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State Legislative Updates -Illinois

Posted By USFN, Wednesday, February 6, 2013
Updated: Monday, November 30, 2015

February 6, 2013

 

by Lee Perres & Nicholas Schad
Fisher and Shapiro, LLC
USFN Member (Illinois)

Editor's Note: On February 8, 2013, Illinois Governor Quinn signed SB16. It is effective June 1, 2013.

On December 5, 2012, SB16 (the Bill) passed both houses of the 97th Illinois General Assembly, set to become effective June 1, 2013. At the timing of the writing of this article, the bill is awaiting the governor’s signature.

The Bill has four main components: (1) funding for housing counseling and foreclosure prevention; (2) an expedited process to foreclose abandoned properties; (3) additional notice requirements to aldermen, if the property is located in the city of Chicago, and to the last-known property insurers; and (4) clarification of the requirements of the form of a properly recorded Illinois mortgage. The Bill applies to standard mortgages and “revolving credit” loans.

Funding for Housing Counseling and Foreclosure Prevention
— The Bill authorizes the Illinois Housing Authority to establish and administer a Foreclosure Prevention Program. The program uses monies in the Foreclosure Prevention and Counseling Fund, appropriated for that purpose, to make grants to HUD-certified housing counseling agencies to support pre-purchase and post-purchase home ownership education and foreclosure prevention counseling. Seventy-five percent of the fund monies are to be used for housing counseling outside of the city of Chicago, and twenty-five percent for counseling in Chicago. Funding for the Foreclosure Prevention and Counseling Fund and the Abandoned Residential Property Municipality Relief Fund comes from additional filing fees charged to plaintiffs in foreclosure actions. The amount of the additional fee is determined by a “tier system” based on the number of foreclosure complaints filed by a plaintiff, “together with its affiliates” (defined as “any company that controls, is controlled by, or is under common control with another company” by the Bill), during the calendar year immediately preceding the filing of the subject foreclosure:

Tier

Number of Complaints filed by Plaintiff

together with its Affiliates

Amount of additional filing

fee per case

Tier One
175+ foreclosure complaints
$500
Tier Two
50 – 174 foreclosure complaints
$250

Tier

Three

0 – 49 foreclosure complaints
$50







 

 

 


 

A fee of $500 per case applies in the following instances: (1) the plaintiff, together with its affiliates, is a “tier one” filer and files the subject complaint on its own behalf as the holder of the indebtedness; (2) the plaintiff, together with its affiliates, is a “tier one” filer and files the subject complaint on behalf of a “tier one” mortgagee; or (3) the plaintiff, together with its affiliates, is not a depository institution (defined as a bank, savings bank, savings and loan association, or credit union chartered, organized, or holding a certificate of authority to do business under the laws of Illinois, another state, or the United States by the Bill) and files the subject complaint on behalf of a “tier-one” mortgagee.

A fee of $250 per case applies in the following instances: (1) the plaintiff, together with its affiliates, is a “tier two” filer and files the subject complaint on its own behalf as the holder of the indebtedness; (2) the plaintiff, together with its affiliates, is a “tier one” or “tier two” filer and files the subject complaint on behalf of a “tier two” mortgagee; (3) the plaintiff, together with its affiliates, is a “tier two” filer and files the subject complaint on behalf of a “tier one” mortgagee; or (4) the plaintiff, together with its affiliates, is not a depository institution and files the subject complaint on behalf of a “tier two” mortgagee.

A fee of $50 per case applies in the following instances: (1) the plaintiff, together with its affiliates, is a “tier three” filer and files the subject complaint on its own behalf as holder of the indebtedness; (2) the plaintiff, together with its affiliates, is a “tier one,” “tier two,” or “tier three” filer and files the subject complaint on behalf of a “tier three” mortgagee; (3) the plaintiff, together with its affiliates, is a “tier three” filer and files the subject complaint on behalf of a “tier one” mortgagee or “tier two” mortgagee; or (4) the plaintiff, together with its affiliates, is not a depository institution and files the subject complaint on behalf of a “tier three” mortgagee.

To determine which fee the plaintiff must pay, a verified statement is to be filed by the plaintiff at the time the complaint is filed, stating which tier applies to the plaintiff. The clerk of the court may specify other processes by which a plaintiff may certify its eligibility for exemption from the additional fee. The additional fees will expire on January 1, 2018.

Expedited Process to Foreclose Abandoned Property
— The Bill amends Illinois Mortgage Foreclosure Law (IMFL) to permit a mortgagee to file a “motion to expedite the judgment and sale” at filing or any time thereafter on abandoned residential property (735 ILCS 5/15-1505.8). “Abandoned residential property” is defined as “residential real estate that either is unoccupied by a lawful occupant as a principal residence or contains an incomplete structure if the real estate is zoned for residential development, where the structure is empty or otherwise uninhabited and is in need of maintenance, repair or securing,” and, in either case, two or more of the following conditions exist:

  • Construction was initiated on the property and was discontinued prior to completion, leaving a building unsuitable for occupancy, and no construction has taken place for at least six months;
  • Multiple windows on the property are boarded up, closed off, or are smashed through, broken off, or unhinged, or multiple window panes are broken and unrepaired;
  • Doors on the property are smashed through, broken off, unhinged, or continuously unlocked;
  • The property has been stripped of copper or other materials, or interior fixtures to the property have been removed;
  • Gas, electrical, or water services to the entire property have been terminated;
  • There exist one or more written statements of the mortgagor or the mortgagor’s personal representative or assigns, including documents of conveyance, which indicate a clear intent to abandon the property;
  • Law enforcement officials have received at least one report of trespassing or vandalism or other illegal acts being committed at the property in the last six months;
  • The property has been declared unfit for occupancy and ordered to remain vacant and unoccupied under an order issued by a municipal or county authority or court of competent jurisdiction;
  • The local police, fire, or code enforcement authority has requested the owner or other interested or authorized party to secure or winterize the property due to the local authority declaring the property to be an imminent danger to the health, safety, and welfare of the public;
  • The property is open and unprotected and in reasonable danger of significant damage due to exposure to the elements, vandalism, or freezing; or
  • There exists other evidence indicating a clear intent to abandon the property; or
  • The real estate is zoned for residential development and is a vacant lot that is in need of maintenance, repair, or securing (735 ILCS 5/15-1200.5).

The Bill excludes the following from the definition of “abandoned residential property”: (1) property undergoing active construction; (2) property that is seasonably inhabited but otherwise secure; (3) property on which appear bona fide rental or “for sale” signs; (4) property that is otherwise secure, but is subject to probate, quiet title, or ownership dispute; or (5) a property that is otherwise secure and substantially complies with all applicable codes, regulations, and laws (735 ILCS 5/15-1200.7).

The motion must be supported by an affidavit that sets forth facts demonstrating the mortgaged real estate is abandoned residential property under Section 15-1200.5. If the motion is filed with the complaint, or before the period to answer the foreclosure complaint has expired, a hearing on the motion “shall be held no earlier than before the period to answer the foreclosure complaint has expired and no later than 15 days after the period to answer the foreclosure complaint has expired.” If the motion is filed “after the period to answer the foreclosure complaint has expired, the motion shall be heard no later than 15 days after the motion is filed with the court.” If the court determines that the property is abandoned, the court shall grant the motion for expedited judgment and the matter can immediately proceed to “trial of the foreclosure.” While the section is not clear, these authors are hopeful that the judgment hearing will proceed as it always does, by affidavit.

A court may not grant a motion for expedited judgment if the mortgagor, unknown owner, owner, or lawful occupant, appears in the action before or at the hearing and objects to a finding of abandonment. The court is required to vacate an order granting a motion for expedited judgment and sale if the mortgagor or lawful occupant appears in the action at any time before the order confirming sale and presents evidence establishing that the mortgagor or lawful occupant has not abandoned the property. The Bill does not offer guidance regarding the proof that the court will require from an objecting defendant.

The reinstatement period and redemption period for the abandoned property shall expire 30 days after entry of judgment, and the property is to be sold at the earliest possible time thereafter.

Upon confirmation of the sale, any personal property left in or upon the property shall be deemed to have been abandoned by the owner and may be disposed of or donated by the holder of the certificate of sale. The mortgagee, its successors or assigns, the holder of the certificate of sale, or purchaser at sale shall not be liable for the disposal or donation of personal property.

Statutory notices are required to be posted at the property address at least 14 days prior to the hearing on the motion requesting expedited judgment and sale, and at least 14 days prior to the hearing to confirm the foreclosure sale. All notices must be sent to the last-known address of the mortgagor.

Additional Notice Requirements — If the real subject property is located within a city of 2,000,000 or more people (Chicago), the party initiating the foreclosure must send the notice of foreclosure (lis pendens) to the alderman for the ward in which the real estate is located. The notice must be sent by first-class mail. The plaintiff must file an affidavit with the court attesting that the notice was sent to the alderman. Failure to comply with this requirement results in a dismissal without prejudice of the complaint or counterclaim upon the motion of a party or the court.

A copy of the confirmation order (the order confirming the foreclosure sale) must be sent to the last-known property insurer by first-class mail. Failure to send this notice shall not impair or abrogate in any way the rights of the mortgagee or purchaser or affect the status of the foreclosure proceedings.

Clarification of the Required Form of Mortgage — Finally, the Bill addresses a decision of a bankruptcy court in Illinois which invalidated mortgages that do not have the interest rate stated on the face of the mortgage. The Bill provides that “the failure of an otherwise lawfully executed and recorded mortgage to be in the form described in subsection (a) in one or more respects, including the failure to state the interest rate or the maturity date, or both, shall not affect the validity or priority of the mortgage, nor shall its recordation be ineffective for notice purposes regardless of when the mortgage was recorded.”

© Copyright 2013 USFN. All rights reserved
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Florida: Recent Change to Statutes Governing Estoppel Letters on Mortgage Loans

Posted By USFN, Friday, January 4, 2013
Updated: Tuesday, December 1, 2015

January 4, 2013

 

by Roger D. Bear
Florida Foreclosure Attorneys, PLLC – USFN Member (Florida)

Last year the Florida legislature enacted some changes to Florida Statute 701.04 relating to estoppel letters on mortgage loans. The changes became effective on January 1, 2013.

Under the old law, mortgagors could request and receive from the mortgagee, within 14 days, an estoppel letter about their loan. Generally, only the mortgagor was able to receive this information from the mortgagee. Due to the privacy requirements of the federal Gramm-Leach-Bliley Act, some mortgagees refused to provide estoppel letters to anyone other than the mortgagor.

However, persons other than the mortgagor may have a legitimate interest in knowing the loan information. These other parties include an heir or devisee through probate, a surviving spouse who was not on the note, or a junior lienholder that has foreclosed on the property against the mortgagor.

The revised law (http://laws.flrules.org/2012/49) now allows an estoppel letter to be requested by: (1) the mortgagor; (2) a record title owner of the property; (3) a fiduciary or trustee lawfully acting on behalf of a record title owner; or (4) any other person lawfully authorized to act on behalf of a mortgagor or record title owner of the property.

As under the old law, the mortgagee is required to provide the estoppel letter within 14 days after receipt of a written request.

If the request is made by anyone other than the mortgagor, they must provide a copy of the instrument proving title in the property ownership interest or lawful authorization.

If the requestor is not the mortgagor, the estoppel letter does not have to contain an itemization of the unpaid balance of the loan secured by the mortgage, but it must include a per-day amount for the unpaid balance.

The new law provides that the mortgagee or servicer of the mortgagee, acting pursuant to the request, is not liable to any person because of the release of the requested information, other than the obligation to comply with the terms of the estoppel letter. A mortgagee is authorized to provide the information required under this law to a person authorized to request the financial information notwithstanding laws that would otherwise prohibit the disclosure of the information.
As a result of this change in the law, it will allow a record title owner of a property, a fiduciary or trustee lawfully acting on behalf of a record title owner, or any other person lawfully authorized to act on behalf of a mortgagor or record title owner of the property access to information in order to pay off a mortgage.

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Kentucky: Recent Developments in the Law of Standing

Posted By Jeff McIntosh, Wednesday, January 2, 2013
Updated: Tuesday, December 1, 2015

January 2, 2013

 

by David E. Johnson
Lerner, Sampson & Rothfuss – USFN Member (Kentucky, Ohio)

In light of the recent trend in foreclosure defense to challenge a plaintiff lender’s standing to sue, some important decisions out of Kentucky’s appellate courts bear significantly on this issue.

The most important recent Kentucky case on standing arose in the domestic relations context. In the seminal opinion of Harrison v. Leach, 323 S.W.3d 702 (2010), the Kentucky Supreme Court addressed the law of standing at its most fundamental level. The court began by reaffirming its earlier definition of standing as the requirement for a party to “have a judicially recognizable interest in the subject matter of the suit.” Id. at 705. It then considered whether standing was a matter of subject matter jurisdiction, concluding that because Kentucky circuit courts are courts of general jurisdiction empowered to hear “this kind of case,” the court’s subject matter jurisdiction was not implicated.

The court said that “the concepts of standing and subject matter jurisdiction are distinct. Since a lack of standing does not deprive a trial court of subject matter jurisdiction, a party’s failure to raise timely his or her opponent’s lack of standing may be construed as a waiver. Since standing may be waived, an appellate court errs by injecting it into a case on its own motion.” Id. at 709. Further, the court stated elsewhere that “lack of standing is a defense which must be timely raised or else will be deemed waived.” Id. at 708. The practical consequence of this ruling is that since standing is a defense, it is by definition not an element of a plaintiff’s cause of action. In other words, a plaintiff has no legal burden to prove standing if this defense is not raised.

Another important recent case is Stevenson v. Bank of America, 359 S.W.3d 466 (2011), which considered whether a lender had standing where the assignment of mortgage to it was executed and recorded after the filing of the foreclosure. During the foreclosure the lender produced the original blank-endorsed note for inspection, thus proving possession. The court cited UCC section 3-201(2) and held that “[c]ontrary to Stevenson’s contention, the assignment of mortgage was not the document which transferred enforcement rights on the note to BAC, and the date of its execution is immaterial to the case at bar.” Id. at 470.

On both of these issues, in light of the recent decision in Wallace v. Washington Mutual Bank, Case No. 10-3694 (6th Cir. June 26, 2012), it remains the best practice to ensure that the lender’s standing is fully documented when a foreclosure complaint is filed.

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Wisconsin: Appellate Court Upholds Summary Judgment to Lender

Posted By USFN, Wednesday, January 2, 2013
Updated: Tuesday, December 1, 2015

January 2, 2013

 

by Christopher C. Drout, Jr.
Gray & Associates, L.L.P. – USFN Member (Wisconsin)

The Wisconsin Court of Appeals recently affirmed a circuit court’s decision to grant the bank’s motion for summary judgment. PNC Bank, N.A. v. Bierbrauer, 2012 Wisc. App. Lexis 916 (Wis. Ct. App. Nov. 20, 2012). The defendants argued that PNC failed to establish that it was the holder of the note and, therefore, failed to establish a prima facie case for summary judgment. The court of appeals disagreed and affirmed the judgment.

This case involved an action for foreclosure of a first mortgage held by PNC where the defendants failed to make payments. The defendants filed an answer, alleging general denials regarding the default and an affirmative defense that the original loan was with First Franklin.

PNC moved for summary judgment by submitting the affidavit of a document control officer for the servicer. The officer averred that the servicer has possession, control, and responsibility for the accounting and other mortgage loan records relating to the defendants’ loan. Further, the officer stated that the affidavit is made from her personal inspection of the records and her own personal knowledge of how those records are created and kept and maintained. Lastly, the affidavit stated that PNC is the current holder of the note and mortgage.

The defendants did not file a response to the motion for summary judgment; however, they appeared at the hearing and argued that the affidavit did not establish PNC’s right to enforce the note. The circuit court agreed and denied the motion. PNC moved for reconsideration. The circuit court reversed its earlier decision, reasoning that the defendants failed to submit any affidavit or other evidence in opposition to PNC’s summary judgment motion and failed to raise a genuine issue of material fact.

The defendants then moved for reconsideration; however; the circuit court denied their motion, reiterating that PNC made a prima facie case that it was entitled to enforce the note. An appeal was filed, alleging that the affidavit cannot establish PNC as the holder of the note because the affidavit does not establish that the officer had personal knowledge regarding the transfer of the note.

The appellate court affirmed the decision, reasoning PNC made a prima facie case that it was the holder of the note. The affidavit of the servicer’s document control officer was sufficient as it established that the servicer had possession of the accounting and other mortgage loan records and that the affidavit was made from the officer’s personal inspection of said records. The court reasoned the affidavit asserted that PNC was the current holder of the note based upon this personal knowledge of the records. Furthermore, the defendants failed to submit any counter affidavits or contrary evidence in opposition to the motion for summary judgment. The instant case is a positive decision for lenders in Wisconsin and illustrates a trend towards requiring specific pleadings and defenses.

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Michigan Legislature Extends Foreclosure Prevention/Mediation Program

Posted By USFN, Wednesday, January 2, 2013
Updated: Tuesday, December 1, 2015

January 2, 2013

 

by Jeffrey D. Weisserman
Trott & Trott, P.C. – USFN Member (Michigan)

As expected, the Michigan Legislature approved Senate Bill 1172 on December 13, 2012, thereby extending Michigan’s Foreclosure Prevention/Mediation program for another six months without change. The governor signed the bill on Friday, December 28, and assigned it Public Act No. 521. The program, which would otherwise have expired on December 31, 2012, will now continue until at least June 30, 2013. The legislature expects to revisit the program and determine whether any changes need to be made to it in the next session.

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Who is the “Secured Creditor” with Standing to Foreclose under Georgia Law?

Posted By USFN, Wednesday, January 2, 2013
Updated: Tuesday, December 1, 2015

January 2, 2013

 

by Kimberly Wright and Adam Silver
McCalla Raymer, LLC – USFN Member (Georgia)

Georgia’s foreclosure statutes mandate that any foreclosure sale of real property must be conducted by the “secured creditor.” See O.C.G.A. § 44-14-162; O.C.G.A. § 44-14-162.1; O.C.G.A. § 44-14-162.2. Because Georgia’s foreclosure statutes impose duties upon the “secured creditor” in connection with the foreclosure process, an understanding of exactly who qualifies as a “secured creditor” is important to ensure statutory compliance and alleviate uncertainty in the foreclosure process. However, despite the fact that the term “secured creditor” is utilized in multiple places within Georgia’s foreclosure statutes, the term is not defined in the relevant provisions of the Georgia Code. See O.C.G.A. §§ 44-14-160, et seq.; O.C.G.A. § 23-2-114. Consequently, the definition of the term “secured creditor” under Georgia foreclosure law has been varyingly interpreted by the Georgia Court of Appeals, as well as by the federal district courts in Georgia.

The majority of federal courts sitting in Georgia addressing the issue of how “secured creditor” is defined under Georgia foreclosure statutes have held that an assignee of the security instrument containing a power of sale provision is the “secured creditor” and may initiate nonjudicial foreclosure proceedings against the property, even without also holding the subject promissory note evidencing the underlying indebtedness. See, e.g., LaCosta v. McCalla Raymer, LLC, No. 1:10-CV-1171-RWS, 2011 WL 166902, at *4 (N.D. Ga. 2011) (Story, J.) (“Plaintiff does not direct the Court’s attention to any Georgia statute or decision that requires that the Note be legally transferred to the entity carrying out the foreclosure sale, if that entity is in possession of the security deed to the property.”); Kabir v. Statebridge Co., LLC, No. 1:11-CV-2747-WSD, 2011 WL 4500050, at *5 (N.D. Ga. 2011) (Duffy, J.) (same); Smith v. Saxon Mortgage, 446 F. App’x 239 (11th Cir. 2011) (unpublished opinion) (same).

The reasoning behind this analysis is that under Georgia law, a security instrument that includes express language granting the holder of the security instrument an assignable power of sale is a contract and the provisions under the security instrument are controlling as to the rights of the parties and their privies. See McCarter v. Bankers Trust Co., 247 Ga. App. 129, 132, 543 S.E.2d 755, 757 (2000) (citations and punctuation omitted). Moreover, O.C.G.A. § 44-14-64 expressly provides that the underlying indebtedness follows the transfer of the security instrument; i.e., the security deed or deed to secure debt. See O.C.G.A. § 44-14-64(b) (“Transfers of deeds to secure debt … shall be sufficient to transfer the property therein described and the indebtedness therein secured, whether the indebtedness is evidenced by a note or other instrument or is an indebtedness which arises out of the terms or operation of the deed, together with the powers granted without specific mention thereof.”) Thus, the security instrument constitutes a separate contractual agreement between the lender and the borrower and “stands alone” so long as the underlying indebtedness remains on the subject promissory note. See Decatur Federal Sav. & Loan v. Gibson, 268 Ga. 362, 364, 489 S.E.2d 820, 822 (1997).

However, the minority view among federal courts sitting in Georgia is that Georgia law mandates that in order to conduct a nonjudicial foreclosure pursuant to a power of sale contained in a security instrument, the “secured creditor” must be the holder of the promissory note and/or possess an interest in the underlying debt in addition to being the holder of the security instrument. See Stubbs v. Bank of America, 844 F. Supp. 2d 1267, 1273 n.3 (N.D. Ga. 2012) (Totenberg, J.); Morgan v. Ocwen Loan Servicing, LLC, 795 F. Supp. 2d 1370, 1376 (N.D. Ga. 2011) (Totenberg, J.) (citing Weems v. Coker, 70 Ga. 746, 749 (1883)).

Recently, the Georgia Court of Appeals in Reese v. Provident Funding Associates, LLP, 730 S.E.2d 551, 553 (Ga. Ct. App. July 12, 2012), the majority opinion, without explicitly defining the term “secured creditor” as part of its holding, in dicta, appeared to equate the term “secured creditor” with the “owner” of the loan for purposes of Georgia’s foreclosure statutes and found that the servicer of the loan does not qualify as a “secured creditor” under Georgia foreclosure law. However, the majority opinion of the Georgia Court of Appeals in Reese did not clarify whether a party is also required to be a “holder in due course” of the promissory note, in addition to being the owner of the loan in order to qualify as a “secured creditor” for purposes of Georgia’s foreclosure statutes. This created more confusion as to how “secured creditor” is defined under Georgia foreclosure law because Georgia’s Uniform Commercial Code (UCC) makes a clear distinction between a “holder in due course” and the “owner” of a negotiable instrument. See O.C.G.A. § 11-3-301 (setting forth who qualifies as a “holder in due course” entitled to collect on a negotiable instrument, such as a promissory note). Under Georgia’s UCC, there is a clear distinction between “owners” of negotiable instruments and persons “entitled to enforce” those instruments and, as a result, more litigation has ensued as to whether the “owner” or “holder of the loan” is defined as the “secured creditor” under Georgia’s foreclosure statutes based on Stubbs and Reese.

As a result of the great ambiguity created by the split of authority defining the term “secured creditor” under Georgia foreclosure law, on September 7, 2012, the Chief Judge of the U.S. District Court for the Northern District of Georgia, in You v. JPMorgan Chase Bank, N.A., No. 1:12-CV-00202-JEC, Doc. 16 (N.D. Ga. Sept. 7. 2012), certified three questions to the Supreme Court of Georgia, asking the state Supreme Court to provide guidance and clarity on the legal issues pertaining to Georgia foreclosure law. The question relevant to defining the secured creditor states:


“Can the holder of a security deed be considered to be a secured creditor, such that the deed holder can initiate foreclosure proceedings on residential property even if it does not also hold the note or otherwise have any beneficial interest in the debt obligation underlying the deed?”


Id., No. 1:12-CV-00202-JEC, at Doc. 16, p. 2 of 3. The certified questions were docketed in the Georgia Supreme Court on September 13, 2012 and were assigned case number S13Q0040. They are presently pending before the Georgia Supreme Court and oral arguments were presented on January 7, 2013.

The recent court decisions related to the party having standing to prosecute foreclosure cases in Georgia that have diverged from the longstanding rule allowing the assignee of the mortgage the right to foreclose have created inefficiencies and delays in the Georgia foreclosure process. Today, as a result of the recent case law, many investors and servicers have chosen to err on the side of caution when foreclosing in Georgia by taking the following actions: (1) recording assignments prior to the initiation of the foreclosure action; and (2) naming the loan investor in addition to the note holder on the statutory foreclosure notices. However, investors, servicers, and law firms handling foreclosures all hope that when the Supreme Court of Georgia hears this issue, the court will specifically address the meaning of secured creditor.

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Alabama Title Insurance Act and New Residency Requirements

Posted By USFN, Wednesday, January 2, 2013
Updated: Tuesday, December 1, 2015

January 2, 2013

 

by Jeff G. Underwood
Sirote & Permutt, P.C. – USFN Member (Alabama)

On January 1, 2013, House Bill 460, “The Alabama Title Insurance Act,” (the Act) became effective. The Alabama Department of Insurance has adopted regulations that implement the provisions of the Act, which also became effective on that date. The Act is codified in Title 27-25-3, et seq. The Act requires higher qualification standards and strengthened residency requirements for title insurance agents or agencies in the state of Alabama.

The new law dictates that in order to receive a title insurance agent’s license, an applicant must be at least 19 years of age and a bona fide resident of the state of Alabama or a fulltime employee of a duly licensed title agency with its principal place of business physically located in the state. The applicant must not have committed any act that would provide grounds for revocation, suspension, or refusal of license by the Department of Insurance. The applicant must complete a pre-licensing educational course approved by the Department of Insurance (parties with five years of uninterrupted title insurance experience can be exempted from this requirement). The applicant must successfully pass a title licensing exam and pay the necessary licensing fee to the state.

Further, the law compels that business entities which are title agents must have a principal place of business physically located in Alabama. This “brick and mortar” requirement is a key change to the existing law. Failure to comply with this act would subject individuals or agencies to license denial, nonrenewal, or revocation, in addition to the potential for civil fines of up to $10,000 per violation.

Clients should analyze their current title vendors to ensure that the existing title agents meet the licensing requirements outlined under this law, especially in light of the punitive measures put into place under the new provisions.

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PII: Personally Identifiable Information

Posted By IUSFN, Wednesday, January 2, 2013
Updated: Tuesday, December 1, 2015

January 2, 2013

 

by Michael Zevitz
South & Associates, P.C. – USFN Member (Kansas, Missouri)

PI is easily defined as 22÷7 or about 3.14159. On the other hand, PII is not so easily defined or recognizable.

PII, as employed in the financial services industry, is information that can be used to uniquely identify, contact, or locate a single person, or which can be utilized with other sources to uniquely identify a single individual. The abbreviation PII is widely accepted, but the phrase it abbreviates has four common variants based on personal, personally, identifiable, and identifying. Not all are equivalent and, for legal purposes, the effective definitions vary depending on the jurisdiction and the purposes for which the term is being used.

The most common definition of “personal information” refers to a consumer’s first name and last name linked to any one or more of the following data elements that relate to the consumer, when the data elements are neither encrypted nor redacted: Social Security number; driver’s license number or state identification card number; loan or financial account number; credit or debit card number, alone or in combination with any required security code, access code, or password that would permit access to a consumer’s financial account; street address, telephone number, email address; photo, fingerprint, or other biometric image.

Basis of PII
— It is interesting to note that PII is a legal concept, not a technical concept. Because of the versatility and power of modern re-identification algorithms, the absence of PII data does not mean that the remaining data does not identify individuals. While some attributes may be uniquely identifying on their own, any attribute can be identifying in combination with others.

A Case Study — In the bankruptcy forum, protecting the PII of debtors gained importance with the pervasive use of electronic case filing. Section 205(c)(3) of the E-Government Act of 2002 required the U.S. Supreme Court to prescribe rules “to protect privacy and security concerns relating to electronic filing of documents and the public availability ... of documents filed electronically.” To satisfy this requirement, the court adopted Rule 9037, which restricts the filing of documents in bankruptcy cases containing certain types of PII, to address privacy concerns resulting from public access to electronic case files. Rule 9037 addresses the Social Security number, date of birth, and loan number. Pursuant to Rule 9037(a), any document filed in a bankruptcy case must limit the disclosure of that PII to the last four digits of the Social Security number, the year of the individual’s birth, and the last four digits of the loan number.

The term “personal information” does not include public information that is lawfully made available to the general public from federal, state, or local government records. Although the concept of PII is old, it has become much more important as information technology and the internet have made it easier to collect PII through breaches of internet, network, and web browser security, leading to a profitable market in collecting and reselling PII.

Response
— As a response to these threats, servicers and their attorneys are implementing policies and security safeguards to protect against risks such as loss or unauthorized access, destruction, use, modification or disclosure of PII data. For data in motion, companies are now resorting to secure and encrypted email protocols prior to transmission, in addition to redaction policies for publically available documentation. For data at rest, which refers to information stored on a secondary storage device, such as a hard drive or backup tape, encryption solutions are also readily available. The adage “you can never be too careful” certainly applies to just about every aspect of Personally Identifiable Information.

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Connecticut: “Chapter 20” Plan May Not Strip Off an Unsecured Lien

Posted By USFN, Thursday, August 2, 2012
Updated: Monday, November 30, 2015

August 2, 2012

 

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

The U.S. Bankruptcy Court for the District of Connecticut once again has ruled that a debtor cannot strip off an unsecured lien in a “Chapter 20” case. The latest decision came out of the Division of New Haven, and this time the claim involved an undersecured first mortgage.

This decision stems from a contested motion to determine secured status filed pursuant to Bankruptcy Code § 506(a) on March 2, 2012 by the debtor in her chapter 13 case (In re Rogers, BK Case No. 11-32961). The motion proposed to deem the first mortgage held by Eastern Savings Bank (ESB) as partially secured and partially unsecured with the unsecured balance being paid nothing in the debtor’s plan and, therefore, deemed voided upon an “implied” discharge. In response to this motion, ESB filed an objection in which it asserted that the debtor could not void the unsecured balance of its claim since the debtor was not eligible for a discharge in her case due to having received a discharge within four years in a previous chapter 7 case.

The bankruptcy court took judicial notice of a previous decision entered in the Division of Hartford in In re Sadowski, which held that a borrower cannot strip off a wholly unsecured junior lien in a chapter 20 case as such does not satisfy the lien retention requirements of Bankruptcy Code § 1325(a)(5)(B)(i). In its decision, the court in Rogers stated that after review of the Sadowski decision, along with other relevant authority and the record of the case, it agreed and would adopt the rationale of Sadowski in relevant part. The court continued on to state “the Debtor in this Chapter 20 case, while not precluded from filing a Chapter 13 petition and plan after receiving a Chapter 7 discharge [even if not eligible for a Chapter 13 discharge in this case], may not avoid an undersecured … lien in doing so.” The court went on to deny confirmation due to the fact that the plan could not be confirmed because it did not comply with the lien retention requirements of § 1325(a)(5)(B)(i).

The Rogers decision leaves one division in Connecticut (Bridgeport) silent on the issue of Chapter 20 lien avoidance. It is anticipated that division will soon rule on this issue. (Note that Rogers is currently under appeal, as is Sadowski.)

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Connecticut BK Court Holds “Chapter 20” Plan May Not Strip Off a Wholly Unsecured Junior Lien

Posted By USFN, Monday, November 7, 2011
Updated: Monday, November 30, 2015

November 17, 2011

 

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

The U.S. Bankruptcy Court for the District of Connecticut recently rendered a decision in the case of In re Sadowski, which held that a borrower cannot strip off a wholly unsecured junior lien in a “chapter 20” case as such does not satisfy the lien retention requirements of Bankruptcy Code § 1325(a)(5)(B)(i).

This decision stems from an order that entered on the debtors’ “Motion to Determine Secured Status” filed pursuant to Bankruptcy Code § 506(a) on June 8, 2010 in their chapter 13 case (No. 10-21894). The order deemed a junior lien in favor of Wachovia Bank wholly unsecured. In response to that order, the chapter 13 trustee filed an objection to plan confirmation, asserting, in part, that the debtors’ attempt to avoid Wachovia’s mortgage lien without being eligible for a discharge violated the lien retention requirements of § 1325(a)(5)(B)(i)(1) and Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773 (1992).

Neither party disputed that the debtors’ in personam liability to Wachovia was discharged in the debtors’ prior chapter 7 case, that the mortgage lien passed through the chapter 7 case unaffected, or that, following the chapter 7 discharge, Wachovia continued to hold an in rem claim against the property. The court noted that “the essence of the present controversy is the question of whether Wachovia’s claim falls within the purview of the term ‘allowed secured claim,’ as the term is used in § 1325(a)(5)” and, further, went on to look at the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) and the amendments to §§ 1325(a)(5)(B)(i) and 1328(f). The court determined that those amendments provided an objective test to prevent debtors from using chapter 13 as a way to circumvent Dewsnup’s prohibition against lien stripping in chapter 7 cases.

In its analysis, the court determined that “allowed secured claim” as used in § 1325(a)(5) refers to any claim allowed under § 502 of which the creditor holds a lien to secure payment, regardless of whether the claim is recourse or nonrecourse, collectible or uncollectible. With that determination, the court held that the debtors, who were ineligible for a discharge, could not confirm their chapter 13 plan, absent full payment on Wachovia’s claim, as the proposed plan did not satisfy the lien retention requirements under § 1325(a)(5).

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