have been determined to be vacant or abandoned.”

Fannie Mae specified, “During the period of the extension, servicers may not, except with respect to a vacant or abandoned property, initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure sale. This suspension does not apply to mortgage loans secured by properties that have been determined to be vacant or abandoned.

We generally require servicers to file motions for relief from the automatic stay in bankruptcy cases upon certain milestones. In light of the CARES Act and other impacts resulting from the COVID 19 National Emergency, on Apr. 8, 2020, we temporarily relieved servicers of the obligation to meet these timelines. We are continuing this temporary suspension. Servicers must continue to work with their bankruptcy counsel to determine the appropriate time to file such motions”

The move is a continuation of a directive from the Federal Housing Finance Agency (FHFA), in which the two entities were instructed on March 18 to suspend foreclosures and evictions for at least 60 days. The FHFA originally enacted the moratorium in response the to the national emergency that was declared on March 13 by President Trump due to the COVID-19 outbreak.  

Fannie Mae Lender Letter (LL-2020-02)

Freddie Mac Bulletin 2020-16: Temporary Servicing Guidance Related to COVID-19

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Weathering the Storm: How Mortgage Servicers and Default Firms can Work Together to Survive COVID-19 Moratoria

Posted By USFN, Tuesday, May 5, 2020

 

by Christianna Kersey, Esq., Richard Solomon, Esq., Michael McKeefery, Esq. and Kevin Hildebeidel, Esq.
Cohn, Goldberg & Deutsch, LLC
USFN Member (DC, MD)

According to the World Health Organization, over 7 million cases of COVID-19 have been reported worldwide to date. With no vaccine and no way of knowing when the curve will completely flatten, federal and local governments have taken drastic and unprecedented steps to ease the burden on borrowers affected by the virus. Moratoria on residential foreclosure actions imposed by various private investors, government sponsored entities and state and local governments have dramatically altered the needs of foreclosure servicing agents. These unparalleled governmental actions have both mortgage servicers and default law firms in a state of flux. With needs ever-changing, there is one common goal: withstand the storm.

Since the COVID-19 pandemic was first declared in the United States, there have been numerous federal and state moratoria imposed on both foreclosure and eviction actions.

On March 25, 2020, the U.S. Senate passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The U.S. House passed the bill on Friday, March 27, 2020, and President Trump signed the bill into law that same day. The more stringent CARES Act foreclosure moratorium supplanted all the prior federal moratoria that had been imposed between March 18, 2020 and March 19, 2020.

Section 4022(c)(2) of the CARES Act (“Foreclosure Moratorium and Consumer Right to Request Forbearance”) provides “Except with respect to a vacant or abandoned property, a servicer of a Federally backed mortgage loan may not initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale for not less than the 60-day period beginning on March 18, 2020.” The CARES Act defines a “Federally backed mortgage loan” as any loan that is secured by a first or subordinate lien on real property (including individual units of condominiums or cooperatives) designed principally for the occupancy of from one to four  families that is either insured by the Federal Housing Administration or the National Housing Act, guaranteed under Housing and Community Development Act, the Department of Veterans Affairs, or the Department of Agriculture, made by the Department of Agriculture or purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.

On April 8, 2020, Fannie Mae issued an update to its previously issued LL-2020-02 indicating that “In response to the CARES Act, we are acknowledging that the servicer must now suspend foreclosure-related activities in accordance with the requirements of the CARES Act,” and Freddie Mac issued an update to Bulletin 2020-10, which indicated “As provided in the CARES Act, Servicers must suspend all foreclosure actions, including foreclosure sales, through May 17, 2020. This includes initiation of any judicial or non-judicial foreclosure process, move for foreclosure judgment or order of sale. This foreclosure suspension does not apply to Mortgages on properties that have been determined to be vacant or abandoned.”

Fannie Mae further indicated, “Fannie Mae generally requires servicers to file motions for relief from the automatic stay in bankruptcy cases upon certain milestones. In light of the CARES Act and other impacts resulting from the COVID-19 National Emergency, Fannie Mae is temporarily relieving servicers of the obligation to meet these timelines. This temporary suspension shall be in effect for not less than the 60-day period beginning on Mar. 18, 2020.” Freddie Mac had nearly identical language in its Bulletin 2020-10.

It should be noted that the CARES Act specifically exempts “vacant or abandoned” properties.

On May 14, 2020, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac are extending their moratorium on single-family mortgage foreclosures and evictions (at that time, set to expire on May 17th) until at least June 30, 2020.  Likewise, on that same date, HUD issued Mortgagee Letter 2020-13, VA issued Circular 26-20-28, and USDA issued an announcement, granting  similar extensions of the CARES Act moratoria.

However, notwithstanding the CARES Act and various federal moratoria, states, of course, may have more stringent prohibitions in place. Maryland and the District of Columbia are two jurisdictions that have issued emergency measures and guidance in addition to the federal prohibitions. On March 18, 2020, the same day as most of the federal mandates, the Court of Appeals of Maryland issued an Administrative Order indicating that “Those foreclosures of residential properties and foreclosures of the rights of redemption of residential properties pending in the circuit courts shall be stayed effective immediately; and Residential eviction matters pending in the District Court of Maryland and all pending residential eviction orders shall be stayed effective immediately; and New foreclosure of residential property, foreclosure of rights of redemption after a tax sale, and residential evictions shall be stayed upon filing.”

On March 25, 2020, the Court of Appeals of Maryland issued an Administrative Order rescinding its prior order, and indicating that “All proceedings related to foreclosures of residential properties, … pending in the circuit courts shall be stayed effective immediately, … ; and New foreclosures of residential property, … , and all other actions for possession (residential evictions) shall be stayed upon filing; … .” The only exception being “Where the parties can demonstrate that a delay of a residential foreclosure will place an undue burden on the defendant, a consent motion to lift stay to allow ratification, signed by the defendant, shall be considered on an expedited basis.” Unlike with the federal mandates, there was no specific end date for the March 25, 2020 Maryland Order (like the earlier order), and it merely stated that the order “will be revised as circumstances warrant.”  However, on May 22, 2020, the Court of Appeals issued an Administrative order lifting the suspension of foreclosure, evictions and other ejectments imposed by its prior orders, effective July 25, 2020. So, currently, notwithstanding the federal orders, all post-docket action in Maryland is currently stayed until that time (unless further revised).

Conspicuously, in the Maryland orders, there is no exception, as with the federal mandates, for vacant or abandoned properties. The Maryland orders leave open the possibility of sending the Maryland Notice of Intention Foreclose, in addition to being able to at least file a foreclosure case. However, on April 3, 2020, the Governor of Maryland issued Executive order 20-04-03-01, indicating that “The Commissioner [of Financial Regulation of the State of Maryland] is hereby ordered to suspend the operation of the Commissioner’s Notice of Intent to Foreclose Electronic System, and to discontinue acceptance of Notices of Intent to Foreclose until the state of emergency is terminated and the catastrophic health emergency is rescinded.” This had the practical effect of putting a stop to nearly all foreclosure related activity in the State of Maryland from the very beginning of the process to the very end.  Basically, at the current time, the only action permitted on Maryland residential foreclosure matters is the bare filing of foreclosures based on Notices of Intent to Foreclose (“NOI”) sent prior to the Governor’s order suspending the NOI registration database.

In the District of Columbia, the Chief Judge of the Superior Court initially continued all foreclosure hearings and stayed all evictions before May 1, 2020, and the Court of Appeals canceled all oral arguments before May 31, 2020.  The Mayor issued a series of Emergency Orders which stopped all foreclosures and evictions, which were later extended to June 8, 2020 (Order 2020-066).  On May 27, 2020 the Mayor signed B23-0743, the Foreclosure Moratorium Emergency Amendment Act of 2020. The Act prohibits initiation of or conduct of a residential mortgage foreclosure while a public health emergency is in effect or for sixty (60) days thereafter.  The Act makes a similar provision for condominium foreclosures but only if it is owner occupied or occupied by an heir or beneficiary for a certain period of time if the owner is deceased.

The Council also passed legislation prohibiting evictions and requiring mortgage companies to offer 90-day deferrals of payments.  What emerged was D.C. Act 23-286, which excepted foreclosures which had already been initiated, or where the acceleration had already been exercised, before March 11, 2020.  All others, without regard to the type or nature of the loan (residential and commercial included) will have to comply with the Commissioner of the Department of Insurance, Securities and Banking (“DISB”) to grant a 90-day deferment and waive any late fees, processing fees or other fees accrued during the emergency.

Servicers cannot report delinquency or other derogatory information to credit agencies as a result of the deferral.  Servicers are required to approve all applications where the borrower demonstrates a financial hardship and agrees to pay within a “reasonable” time.  That length of time is defined as either the time which is agreed by the parties or, if there is no agreement, five years after the end of the deferment period or the original term of the loan--whichever is earlier.  No lump sums can be required as a part of the deferral.  Servicers will need to take both the date of acceleration or filing and the new requirements into account before proceeding in the District.

The Act also addressed debt collection generally.  On April 24, 2020 the Office of the Attorney General of the District of Columbia provided guidance on the debt collection provisions and how they would interpret the same.  While the entire guidance is recommended reading to those who are interested, the major points are: the limitations last for the length of the Mayor’s Emergency Declaration and 60 days beyond; attempts to initiate contact with debtors in connection with debt collection are prohibited; and no suits for collection or threats of suits for collection may be issued during the provided term.  Repossession activity must also be halted

Virginia, a non-judicial state, is normally considered very “hands-off” when it comes to foreclosures. On March 30, 2020, Governor Northam issued Executive Order 55, a “stay at home” order which enumerated items for which people could leave their home.  The Order invoked VA Code Sec. 44-146.17 and threatened a Class 1 misdemeanor for violations of the Order.  Calling or attending foreclosure sales was not specifically listed among the enumerated items, leading one to believe it is not permitted.  Moreover, it was suggested that sales might be chilled if bidders could not lawfully attend or were deterred from attending.  The Order states it will remain in effect for 10 weeks, until June 10, 2020, unless amended or altered.  Courts were effectively closed, with each jurisdiction defining what essential functions would be handled during the emergency.

The primary focus of servicers during this unprecedented period has been, and will likely continue to be, loss mitigation assistance.  While foreclosure actions are on mandated holds, servicers are inundated with requests for loss mitigation assistance, including, but not limited to, requests for loan modification, repayment plans, forbearance agreements, deeds in lieu of foreclosure and short sales.  Servicers need to ensure that they not only compile the information and/or documentation necessary to fully review borrowers for any and all applicable loss mitigation alternatives to foreclosure, but servicers must also ensure that they are complying with the Consumer Financial Protection Bureau (“CFPB”) regulations regarding loss mitigation requests.  See 12 C.F.R. § 1024.41.  Furthermore, servicers need to review borrowers for eligible loss mitigation options, and issue decisions regarding each application.  During this entire process, servicers must ensure that they are fully compliant with all applicable CFPB guidelines and local regulations.  Due to the expected significant increase in requests for loss mitigation assistance, servicers may be hard pressed to timely review and respond to loss mitigation applications within the prescribed CFPB or local deadlines.

Servicers will also likely experience a significant increase in volume to their call centers.  As unemployment increases to historic levels, and as many Americans continue to be unsure about their economic future, borrowers will likely contact servicers’ call centers to discuss mitigation of any mortgage loan default, and alternatives to the normal repercussions of such default, i.e. foreclosure.  Borrowers will also contact the servicers’ call centers to determine the current status of their loan and to proactively inquire as to what options are available to them if income streams are impacted by the current pandemic.  All of these factors lead to a serious need for servicers to keep their call centers fully staffed with knowledgeable and experienced individuals who can answer borrowers’ inquiries and who can effectively and accurately usher borrowers through the loss mitigation process.  Servicers must ensure that they have plans in place to safeguard their call centers from being overwhelmed with borrower inquiries.

It may now seem far off, but, at some point not in the too distant future, the imposed moratoria will all be lifted.  When that occurs, it will behoove many servicers to be ready to proceed with files that have been on hold for a significant period of time.  As a result, it is important for foreclosing servicers to focus upon drafting and preparing necessary documentation during these mandated foreclosure holds.  Information and documentation that is needed in order to send out any state or contractually mandated notices that are required prior to initiating foreclosure, or to file first legal, can be completed and submitted to local foreclosure counsel while foreclosure holds are still in full effect.  Ensuring that such documentation is ready will guarantee that servicers and local law firms can work quickly to proceed with foreclosure actions once they are able to do so.

Furthermore, it is very important for servicers to gather information from their various local foreclosure counsel on what the foreclosure restrictions are for each state and/or jurisdiction.  While foreclosure moratoria are in place, servicers can determine what actions are legally permissible in each state to ensure that they are proceeding with their respective portfolios in a practical and legally responsible manner, and to ensure that they are prepared to proceed with foreclosure actions once the moratoria are lifted. 

During these uncertain times, the primary focus of local foreclosure counsel is to assist servicing clients with their ever-changing needs. Most law firm employees and attorneys have a significant amount of experience, that, in many cases, spans decades and covers the entire default process. Unfortunately, at the moment, many of these knowledgeable folks are sitting idle, as the numerous moratoria have brought default legal services to a screeching halt.

While foreclosure actions are on mandated holds, and requests for loss mitigation assistance continue to grow, experienced law firm staff could undoubtedly assist servicers with the processing and drafting of the loss mitigation documents such as loan modifications, repayment plans, forbearance agreements, deeds in lieu of foreclosure and short sale agreements.  Not only would servicers have the benefit of highly experienced and knowledgeable staff drafting documents, but there would also be attorney involvement each step of the way.  Since local counsel have considerable experience with CFPB guidelines and local loss mitigation laws, local firms can also ensure that servicers are fully compliant with all guidelines, laws and rules applicable to the loss mitigation process.  Local foreclosure counsel can also be tapped as a well-versed intermediary with regard to short sale communications, as interacting with borrowers, realtors and opposing counsel are all routine law firm functions. Law firm employees know the right questions to ask and how to properly communicate this information to servicers. Further, most firm employees and attorneys already have relationships with individuals at the servicing companies, so communication should be relatively seamless. Shifting some, or all, of this burden to local firms conserves resources for the variety of other loss mitigation activity which must be performed by the servicer.

As indicated above, servicers have to ensure that they have plans in place to prevent their call centers from being overwhelmed.  In addition to assistance with loss mitigation, local counsel can be sourced as local call center support. Firms have been thoroughly vetted and are already integrated into numerous servicing platforms. Firm employees could quickly direct calls to the proper individuals within each servicing entity, benefitting the borrower by saving time, while also alleviating the servicers’ need to hire and vet additional staff. This would ultimately reduce out of pocket costs to the servicer. 

Another area where existing default operations should focus, is on pre-sale documentation. In more restrictive jurisdictions it is important for foreclosing servicers to carefully consult with local counsel on drafting and preparing necessary documentation to facilitate expedited first legal filing once moratoria are lifted. It is said that “proper planning prevents poor performance,” so pre-planning this process in conjunction with local law firms will minimize legal issues and restart time. Local counsel are experienced in their respective jurisdictions and can gather the necessary information to place each case in a proper posture for filing quickly once the moratoria lift.  Much of this information can be collected while holds are still in place. Substitutions of trustees can be executed, assignments can be executed and made ready for recording, and assignments can even be recorded in jurisdictions that have E-recording.  Title curative actions can proceed and probate petitions can be filed for deceased borrowers. In certain circumstances, under the CARES Act, where properties are vacant, the foreclosure process can continue, if permitted by state law. Servicers should communicate with counsel in various jurisdictions to see if the state moratoria are more restrictive. If they are not, counsel could assist with verification of vacancy on properties, to push the process forward.   Ensuring that such information and documentation is ready and being processed will ensure that servicers and local law firms can work quickly to move forward with foreclosure actions once they are able to do so, and will mitigate the shock to those departments when foreclosures resume.

Finally, while it remains very important for servicers to understand what actions are legally permissible in every jurisdiction, it is equally important to ensure that they are prepared to proceed with foreclosure actions once the holds are lifted. Although it may be difficult to shift perspectives to think of the delay as beneficial, in states where servicers have been given time to prepare, servicers should maximize that preparedness in cooperation with the local law firms.

We do not have a crystal ball and we do not know what the future holds for the default industry, but what we do know is that servicers and counsel can work in concert to prepare for the many shared challenges facing both before and after the lifting of the moratoria imposed as a result of the COVID-19 pandemic.

 

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Six Feet of Separation: Service of Process in the Era of Social Distancing

Posted By USFN, Tuesday, May 5, 2020

by Lisa Lee, Esq.
KML Law Group, P.C.
USFN Member (NJ, PA)


“Whatever disagreement there may be as to the scope of the phrase ‘due process of law’ there can be no doubt that it embraces the fundamental conception of a fair trial, with opportunity to be heard.”

-          Justice Oliver Wendell Holmes, Jr.

 

Justice Holmes said it best – there can be no due process of law without the “opportunity to be heard.”  A party who receives proper service of legal process is deemed to have been notified of the action being taken against them, and provided with an opportunity to defend that action.  Many states require that this service be “personal” or, failing that, made by another means that ensures the party is well aware of the action, and can be held accountable to the outcome.

Personal service is affected most often by municipal officers (sheriff’s deputies, constables, and the like) or private process servers, depending on the jurisdiction and the thing to be served.  Personal service is the preferred method for obvious reasons, and often requires that documents be “handed” to the party being served, or that they be signed for by the party being served.

 

In the current era of social distancing due to the COVID-19 pandemic, service of process has taken on new complexity. 

Sheriff and Constable Service has been restricted and delayed to varying degrees by state and local court closures, and the furloughing of some municipal employees, which is delaying service.

Private process servers have been affected by court closures as well, in that less filings mean less papers to serve, and a general downturn in business.  In addition, Stay at Home/Shelter in Place Orders and travel restrictions are preventing some process servers from doing their jobs at all.  Further complicating the job for those who are able to do it legally and safely in their states is the closure of the majority of businesses, which is making service on those businesses and their employees close to impossible.  Social distancing also necessarily affects how process servers conduct themselves.  How do you “hand” something to someone else and still stay at a safe distance?  Understandably, social distancing may result in an increased number of parties refusing service.  This will likely increase the need to serve by alternate means, often at increased cost.  If a service return notes that personal service was made on a party by a means other than handing the document(s) to the party, will that constitute good service?  In states where service requirements have not been relaxed to account for social distancing, this will be an evolving question for your local counsel as firms and courts resume more normal operations in the wake of COVID-19.

If personal service is not or cannot be affected, another method of service will be necessary.  One possibility, in some states and for some forms of notice, is signature required mail service. This form of service is sometimes an acceptable alternative because it is designed to provide notice to the particular person to whom the mail is addressed.  But, this method is not without its COVID-19 related challenges either.

In March 2020, the United States Postal Service (“USPS”) revised its signature required mail delivery procedures to account for the social distancing and health and safety concerns related to the pandemic.  The change in recognizes the close proximity and additional handling that occurs when a mail carrier must ask customers for a signature and government issued identification, when required. To reduce the health risks of this activity, the USPS has instituted a temporary policy whereby carriers will:

 

1) avoid ringing the doorbell when possible, and instead knock on the customer’s door;


2) avoid areas that may be frequently touched when knocking;

3) request the customer’s first initial and last name while maintaining a safe, appropriate distance;


4) request the customer’s first initial and last name so that the employee can enter the information on the electronic screen or hard copy items such as return receipts; and


5) ask the customer to step back a safe distance or close the screen door/door so that they may leave the item in the mail receptacle or appropriate location by the customer door.

 

These temporary measures seem quite reasonable.  However, in situations where the rules of court of other law require that mail be signed for by the recipient, it remains to be seen whether courts will agree that this altered process will stand muster from a due process standpoint. 

For default servicing practitioners, service of process was a procedural hurdle that, while sometimes cumbersome and time-consuming, was relatively straight-forward in most jurisdictions.  The COVID-19 pandemic has now added some curveballs to an otherwise fairly black and white process, giving new meaning to the phrase “never a dull moment.”

 

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Florida Governor Issues Executive Order Suspending Mortgage Foreclosure Cause of Action

Posted By USFN, Wednesday, April 22, 2020

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

and Adam Diaz, Esq.
Diaz, Anselmo, Lindberg, P.A.
USFN Member (FL, IL)

In addition to the foreclosure moratoriums set forth in the CARES Act, the COVID-19 pandemic has resulted in state governors issuing additional foreclosure and eviction protection in the form of executive orders. On April 2, Florida Governor Ron DeSantis issued an executive order (Number 20-94) stating as follows in regard to mortgage foreclosures, “I hereby suspend and toll any statute providing for a mortgage foreclosure cause of action under Florida law for 45 days from the date of this executive order.” 
  

The governor refers to the State of Emergency and the Public Health Emergency in the State of Florida, as well as the 60-day moratoriums implemented by HUD and FHFA in regard to single family mortgage foreclosures and evictions due to the COVID-19 emergency.  The governor finds that “this emergency has impacted the ability of many Floridians with single family mortgages to make their mortgage payments” and as governor, he is responsible for meeting the dangers presented to the state and its people by this emergency.

The Order is vague on how it will affect the Court system, as the governor does not have the ability to toll Court deadlines or deadlines set under the Rules of Civil Procedure.  In addition, the Order does not bar borrowers’ counsel from filing motions or discovery.

It was expected the individual Circuits Court would enter Administrative Orders detailing the practical application of this order,  however, that has not been the case.  Currently, Orange, Osceola and Duval Counties have issued Administrative Orders essentially suspending all actions related to mortgage foreclosure causes of action and canceling all pending foreclosure sales until 12 am on May 19, 2020.  Nassau County’s order states that all pending mortgage foreclosure actions are hereby tolled and shall not proceed until further order of the court.  Nassau’s order also states that the Clerk of the Court is authorized to accept complaints or petitions seeking foreclosure of a mortgage, but any new cases filed shall be subject to this tolling order. In addition, Broward County has suspended all Civil Court proceedings until June 1, and in Miami-Dade each Judge has their own discretion on how to handle their foreclosure dockets.

 

The conservative approach is recommended in complying with the governor’s order. To that end, it is recommended ceasing all filing of Mortgage Foreclosure Complaints, Motions for Judgment or proceeding to final judgment or judgment hearings, unless specifically ordered to do so by the Court.   It is also recommend stopping service of process on any in flight foreclosures that were not previously covered under the CARES Act or any of the servicer or investor-imposed moratoriums.  Please note that unlike the CARES Act, this executive order does not except vacant properties.

 

Many of the Circuit Courts have already canceled sales for a defined period of time.  To the extent that the foreclosure sale has not otherwise been canceled by an administrative order, we recommend filing a motion to cancel the sale in order to comply with the governor’s order.   It is also recommend filing motions to stay or abate foreclosure on all in flight foreclosures to preserve the Court record and also to toll the time limit for service of process (in the event service is not yet complete) and to prevent the court or other parties from affirmatively setting hearings to move the case forward.

 

For litigated files, in which the Borrower has filed a motion, answer, discovery or other defensive actions, there are specific time periods which must be met, and responses must be completed in a timely manner. As the governor’s order does not contemplate ongoing litigation or time periods under the Rules of Civil Procedure, it recommends completing the contested portion timely without proceeding to judgment unless there is an order from the Circuit Court or specific Judge which would not allow the same. The client will need to work closely with the assigned litigation attorney to determine the best course of action on a case by case basis.  It is important to note Borrower’s attorneys are already using this time to obtain orders providing for indefinite stay in these matters, which should be objected to.

Please note that the Executive Order issued on April 2, 2020 does not specifically address post foreclosure evictions. However, it does state, “I hereby suspend and toll any statute providing for an eviction cause of action under Florida law solely as it relates to non-payment of rent by residential tenants due to COVID-19 emergency for 45 days from the date of this Executive Order, including any extensions.”

Currently, pursuant to the Supreme Court of Florida Order No. AOSC20-17, issued on March 24, 2020, the requirement in Florida Rule of Civil Procedure 1.580(a) for the clerk to issue a Writ of Possession “forthwith” shall be suspended through the close of business on Friday, April 17, 2020 or as provided by subsequent Order. Therefore, clerks throughout the state of Florida are not moving forward with issuing Writs of Possession for the next two weeks and lockouts will not be taking place. Since the language of the Executive Order specifically states it is solely pausing the initiation of an eviction for non-payment of rent due to COVID-19, this deducts that Eviction Notices to Vacate and post foreclosure Motions for Writ for former owner occupied and vacant properties are clear to proceed.  However, it may be challenged that this interpretation was not the intent of the Executive Order. Therefore, it is recommended to stay on sending any eviction notices and Motions for Writ of Possession until we have clearer direction as to how the Supreme Court of Florida shall apply this order to post foreclosure evictions.

 

 

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Massachusetts Issues Moratorium on Evictions and Foreclosures

Posted By USFN, Wednesday, April 22, 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 April 20, Massachusetts Governor Charlie Baker signed into law “An Act providing for a moratorium on evictions and foreclosures during the COVID-19 Emergency” (hereinafter the "Act"). The new law places a moratorium on non-essential evictions of residential and small business tenants and residential mortgage foreclosures. Specifically:

For foreclosures, the Act prohibits mortgage lenders on 1-4 family "residential property" from (i) publishing notices of a foreclosure sale, (ii) exercising a power of sale, (iii) exercising a right of entry, (iv) initiating a judicial or non-judicial foreclosure or (v) filing a complaint to determine the military status of a borrower under the federal Servicemembers Civil Relief Act. It is important to note that "residential property" is defined pursuant to M.G.L. 244 sec. 35B as four or fewer separate households occupied or to be occupied in whole or in part by the borrower and is limited to principal residences (excluding commercial or investment property, residence other than a primary residence, residential property taken in whole or in part as collateral for a commercial loan or a property subject to condemnation or receivership). It does not apply to vacant or abandoned property. Furthermore, lenders are required to grant forbearance of 180 days based on a borrower request to the lender affirming that he or she has experienced negative financial impact due to COVID-19. Loan payments subject to the forbearance will be added to the end of the loan unless agreed otherwise. Lastly, the Act prohibits the imposition of fees, penalties or interest and providing negative information to reporting agencies.

For Evictions, the Act prohibits "non-essential" evictions on both residential and small business premises units. A "non-essential eviction" is defined as an eviction for (i) nonpayment of rent, (ii) resulting from a foreclosure, (iii) for no fault or no cause, or (iv) for cause that does not involve allegations of: (a) criminal activity that may impact the health or safety of other residents, health care workers, emergency personnel, personal lawfully on the subject property or the general public; or (b) lease violations that may impact the health or safety of other residents, health care workers, emergency personnel, persons lawfully on the subject property or the general public. The eviction moratorium does not apply to i) commercial tenants that operate outside of Massachusetts, are publicly traded, or have 150 or more full-time equivalent employees; or ii) commercial tenants arising from the expiration of a lease term or a tenant default that occurred prior to March 10, 2020.

The moratorium shall expire 120 days after the effective date of this act or 45 days after the COVID-19 emergency declaration has been lifted, whichever is sooner.

A link to the full copy of the Act: https://malegislature.gov/Laws/SessionLaws/Acts/2020/Chapter65

 

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Maine Legislature Passes Bill Affecting Residential Foreclosure, Property Preservation

Posted By USFN, Wednesday, April 15, 2020

by James Garnet
Brock and Scott, PLLC
USFN Member (AL, CT, FL, GA, MA, MD, ME, ME, MI, NC, NH, OH, RI, SC, TN, VA, VT)

The Maine Legislature recently passed a bill that will have an impact on the residential foreclosure and property preservation processes (An Act to Preserve the Value of Abandoned Properties by Allowing Entry by Mortgagees – H.P. 1407 – L.D. 1963). This bill was signed by the Governor on March 18, 2020 and will take effect on June 16, 2020.

The stated purpose of this bill is to assist communities and financial institutions when a property becomes abandoned by the owner. In reality, the bill makes it more difficult for financial institutions to secure a property or take any ameliorative actions to prevent further deterioration. Most mortgages contain a provision that allows a mortgagee to enter a property to make repairs, change locks, replace or board up doors and windows, drain water from the pipes or rectify any code violations or dangerous conditions.  This new law, however, will place additional burdens upon mortgagees and mortgage loan servicers who have commenced a foreclosure action before they can take any of the aforementioned actions.

After commencement of an action for foreclosure, a mortgage loan servicer is required to file an affidavit with the court attesting to the abandonment of the property before any property preservation efforts that require entry on to the property may be commenced. The bill sets forth the criteria that may be used to make a determination of abandonment and further sets forth what must be included in the affidavit and who may attest to those facts. The court will not make a determination of abandonment or take any further action on the filed affidavit.

The bill further imposes notice and record maintenance requirements upon the mortgage loan servicer. The notice must be posted on the front door of the property and the bill specifies what information is required to be included in the notice. Records of entry must be maintained by the servicer or its designee for at least four years. The bill also provides for penalties against servicers for any violations.

Text of the full bill may be found here: https://www.usfn.org/resource/resmgr/misc_images/BrockScott_MEHP1407_4_15_20.pdf

 

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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: Monday, July 27, 2020

In addition to our NMSRD and other one-of-a-kind resources, USFN is collecting industry, state and regional announcements related to changes in deadlines and regulatory requirements as a result of COVID-19. While not an exhaustive list, we update information as it is made available to us. 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
Click here

Supreme Court of Illinois Grants Three-Month Extension to Attorneys with a June 30 MCLE Compliance Deadline - Supreme Court of Illinois via Illinois MCLE Board - 4/20/20
Click here


Industry Education

Monthly USFN Briefings
Click here


National Foreclosure Announcements
FHFA Extension of Foreclosure and Eviction Moratorium (FNMA & FHLMC) - FHFA via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/22/20
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HUD Extension of Foreclosure & Eviction Moratorium - HUD via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/22/20
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VA Extension of Foreclosure & Eviction Moratorium - VA via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/22/20
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USDA Extension of Foreclosure & Eviction Moratorium - USDA via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/22/20
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Fannie Mae, Freddie Mac Announce Moratorium Extensions - 5/14/20 
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Bill Banning Collection During Major Disasters Introduced in U.S. Senate - insideARM - 3/25/20 
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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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USFN Member Firm Announcements

New York - Administrative Order 157-20 - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/27/20
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Maryland Update: COVID-19 Stay Lifting - Alba Law Group, P.A. - 7/22/20
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New York Foreclosure District Orders - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/1/20
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Extended COVID-19 Moratoriums - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/15/20
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Moratorium on Evictions and Foreclosures in New York - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/8/20
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Credit Reporting COVID-19 - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/14/20
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GSE Guidance Related to CARES Act - Scott and Corley, P.A. - 4/10/20
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CARES Act Details - Scott and Corley, P.A. - 3/30/20
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State Announcements

District of Columbia
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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Court Updates in Response to Covid-19 - Rosenberg & Associates, LLC - 3/16/2020

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Superior Court of the District of Columbia Order - Rosenberg & Associates, LLC - 3/16/2020
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Florida
Florida Governor Issues Executive Order Suspending Mortgage Foreclosure Cause of Action - McCalla Raymer Leibert Pierce, LLC and Diaz, Anselmo, Lindberg, P.A. - 4/22/20
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Hawaii

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 
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Illinois 
Supreme Court of Illinois Grants Three-Month Extension to Attorneys with a June 30 MCLE Compliance Deadline - Supreme Court of Illinois via Illinois MCLE Board - 4/20/20
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Iowa
Extension of Foreclosure Moratorium - State of Iowa via Petosa Law LLP - 4/2/20
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Foreclosure Moratorium - State of Iowa via Petosa Law LLP - 3/22/20
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Kansas

New Hampshire Governor Issues Emergency Order Temporarily Prohibiting Foreclosure and Eviction Actions - Brock and Scott, PLLC - 3/18/20
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Maine
Maine Legislature Passes Bill Affecting Residential Foreclosure, Property Preservation - Brock and Scott, PLLC - 4/15/20
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Maryland
Administrative Order Expanding and Extending Statewide Judiciary Restricted Operations Due to the COVID-19 Emergency - Court of Appeals of Maryland via Rosenberg & Associates, LLC - 4/15/20
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Maryland Court Update in Response to Covid-19 - Rosenberg & Associates, LLC - 3/23/2020

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Maryland Court Update in Response to Covid-19 - Rosenberg & Associates, LLC - 3/19/2020
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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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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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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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Massachusetts
Massachusetts Issues Moratorium on Evictions and Foreclosures - Brock and Scott, PLLC - 4/22/20
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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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Massachusetts Division Of Banks Issues New Expectations for Lenders - Brock and Scott, PLLC - 3/30/20

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New Hampshire
New Hampshire Governor Issues Emergency Order Temporarily Prohibiting Foreclosure and Eviction Actions - Brock and Scott, PLLC - 3/18/20
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New Jersey
County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/27/20
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Fifth Omnibus Order on Court Operations and Legal Practice - Supreme Court of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/17/20
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Sixth Omnibus Order on Court Operations and Legal Practice - Supreme Court of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/17/20
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Landlord Tenant Protections During Pandemic - New Jersey Courts via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/17/20
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Executive Order No. 151 - State of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/8/20
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Amended General Order Regarding Court Operations - United States Bankruptcy Court, District of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/2/20
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Bar Notice Certain Docket Events CARES Act - United States Bankruptcy Court, District of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/13/20
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Executive Order 138: Extends the Public Health Emergency - State of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/12/20
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A4034: Authorizes the Governor to Permit Mortgage Forbearance and Rent Payment Responsibility Reduction - State of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/11/20
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S2330: Governs Credit Reporting and Debt Collection as They Relate to the COVID-19 Pandemic - State of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/11/20
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Notice to the Bar Adoption of Mandatory Local Form Notice of Mortgage Forbearance - United States Bankruptcy Court, District of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/6/20
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Notice to the Bar Supplemental GO Automobile Loans - United States Bankruptcy Court, District of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/6/20
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Notice Concerning Forbearance Agreements Related to the CARES Act - United States Bankruptcy Court, District of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/4/20
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Notice Concerning Official Form Amendments Related to the CARES Act - United States Bankruptcy Court, District of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/4/20
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Supplemental Standing Order for Adoption of Interim Rule 1020 of Bankruptcy Procedure - United States Bankruptcy Court, District of New Jersey via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/4/20
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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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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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New Mexico
New Mexico court information -  State Bar of New Mexico via Tiffany & Bosco, P.A.
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New York
County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/27/20
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Herkimer County Memo - State of New York Unified Court System via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/27/20
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Revised Procedure for Addressing Residential and Commercial Foreclosure Proceedings - State of New York Unified Court System via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/27/20
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COVID-19 General Order Extension - United States Distrcit Court, Western District of New York via via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/17/20
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Memorandum issued by New York Chief Administrative Judge Marks – State of New York Unified Court System via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/10/20
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New York Executive Order 202.48 - State of New York via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/9/20
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Vacant and Abandoned Property Reporting Bulk Filing Instructions - New York State DFS via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/8/20
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Procedure for Addressing Residential and Commercial Foreclosure Proceedings - State of New York Unified Court System via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/24/20
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New York COVID Form Notice - State of New York Unified Court System via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/24/20
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New York COVID Attorney Affirmation - State of New York Unified Court System via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/24/20
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Procedure for Residential and Commercial Eviction Proceedings - State of New York Unified Court System via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/22/20
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S8243C - Relates to the Forbearance of Residential Mortgage Payments - State of New York via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/22/20
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Administrative Order 20-06 - United States Bankruptcy Court for the Northern District of New York via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/11/20
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Executive Order 202.28 - State of New York via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/8/20
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Administrative Order 20-05 - Northern District of New York, United States Bankruptcy Court via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/29/20
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Request for Mortgage Forbearance Conference and Certificate of Service - Northern District of New York, United States Bankruptcy Court via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/29/20
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General Order M-545 - United States Bankruptcy Court, Southern District of New York via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/29/20
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Courts in Mid-Hudson Region and Long Island Begin Return to In-Person Courthouse Operations - New York State Unified Court System via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/27/20
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Courts in 13 Counties in Western New York and the Capital Region to Begin Return to In-Person Courthouse Operations - New York State Unified Court System via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/22/20
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Message from Chief Judge DiFiore - New York State Courts via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/14/20
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New COVID-19 Bankruptcy Event - Eastern District of New York, United States Bankruptcy Court via  - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/13/20
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A10351 (Introduced but not yet passed or signed by the Governor): Relates to the Forbearance of Residential Mortgage Payments - State of New York via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/12/20
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Executive Order 202.28: Continuing Temporary Suspension and Modification of Laws Relating to the Disaster Emergency - State of New York via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/11/20
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Administrative Order-87-20: Electronic Document Delivery System (EDDS) Procedures for Use Throughout the COVID-19 Pandemic - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/11/20
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State of New York Executive Order Continuing Suspension of Foreclosures and Evictions - State of New York via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/8/20
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EDDS: UCS Program for Electronic Delivery of Documents - State of New York Unified Court System via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/5/20
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UCS Electronic Document Delivery System Frequently Asked Questions - State of New York Unified Court System via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/5/20
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NY S8243 – Forbearance of Residential Mortgage Payments - New York State Senate via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/5/20
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Courts Update - State of New York Unified Court System via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/4/20
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Adoption of Interim Bankruptcy Rules - U.S. Bankruptcy Court, Eastern District of New York via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/27/20
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Adoption of Temporary Amendment to Interim Bankruptcy Rule 1020 - U.S. Bankruptcy Court, Southern District of New York via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/24/20
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Court Appearances Under the Exigent Circumstances Created by COVID-19 - U.S. District Court, Western District of New York via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/21/20
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CARES Act Changes and Changes to Official Forms - U.S. Bankruptcy Court for the Southern District of New York  via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/15/20
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Virtual Courts Expanded Beyond the Limited Category of Essential and Emergency Matters - New York State Unified Court System via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/13/20
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COVID-19 Administrative Order - New York Courts via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/13/20
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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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COVID 19 Relief in New York - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 3/24/20
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New York- Statute of Limitations - 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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North Carolina

US Bankruptcy Court Western District of North Carolina Provides Guidance on How Forbearance Notices Will Be Treated in Chapter 13 Cases - United States Bankruptcy Court, Western District of North Carolina via Brock & Scott, PLLC - 5/27/20
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Oklahoma
Oklahoma Court Status - Oklahoma State Courts Network via Baer Timberlake PC - 3/19/20
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Pennsylvania
County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/27/20
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Pandemic Mortgage Assistance Program Guidelines - Pennsylvania Housing Finance Agency via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/27/20
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CARES Rent Relief Program Guidelines - Pennsylvania Housing Finance Agency via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/27/20
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Pennsylvania Executive Order - State of Pennsylvania via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/10/20
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Homeowner's Emergency Mortgage Assistance Program - Pennsylvania Housing Finance Agency via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/1/20
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President Judge Administrative Order - First Judicial District of Pennsylvania via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/22/20
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Pennsylvania Bulletin, Doc No. 20-737 - Supreme Court, Western District of Pennsylvania via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/8/20
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Notice to ECF Filers - US Appeals Court, Third Circuit - via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/8/20
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President Judge Administrative Order - First Judicial District of Pennsylvania via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/22/20
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Executive Order Concerning Writs of Possession, Act 6 and Act 91 Notices, and Landlord/Tenant Eviction Notices - Commonwealth of Pennsylvania via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/11/20
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Reopening Pennsylvaina - State of Pennsylvania via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/4/20
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Emergency Order of Statewide Judicial Administration - Supreme Court of Pennsylvania, Western District via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 5/4/20
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Philadelphia Extends Judicial Emergency Order to May 29 - First Judicial Distrcit of Pennsylvania via KML Law Group, P.C. - 4/23/20
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Procedures Implementing Forbearance Agreements - U.S. Bankruptcy Court, Eastern District of Pennsylvania via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 4/23/20
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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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Pennsylvania court and county operations - The Unified Judicial System of Pennsylvania - 3/18/20

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South Carolina

South Carolina Bankruptcy Court Update: Limitation on In-Court Appearances - Scott and Corley, P.A. - 5/27/20
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UPDATE - SC Supreme Court Orders Foreclosure Hearings, Foreclosure Sales, and Evictions May Resume on May 15, 2020 - Scott and Corley, P.A. - 5/18/20

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Process for Complying with South Carolina Supreme Court Order to Resume Foreclosure Hearings, Foreclosure Sales, and Evictions on May 15, 2020 - Scott and Corley, P.A. - 5/4/20
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South Carolina Supreme Court Orders Foreclosure Hearings, Foreclosure Sales, and Evictions May Resume on May 15, 2020 - Scott and Corley, P.A. - 5/1/20
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South Carolina Bankruptcy Court Update Regarding CARES Act - Scott and Corley, P.A. - 4/22/20
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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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COVID-19 South Carolina Update - Scott and Corley, P.A. - 3/25/20
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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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South Carolina Regulatory Update - COVID-19 - Scott and Corley, P.A. - 3/19/20
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Vermont
County Updates for New Jersey, New York, Pennsylvania and Vermont - Schiller, Knapp, Lefkowitz & Hertzel, LLP - 7/27/20
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Expansion of Standing Order #20-09 - United States Bankruptcy Court, District of Vermont via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/25/20
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Extension of Standing Order # 20-10 - United States Bankruptcy Court, District of Vermont via Schiller, Knapp, Lefkowitz & Hertzel, LLP - 6/25/20
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Virginia
Court Updates in Response to Covid-19 - 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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Washington

Washington State Governor Inslee Extends Eviction Moratorium Through October 15, 2020 - McCalla Raymer Leibert Pierce, LLC - 7/27/20
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Proclamation by the Governor Extending and Amending Proclamations 20-05 AND 20-19, et seq. - Office of the Governor via McCalla Raymer Leibert Pierce, LLC - 7/27/20
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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.

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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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