ALFN TE@CH Regional Training Seminar September 9, 2015 ...

ALFN TE@CH Regional Training Seminar September 9, 2015

Hyatt Regency Jacksonville Riverfront

CONTENTS OVERVIEW

SCHEDULE Seminar Schedule Page 2

SPONSORS We Thank our Exhibiting Sponsors Page 3

GENERAL SESSION Complex Litigation Group Presentation Page 4

SESSION 1 Litigation Updates Page

SESSION 2 Judicial Foreclosure Updates Page

SESSION 3 Bankruptcy Updates Page 2

SESSION 4 Regulatory & Legislative Updates Page 2

SESSION 5 Non-Judicial Foreclosure Updates Page 3

SESSION 6 Post Foreclosure, Vacant/Abandoned Property & Evictions Update Page

ALFN TE@CH Onsite Regional Training Seminar Schedule

6:30 a.m. – Staff & Exhibitor Arrivals & Setup

8:00 a.m. – 8:30 a.m. – Attendee Arrivals and Networking with Exhibiting Sponsors

7:30 a.m. – 5:00 p.m. – Registration Open (Skybridge – 3rd floor)

8:30 a.m. – 9:30 a.m. – General Session – Complex Litigation Group Presentation (River Terrace 1)

9:30 a.m. – 9:45 a.m. - Refreshment Break with Exhibiting Sponsors

9:45 a.m. – 11:00 a.m. - Track One• Session 1 – Litigation Updates (Conference Center B)• Session 2 – Judicial Foreclosure Updates (River Terrace 2)• Session 3 – Bankruptcy Updates (River Terrace 3)

11:00 a.m. – 11:15 a.m. – Refreshment Break with Exhibiting Sponsors

11:15 a.m. – 12:30 p.m. – Track Two• Session 4 – Regulatory & Legislative Updates (Conference Center B)• Session 5 – Non-Judicial Foreclosure Updates (River Terrace 2)• Session 6 – Post Foreclosure, Vacant/Abandoned Property & Evictions Updates (River Terrace

3)

12:30 p.m. – 1:30 p.m. – Lunch Provided & Networking with Speakers, Attendees & Exhibiting Sponsors (River Terrace 1)

1:30 p.m. – 2:30 p.m. – General Session – Complex Litigation Group Presentation (River Terrace 1)

2:30 p.m. – 2:45 p.m. - Refreshment Break with Exhibiting Sponsors

2:45 p.m. – 4:00 p.m. – Track Three – Repeat of Track One• Session 1 – Litigation Updates (Conference Center B)• Session 2 – Judicial Foreclosure Updates (River Terrace 2)• Session 3 – Bankruptcy Updates (River Terrace 3)

4:00 p.m. - 4:15 p.m. – Refreshment Break with Exhibiting Sponsors

4:15 p.m. – 5:30 p.m. – Track Four – Repeat of Track Two• Session 4 – Regulatory & Legislative Updates (Conference Center B)• Session 5 – Non-Judicial Foreclosure Updates (River Terrace 2)• Session 6 – Post Foreclosure, Vacant/Abandoned Property & Evictions Updates (River Terrace

3)

5:30 p.m. – Training Seminar Concludes

5:30 p.m. – 6:30 p.m. – Cocktail Reception at host hotel (River Terrace 1)

Other Details:

Lunch will be provided. Cocktail reception with hors d’oeuvres and drinks provided. Refreshments, snacks, mints, notepads and pens will be provided to all seminar attendees throughout seminar. Noprinted materials will be provided, as all session materials will be emailed to all registered attendees prior to the seminar.

We Thank our SponsorsPlease take a moment to visit with our sponsors during the breaks in our session schedule at 9:30-

9:45am, 11:00-11:15 am, 12:30- 1:30 pm, & 2:30-2:45pm and 4:00-4:15pm or during the Networking Reception 5:30-6:30 p.m.

General Session (Morning & Afternoon) – Complex Litigation Group PresentationRiver Terrace 1 Morning: 8:30 – 9:30 a.m. Afternoon: 1:30-2:30 p.m.

Speakers:• Dylan Howard, Esq., Shareholder, Baker Donelson (ALFN Member in Tennessee and DC) –

Discussion Leader• Kyle Kotake, Esq., Managing Partner, Brock and Scott, PLLC (ALFN Member in North Carolina)• Debra Innocenti, Esq., Partner, Strasburger & Price, LLP (ALFN Member in Texas)• Jason Whitacre, Esq., Attorney, Law Offices of John D. Clunk (ALFN Member in Ohio)

Session Overview:

Dylan Howard, Esq.ShareholderBaker Donelson 3414 Peachtree Road, N.E. Suite 1600 Atlanta, Georgia 30326 Phone: 404.589.3406 Fax: 404.238.9706 [email protected]

Dylan Howard, a shareholder in the Firm's Atlanta office and vice chair of the Residential Mortgage Litigation Group, concentrates his practice in the areas of business and real estate litigation. He has experience in matters related to regulatory compliance for lenders, title clearance, real estate foreclosure, mortgage servicing and mortgage fraud civil prosecution and defense.

Recent Representative Matters • Represented a Fortune 500 lender in numerous successfully litigated matters in state and federal

courts involving regulatory matters, mortgage fraud and predatory lending allegations.• Represented a major lender in a dispute with another major lender regarding priority of competing

mortgage interests.• Represented title insurer in several successfully litigated title clearance and quiet title actions.

Publications & Speaking Engagements • Author – "Beware the CFPB's Hazardous Civil Investigative Demand," The Bank Board

newsletter, January 2015• Author – "The CFPB's Uncivil Civil Investigative Demands," Law360, November 25, 2014• Author – "Uncivil Civil Investigative Demands," CFPB Focus News, May 27, 2014• Author – "A Paperless World?" Mortgage Banking, November 2014• Author – "Operation Choke Point: The CFPB expands its oversight of payday lending ," Westlaw

Journal Bank & Lender Liability, June 2, 2014• Presenter – "Remedial Action in Southeastern States: Georgia," webinar, May 28, 2014• Author – "Are eClosings for Residential Loans the Future?" CFPB Focus News, May 27, 2014• Co-author – "Foreclosure Notice Which States that Servicer has Authority to Amend or Modify the

Loan May Not Satisfy Georgia Law," Mortgage Alert, March 3, 2014• Author – "First Enforcement Action of 'Operation Choke Point,'" CFPB Focus News, February

2014• Author – "A Brave New World for Mortgage Servicers," National Mortgage News, December 30,

2013• Author – "CFPB's New Regulations Will Affect Small Servicers," National Mortgage News,

December 19, 2013

• Author – "New Servicing Guidelines Going Into Effect January 10, 2014," CFPB Focus News,December 2013

• Author – "CFPB's New Regulations Will Affect Local Banks and Small Servicers," CFPB FocusNews, November 2013

• Co-presenter – "Part One: An Originator's Guide to the CFPB," American Legal & FinancialNetwork webinar, October 16, 2013

• Co-author – "CFPB Demonstrates its Broad Scope," CFPB Focus News, September 2013• Author – "CFPB Amendments," CFPB Focus News, September 2013• Co-author – "The CFPB - A Powerful New Cop," Mortgage Banking, September 2013• Presenter – "Trends in Foreclosure Litigation Claims," American Legal & Financial Network

webinar, May 29, 2013• Co-author – "Georgia's Long-Awaited Ruling Finds in Favor of Lenders ," Mortgage Alert, May 20,

2013• Author – Chapter on Foreclosure Law, "Survey of Georgia Real Property Law," 64 Mercer Law

Review 255, 2012• Presenter – "Confirmation of Real Estate Foreclosure - Practical Practice Tips," Institute of

Continuing Legal Education, Real Property Foreclosure Seminar, 2012• Author – "No Private Right of Action under HAMP: The Growing Consensus," Baker Donelson's

Mortgage Industry News, February 2012; Re-published in Journal of Bankruptcy Law, Vol. 8Number 5, July/August 2012

• Presenter – "Real Property Judicial Update," Institute of Continuing Legal Education, RealProperty Foreclosure Seminar, 2011

• Author – Chapter on Foreclosure Law, "Survey of Georgia Real Property Law," 63 Mercer LawReview 309, 2011

• Author – "Mortgages and the UCC," Baker Donelson's Mortgage Industry News, February 2011• Presenter – "Recent Trends in Default Litigation," Real Property Litigation Roundtable, Georgia

Real Property Law Institute, 2011• Presenter – "Understanding Title Issues Related to Mortgages," Georgia Real Estate Liens CLE,

2009• Author – Chapter on Foreclosure Law, "Survey of Georgia Real Property Law," 61 Mercer Law

Review 301, 2009• Author – Chapter on Foreclosure Law, "Survey of Georgia Real Property Law," 60 Mercer Law

Review 345, 2008• Author – Chapter on Foreclosure Law, "Survey of Georgia Real Property Law," 59 Mercer Law

Review 371, 2007• Author – "Remaking the Pen Mightier than the Sword: An Evaluation of the Growing Need for the

International Protection of Journalists," 30 Georgia Journal of International and Comparative Law505-542 (2002)

• Presenter – "Non-judicial Foreclosure – Start to Finish," Institute of Continuing Legal Education,2006

Professional Honors & Activities • AV® Preeminent™ Peer Review Rated by Martindale-Hubbell• Named a Georgia Rising Star in Business Litigation by Georgia Super Lawyers, 2012, 2014,

2015• Recipient – Baker Donelson Atlanta Pro Bono Attorney of the Year, 2008• Chair – American Legal & Financial Network Complex Litigation Practice Group, 2015• Member – Atlanta Bar Association• Member – State Bar of Georgia• Member – American Bar Association• Member – Georgia Association of Mortgage Brokers• Member – Georgia Association of Real Estate Investors• Member – Georgia Real Estate Fraud Prevention and Awareness Coalition

Admissions• Georgia, 2002• Supreme Court of Georgia, 2010• U.S. Court of Appeals for the Eleventh Circuit• U.S. District Court Northern District of Georgia and Middle Districts of Georgia

Education• University of Georgia School of Law, J.D., 2002• Yale University, B.A., 1999

Kyle Kotake, Esq.Managing Partner Brock and Scott, PLLC 4360 Chamblee Dunwoody Road Ste 310 Atlanta, GA 30341 Phone: 404-789-2661 Fax: 404-294-0919 [email protected]

Kyle Kotake joined Brock & Scott, PLLC in October 2012 as Managing Partner of Evictions and Litigation in the Georgia office. Mr. Kotake is a litigator who practices in the areas of mortgage default litigation and eviction. He regularly represents lenders in both state and federal court.

Before joining Brock & Scott, Mr. Kotake spent 11 years in the Atlanta office of Johnson & Freedman, rising to partner responsible for complex litigation matters, where he gained extensive experience of Georgia foreclosure practice as well as handling numerous cases involving such matters as wrongful foreclosure, wrongful eviction, FDCPA violations, RESPA violations, asset forfeitures, code violations, tax sales, title reformation, declaratory judgments and quiet title actions. Throughout his time with the firm he also regularly appeared in the several bankruptcy courts in Georgia, in particular handling adverse matters and contested bankruptcy cases. For several years, Mr. Kotake managed a multi-state eviction practice, overseeing 19 other law firms and their handling of individual eviction cases.

He routinely speaks and provides training on the subjects of eviction and litigation. He was admitted into practice in the states of Georgia and Hawaii in 1999 and 1997, respectively.

ADMITTED TO PRACTICE • 1999 - Georgia Bar • 1997 - Hawaii Bar

EDUCATION • 1995 - Juris Doctor from Syracuse University. • 1992 - Bachelor of Business Administration from the University of Oklahoma.

AFFILIATIONS• American Legal & Financial Network - Co-Chair, Complex Litigation Committee • American Legal & Financial Network - Member, Default Services Practice Group

Debra L. Innocenti, Esq. PartnerStrasburger & Price, LLP 2301 Broadway Street San Antonio, TX 78215 Phone: 210.250.6127 Fax: 210.258.2734 [email protected]

Debra Innocenti maintains a diverse practice in specialty litigation and transactional law for financial services,technology, and Internet-related industries. In connection with her financial services practice, she assists investors, master servicers, special servicers, and sub-servicers in all real estate and litigation-related matters including issues related to MERS, common owner associations, mortgage-backed security trusts, title insurance, consumer protection law claims, and foreclosure matters.

In connection with her technology and Internet law practice, she assists startups, business owners, web developers, entrepreneurs, and artists with protecting and resolving disputes regarding their intellectual property, developing data security and data privacy policies and social media use policies, licensing software, and resolving online business defamation and cyber harassment. She is a member of Geekdom, and was an instructor in the English-Communications department at St. Mary’s University from 1997-2001.

PROFESSIONAL AFFILIATIONS • Admitted, Texas • Admitted, U.S. District Courts for Northern, Eastern, Western, and Southern Districts of Texas • Admitted, Supreme Court of The United States• American Bar Association – Science & Technology Law Section: Social Media Committee, Open • Source Software Committee, Cloud Computing Committees

o Litigation Section: former Chair, Membership Subcommittee, Bankruptcy and Insolvency Committee (2011); former Co-Chair, Appeals Subcommittee, Bankruptcy and Insolvency Committee (2010); former Co-Chair, Bankruptcy Litigation Subcommittee, Business & Commercial Litigation Committee (2008-2009)

• San Antonio Bar Association • State Board of Texas – Computer & Technology Section, Bankruptcy Section

o former member, Young Lawyers Committee (2008-2010); former Law School Liaison (2010)

• American Bankruptcy Institute o former Newsletter Editor, Mass Tort Committee (2009); former Editor, Fifth Circuit Update

(2009)• Greater San Antonio Chamber of Commerce

o former member, Board of Directors (2005-2007); former Council Chair, Area Business Councils (2007)

EDUCATION • The University of Texas School of Law, J.D., 2004, cum laude

o George Pierre Gardere Endowed Scholar o Phi Delta Phi, Legal Honors Society o American Journal of Criminal Law, Editor-in-Chief

• Sarah Lawrence College, M.F.A., 1995 • Our Lady of the Lake University, B.A.,1993, summa cum laude

EXPERIENCE Financial Services and Debtor/Creditor Law

• Litigation oversight and strategy in real estate and foreclosure matters;

• Investor, master servicer, special servicer and sub-Servicer representation in all real estate and foreclosure related disputes including, without limitation, issues related to MERS, common owner associations , title insurance and consumer protection law claims;

• Representation of clients in a diverse range of bankruptcy-related litigation, including avoidance actions, modifications of the automatic stay, claims estimation and allowance, discharge and dischargeability determinations, and executory contract disputes; and

• Representation of future claim representative (“FCR”) in chapter 11 bankruptcy of diversified mining firm subsidiary involved in the mining, processing and sale of raw asbestos and asbestos products.

Internet and Technology Law• Terms of use, terms of sale, and privacy policies for websites; • Software license agreements for startup software-as-a-service developers; Dispute resolution of

copyright infringement claims related to social media; • Creative clearance, including review of websites and social media for infringement issues;

Domain name/trademark searches and registration; • Cease and desist letters and take-down disputes; • Website development agreements to protect intellectual property ownership; and • Intellectual property license agreements.

PUBLICATIONS • Disclosing Material Connections in 140 Characters or Less , Strasburger Intellectual Property

Law• Blog (April 2015) • Co-author. An Educated Response to Cyberbullying, Texas School Business Magazine (March • 2015) • FTC Creates Office Of Technology Research & Investigation , Strasburger Intellectual Property

Law• Blog (March 2015) • The Top Three Things You Should Do to Manage Cybersecurity Risks , Strasburger Intellectual• Property Law Blog (February 2015) • FTC Issues Report on Privacy and Data Security Recommendations for Internet of Things ,

Strasburger Intellectual Property Law Blog (January 2015) • Obtaining Identities of Anonymous Online Defamers Just Got Harder , Circuits: Fall Newsletter of

the• Computer & Technology Section of the State Bar of Texas (November 2014) • FDA Releases Guidance on Medical Device Cybersecurity , Strasburger Intellectual Property

Blog• (October 2014) • Obtaining Identities of Anonymous Online Defamers Just Got Harder, Strasburger Intellectual • Property Blog (September 2014) • Like It or Not: Facebook Prohibits Like-Gating and Other Incentives, Strasburger Intellectual • Property Blog (August 2014) • Think Before You Tweet: Avoiding Liability in 140 Characters or Less , Strasburger Intellectual• Property Blog (August 2014) • Five Questions to Ask Your Webmaster and Your Lawyer, Strasburger Intellectual Property

Blog• (June 2014) • Four Steps in Responding to that Bad Online Review, Strasburger Intellectual Property Blog

(March • 2014)

MEDIA MENTIONS • Measure to Criminalize ‘Revenge Porn’ Will be Problematic for Lawmakers 1200 WOAI (May

2015) Monthly Tech Meetup to Feature IP Legal Education , San Antonio Business Journal (March 2015)

• Guest Voices: The Top Three Things You Should Do to Manage Cybersecurity Risks , San Antonio

• Express-News. Subscription required. (February 2015)• SCOTUS Seen Unlikely to Grant New Protections to Online Speech , 1200 WOAI (December

2014)

• Obtaining IDs of Anonymous Cyberbullies Just Got Harder , San Antonio Express-News. Subscription required. (September 2014)

• Unmasking Online Bullies Just Got Harder in Texas, 1200 WOAI (September 2014) • Product Review Legal Threat Could Be Start of ‘Mainstreaming’ Internet Speech , 1200 WOAI

(May • 2014) • San Antonio Artist Sues Over Public Art in Alabama , San Antonio Express News (December

2013)COMMUNITY

• San Antonio Pets Alive! , Founding Board Member • Leadership San Antonio, Class XXXI, Steering Committee and Class III and Class XXXV

RECOGNITION • Named among the Best Attorneys in Banking and Information Technology by San Antonio Scene • Magazine (2015)• Named among Texas Rising Stars by Thomson and Reuters (2007-2013) • Named a Rising Star in San Antonio’s Legal Community by San Antonio Scene Magazine (2009,

2013)• Named among the Best Bankruptcy and Workout Attorneys by San Antonio Scene Magazine

(2010- 2012)• Named a Top Forty Under 40-San Antonio Rising Star by San Antonio Business Journal (2006)

Jason Whitacre, Esq., AttorneyLaw Offices of John D. Clunk

• Case Western Reserve Law School (J.D. 2003) • Mount Union College (B.A. 2000) • Licensed in the Ohio State and Federal Courts since 2004.

ALFN Southeast TE@CH On-site Regional Training SeminarThe TCPASeptember 9, 2015 Hyatt Regency Jacksonville Riverfront

Dylan Howard, Co-Chair, ALFN Complex Litigation CommitteeShareholderVice Chair, Consumer Financial Litigation and Compliance Practice Group Baker Donelson [email protected]

2www.bakerdonelson.com © 2014 Baker, Donelson, Bearman, Caldwell & Berkowitz, PC

The Telephone Consumer Protection Act of 1991 47 U.S.C. 227

What is it?



What is it?

Statutory scheme enacted by Congress to:



What is it?


1. Confuse companies that have, as part of their business, the communication with large numbers of customers, or consumers.




1. Confuse companies that have, as part of their business, the communication with large numbers of customers, or consumers.

2. Give litigious customers/consumers another method for gaining leverage over their banks and mortgage servicers.



But seriously though:

1. Prohibits solicitors from calling residences before 8 a.m. or after 9 p.m., local time.

2. Requires solicitors maintain a company-specific "do-not-call" (DNC) list of consumers who asked not to be called.

3. Requires solicitors honor the National Do Not Call Registry.

4. Requires solicitors provide their name, the name of the person or entity on whose behalf the call is being made, and a telephone number or address at which that person or entity may be contacted.



5. Prohibits solicitations to residences that use an artificial voice or a recording. (w/o consent)

6. Prohibits any call made using automated telephone equipment or an artificial or prerecorded voice to, among other things, a cellular telephone. (w/o consent)

7. Prohibits autodialed calls that engage two or more lines of a multi-line business.

8. Prohibits unsolicited advertising faxes. (w/o consent)



Critical definition:

Automated telephone technology or auto dialer: dialing equipment that has the capacity to store or produce, and dial random or sequential numbers. Doesn’t matter if you are using that capability.



Which companies are covered?



Whichcompanies arearecovered?

YOURS!!!!

11 www.bakerdonelson.com © 2014 Baker, Donelson, Bearman, Caldwell & Berkowitz, PC


The TCPA doesn’t limit its application to any particular category of company.

If your business utilizes automatic dialing software/equipment, prerecorded messages in calls, sends text messages to numbers that may be associated with cellular lines, or engages in telemarketing or facsimile advertising, you are almost certainly covered.

Vicarious liability – if you outsource your marketing activity and your provider does these things, you may well be liable.



The TCPA and Litigation:

What’s the big deal?



Consumers have a private right of action.

Can recover:1. Actual damages, or: 2. $500 per violation, or: 3. $1500 per violation for willful

violations.



Not uncommon for consumers to allege several hundred phone calls. Damages can get substantial quickly!



Even worse



Class Actions!



In February, 2015, a Chicago Federal Court approved a TCPA class action settlement with Capital One Financial Corp. and its affiliates totaling $75.5 million.



Pre-litigation Tips:

1. Verify whether your company engages in covered conduct.





2. Get familiar with prior express consent rules. Get a system in place to obtain and keep record of prior written consent.





2. Get familiar with prior express consent rules. Get a system in place to obtain and keep record of prior consent. Require written consent.

3. Require all 3rd party vendors to be in compliance with the TCPA.







4. Keep records of consent for at least four years.







4. Keep records of consent for at least four years.

5. Consistently work to verify that the telephone numbers you have for consumers remain accurate and that you know what kind of phone you are calling.



Express Written Consent: Required for any communication involving “telemarketing”.

Telemarketing: a message that includes any form of advertising or otherwise encourages a consumer to purchase or use a service.

Non-telemarketing calls (purely informational) do not require written consent.

Danger: The lines are blurry

A consumer may revoke consent at any time by any reasonable means.



Tips after the lawsuit is served:




1. Hire experienced counsel.





2. Enter a litigation hold. Want any records about communications with the consumer preserved. Copies of consent documents and recordings of phone calls are the gold standard.






3. Immediately investigate to determine scope of exposure.






3. Immediately investigate to determine scope of exposure.

4. If it’s a class action, you want your attorney to be diligent about attacking the eligibility of the case for class action status.



These rules are very much evolving.

On July 10, 2015, the FCC issued a 138 page declaratory ruling providing guidance.

More guidance is no doubt on the way!


Questions?

Please Contact:

Dylan Howard, ShareholderBaker Donelson [email protected]

Professional Limited Liability Company

o 24 CFR 203.604 • (b) The mortgagee must have a face-to-face interview with the

mortgagor, or make a reasonable effort to arrange such a meeting, before three full monthly installments due on the mortgage are unpaid. If default occurs in a repayment plan arranged other than during a personal interview, the mortgagee must have a face-to-face meeting with the mortgagor, or make a reasonable attempt to arrange such a meeting within 30 days after such default and at least 30 days before foreclosure is commenced, or at least 30 days before assignment is requested if the mortgage is insured on Hawaiian home land pursuant to section 247 or Indian land pursuant to section 248 or if assignment is requested under § 203.350(d) for mortgages authorized by section 203(q) of the National Housing Act.

HUD Regulations Face-to-Face Interview

o 24 CFR 203.604 • (c) A face-to-face meeting is not required if:

o (1) The mortgagor does not reside in the mortgaged property, o (2) The mortgaged property is not within 200 miles of the

mortgagee, its servicer, or a branch office of either, o (3) The mortgagor has clearly indicated that he will not

cooperate in the interview, o (4) A repayment plan consistent with the mortgagor's

circumstances is entered into to bring the mortgagor's account current thus making a meeting unnecessary, and payments thereunder are current, or

o (5) A reasonable effort to arrange a meeting is unsuccessful.

HUD Regulations Face-to-Face - Exceptions

• Most courts recognize that a violation of the HUD requirements can serve as a shield to a foreclosure action. See BAC Home Loans v. Taylor, 986 NE2d 1028. See also, Wells Fargo Bank, N.A. v. Gerst, 5th Dist. No. 13 CAE 05 0042, 2014-Ohio-80; Wells Fargo Bank, N.A. v. Aey, 7th Dist. No. 12 MA 178, 2013-Ohio-5381.

• However, there are a split of cases on whether violation of the HUD regulations may sustain a breach of contract claim. See Christenson v. CitiMortgage 2013 WL 5291947. But compare with Donlon v. Evolve Bank and Trust, 2014 WL 1330522.

• Jackson v. BANA, 2014 WL 5511017 is interesting because it states that even if the express incorporation of the HUD regulations into the Deed of Trust (usually in paragraph 9 of the standard form) creates a breach of contract claim, the claim was invalid (under MS law) because the borrower breached the contract first by failing to pay.

HUD Regulations Face-to-Face – Case Law

• Claim not properly preserved in pleadings

• Other defenses override claim

o Failure to Tender Amount Due

o Res Judicata

o Prior Breach

HUD Regulations Face-to-Face - Strategy

o Substantial Compliance • A common defense utilized by defense counsel in Florida – the

default letter failed to comply with the requirements of the mortgage. This defense had gained traction in Florida, especially in Central Florida. But, District Courts have recently been releasing opinions that apply a “substantial compliance” analysis.See Vasilevskiy v. Wachovia Bank, N.A., 2015 WL 4577415 (July 31, 2015).

o Bankruptcy Surrender • Issue of what “surrender” means within the bankruptcy context.

The court found that the term “surrender” means that debtors cannot thereafter take any overt action to defend or impede the foreclosure. In re Calzadilla, case no. 14-11318-RAM in the U.S. Bankruptcy Court, Southern District of Florida.

FLORIDA Recent Developments

o Notice of Transfer - FCCPA (Florida’s version of FDCPA)• While there are cases that find that some actions taken prior to or within the

context of a foreclosure may be deemed “debt collection” for the purpose of triggering the FCCPA (and FDCPA), the filing of a mortgage foreclosure lawsuit – standing alone – does not. Thus, 559.715 – a provision of the FCCPA that requires notice of debt transfer prior to initiating debt collection activity – is not a condition precedent to filing a lawsuit for mortgage foreclosure – which standing alone is not “an action to collect a debt.” U.S. Bank v. Vila, 2014 WL 10190153 (Fla.Cir.Ct., August 22, 2014).

o Statute of Limitations • Two conflicting decisions in Florida. In Beauvais, 2014 WL 7156961, the Third

District holds no re-breach and re-file beyond the 5 year statute of limitations. In Bartram, 140 So. 3d 1007 (Fla. 5th DCA 2014) review granted, 160 So. 3d 892 (Fla. 2014), the Fifth District held a lender may re-breach and re-file. The Fifth District certified the question to the Florida Supreme Court and oral argument is scheduled in October. Interestingly, the Third District recently granted rehearing en banc in Beauvais, which means that the entire appellate bench will re-hear the issue. The oral argument in Beauvais is scheduled for the week after oral argument in Bartram. Everyone in Florida is watching these cases.

FLORIDA Recent Developments

General Session – ALFN Complex Litigation Group

September 9, 2015 – Jacksonville, FL

SESSION SPEAKERS

Jason A. Whitacre Lead Litigation Attorney The Law Offices of John D. Clunk Co., LPA [email protected]

HANDLING MILL LITIGATION IN

FORECLOSURE

Jason A. Whitacre, Esq. – The Law Offices of John D. Clunk Co., LPA

Common Tactics and Purposes First, what is mill litigation?

Litigation that uses the same or similar tactics in every case, regardless of the facts specific to that case, often by a for-profit law firm representing consumers

Why do it?

The tactic has a history of delaying cases; appears like real, fact-specific litigation; takes very little work (no customization from case-to-case); muddies the case waters.

Also increases the costs for mortgage servicers

The Face of Increased Costs Goal of removing file from foreclosure counsel to litigation

counsel using specific claims or tactics

Litigation counsel is perceived as having access to significantly greater settlement authority

Litigation counsel treats case as a litigated civil matter, helping the mill attorney earn fees and delay foreclosure judgment

“Discovery Bombs”: catch-all, overly extensive sets of discovery designed to prolong the case through an increase in the litigation timeline

Typical Counterclaims Regardless of claimed cause of action (and corresponding

elements), typically boils down to standing of foreclosing plaintiff.

FDCPA or State-equivalent consumer statutes

Fraud-on-the-court (seeks to invalidate assignments)

Quiet Title actions

CFPB Reg X and Notices of Error (often not based on specific complaints over servicing – cause of action manufacturing tool)

Settlement Conference vs. Mediation Typically in front of a judge or magistrate

Goal is to get the settlement process away from loss mitigation applications to corporate counsel for litigation resolution

Posturing and refusing to submit loss mitigation paperwork, knowing the servicer typically must first go through that step, to make the foreclosing plaintiff appear arbitrary and lacking in good-faith negotiations

How to Handle Mill Litigation DILIGENCE. Timely respond to notices of error; flag mill

litigators and track settlement demands, litigation claims.

COMPETENCE. Ensure your counsel and staff know how to handle these claims, can escalate the issues properly.

COMMUNICATION. Seek early opinion of counsel on viability of claims; troubleshoot potential problems in files.

PREPARE. As in, prepare the case. Flesh out the claims, real or imagined.

KEEP CONTROL. A major purpose of these tactics is to hijack the case and blow up or elongate the process.

Session 1 (Track 1 & 3) – Litigation UpdatesConference Center B Track 1: 9:45 a.m. – 11:00 a.m. Track 3: 2:45 p.m. – 4:00 p.m.

Speakers:• Linda Finley, Esq., Shareholder, Baker Donelson (ALFN member in Tennessee and DC) –

Discussion Leader• David Kluever, Esq., Managing Member, Kluever & Platt, LLC (ALFN Member in Illinois) • Denise Griffin, Esq., Senior Litigation Attorney, Shapiro, Swertfeger & Hasty, LLP (ALFN Member

in Georgia)

Session Overview: • Linda Finley - Coast to Coast Litigation Update • David Kluever - Litigation Updates • Denise Griffin - Breach letters (failure to send prior to accelerating); HUD regs incorporated into

security instruments.

Linda S. Finley, Esq. ShareholderBaker Donelson3414 Peachtree Road, N.E. Suite 1600 Atlanta, Georgia 30326 Phone: 404.589.3408 Fax: 404.238.9608 [email protected]

A shareholder in the Firm's Atlanta office, member of the Firm's board of directors and leader of the Residential Mortgage Litigation Group, Ms. Finley has tried more than 300 jury trials to verdict and concentrates her practice in business litigation involving the mortgage lending and servicing industries and litigation regarding real estate issues. Ms. Finley has experience in:

• Lender and servicer liability defense • Mortgage fraud civil prosecution and defense • Mortgage lending and servicing issues including foreclosure, bankruptcy, defense of wrongful

foreclosure and defense of predatory lending charges• QC/QA training and review • Real estate title clearance and litigation

Ms. Finley serves as a court appointed Special Master for purposes of adjudicating litigated real estate title issues. She is a frequent speaker regarding mortgage lending and servicing issues, and is called upon by clients as well as by law enforcement and prosecution offices to provide training on various topics including mortgage fraud investigation and prevention, quality control and loss mitigation. Before entering private practice, Ms. Finley served as an assistant district attorney for Atlanta, Georgia, and was tasked with the prosecution of major felonies.

Recent Representative Matters • Lead counsel in large scale mortgage fraud matter involving more than 250 loans. • Lead counsel in defense of mortgage related issues such as RESPA, TILA and defense of

charges of predatory lending.• Lead counsel in defense of lawsuits brought alleging wrongful foreclosure.• Lead counsel in Class Action suit against lender which alleged improper application of mortgage

fees in bankruptcy claim.

Publications & Speaking Engagements Since the 1990s Ms. Finley has been a national speaker and author on topics of mortgage servicing and real estate related issues. Her most recent engagements are below.

• "Counsel's Corner: The Consumer's Use of Standing as a Defense in Foreclosure Cases ," DSNews, May 27, 2015

• "What's Fraud Got to Do with It? Seeking Civil Relief in Residential Mortgage Fraud Cases," Mortgage Finance Fraud Litigation Strategies, July 1, 2014

• "Walking Dead? Beware the Zombie Foreclosure," Baker Donelson's Mortgage News, Summer 2014; reprinted in National Mortgage News, August 6, 2014

• "Comply with Gen Y?" HousingWire Focus magazine, September 2013 • "From Coast to Coast: Hot Topics in Litigation," Moderator, ALFN Annual Leadership Conference,

Colorado Springs, Colorado, July 24, 2013• "Kicking the Boot Camps – Gaining an Edge in Default Servicing Defensive Litigation,"

Moderator, MBA National Mortgage Servicing Conference, February 2012 • "The Shoe Is On The Other Foot — Fraud Investigations Against Lenders For Document Fraud,"

Panelist, Mortgage Bankers Association National Fraud Issues Conference (March 29, 2011) • "Survey of Georgia Real Property Law," Mercer Law Review, 2002 – 2012• "Blame Enough for All - The Role of the Consumer, Lender and GSE's in the Mortgage Industry

Crisis," West First Focus™ Subprime Reform Actions of the Federal Reserve, September 2008 • "Subprime in the Prime Time," Institute of Continuing Legal Education, 2008 Real Property

Foreclosure Seminar, April 2008 • "Mortgage Fraud: Legislation & Remedies," Georgia Real Estate Fraud Prevention and

Awareness Coalition's Annual Seminar, April 2008 • "Consumers Were the Real Victims of Georgia's Predatory-Lending Law," The Subprime Crisis: A

Thomson West Special Report, April 2008• "Who, What, Where, When and How Much?, Investigating Mortgage Fraud and Preservation of

Evidence," Mortgage Fraud Blog Seminar, Las Vegas, Nevada, November 2007 • "Trials and Tribulations," Georgia Commercial Real Estate Seminar on Foreclosures, Workouts

and Related Litigation Matters, Atlanta, Georgia, November 2007 • "Here's a Subprime Primer," LegalTimes, September 24, 2007 • "Avoid the "F" Words – Fraud and Forgery That Is!" Institute of Continuing Legal Education,

Annual Real Property Law Winter Symposium, 2007 • "Introduction to Mortgage Fraud: From Start to a Successful Finish," American Conference

Institute, Las Vegas, Nevada, 2006• "Mortgage Fraud Recovery: Civil or Criminal?" Georgia Real Estate Fraud Prevention and

Awareness Annual Conference, 2006• "Beware of the Land Shark! Don’t Get Bitten by Mortgage Fraud," Institute of Continuing Legal

Education, Real Property Law Institute, 2006 • "Confirmation of Real Estate Foreclosure - Practical Practice Tips," Institute of Continuing Legal

Education, Real Property Foreclosure Seminar, 2006 • "Everything You Ever Wanted to Know about Title Examination, but Were Afraid to Ask," Legal

Issues for Georgia Professional Surveyors, 2006• "Preventing and Addressing Mortgage Fraud," Mortgage Banker's Association of Jacksonville,

Florida, 2005• "Beware of Land Sharks - Preventing Mortgage Fraud," Georgia Real Estate Fraud Prevention

and Awareness Coalition, Annual Conference, 2005• "Land Shark - Don’t Feel the Bite of Mortgage Fraud," SmartBusiness Magazine, 2005 • "Mortgage Fraud and Georgia," presented to the Georgia Senate Banking Committee and the

Georgia House of Representatives Banking Committee, 2005 • "Predatory Lending - What is it?" Fannie Mae, 2002

Professional Honors & Activities • Listed in The Best Lawyers in America® in Mortgage Banking Foreclosure Law, 2015 • Listed in Georgia Super Lawyers since 2009, listed as one of the top 50 female attorneys in

Georgia • Named to Georgia Trend Legal Elite in the area of Bankruptcy/Creditors' Rights, 2009 – 2011• Member – American and Atlanta Bar Associations• Board Member – Georgia Real Estate Fraud Prevention and Awareness Coalition, 2006 – 2008 • Fellow – American College of Mortgage Attorneys

• AV® Preeminent™ Peer Review Rated by Martindale-Hubbell • Former Assistant District Attorney – Major felony prosecution, Atlanta, Georgia

Admissions• Georgia, 1982 • Florida, 1986 • U.S. District Court for the Northern, Middle and Southern Districts of Georgia • U.S. Court of Appeals for the Eleventh Circuit • U.S. District Court for the Northern and Middle Districts of Florida • U.S. Supreme Court

Education• Mercer University Walter F. George School of Law, J.D., 1981 • Mercer University, B.A., 1978

David C. Kluever, Esq. PartnerKluever & Platt, LLC 65 East Wacker Place Suite 2300 Chicago, Illinois 60601 Phone: (312) 236-0077 Fax: (312) [email protected]

Education• Case Western Reserve University, J.D., 1983 John Marshall Law School, L.L.M. in Taxation,

1987 DePauw University, B.A. Economics, 1980

Admissions• Illinois, 1983 • United States District Court for the Northern District of Illinois,• including the federal trial bar, 1986 • United States District Court for the Southern District of Illinois, 2004 • United States District Court for the Central District of Illinois, 2009 • United States Court of Appeals for the Seventh Circuit, 2008 • United States Supreme Court, 2009

Affiliations• American Bar Association • Illinois Mortgage Bar • American Legal and Financial Network

Prior Experience • Cook County State’s Attorney’s Office 1983 – 1987 • Katz Randall & Weinberg (firm later named later Weinberg & Richmond) 1987-1988 • Gottlieb and Schwartz, Partner, 1988-1993

Mr. Kluever is an attorney specializing in the areas of commercial real estate transactions, secured financing transaction and all manner of real estate, creditor’s rights and commercial litigation. He has twenty five years experience in representing banks and institutional lenders in commercial loan transactions, creditor’s rights litigation and other compliance and contractual commercial litigation. Mr.

Kluever has had significant experience with failed institution litigation beginning with the RTC Crisis in 1989 and extending into the 1990’s. Kluever & Platt similarly operated under a legal services agreement and continues to handle litigation of a wide range of matters concerning failed institutions over the past five years.

His experience extends to the mortgage banking industry and currently includes the representation of three of the 5 major national banks subject to the National Mortgage Settlement decree, mortgage loan servicers some of which are subsidiaries of international banks and Wall Street firms, default industry process outsourcers, title companies and industry professionals.

While many firms specialize in handling only volume default-related litigation in actions to collect sums due under defaulted mortgage loans, Mr. Kluever leads Kluever & Platt’s separate team of litigators in handling all manner of related contested litigation and appeals. Such related litigation has included appraiser liability claims, loan origination and put-back claims, robo-signing litigation, MERS (standing) litigation, and other loan origination claims including TILA, HOEPA, Reg Z, and other contested claims and litigation.

Mr. Kluever represents clients not only in the trial courts but also in civil appeals. He has prevailed in appeals before the United States Seventh Circuit Court of Appeals, the Illinois Supreme Court and the First, Second, Third and Fifth Illinois Appellate Districts.

Mr. Kluever’s transactional clients include commercial real estate developers; developers of single family subdivisions, condominium and mixed use developments, low income tax credit and senior citizen multifamily housing developments; property management companies; condominium and homeowner’s associations; corporation, individual entrepreneurs and business owners; and accountants. It is noteworthy that a number of other attorneys practicing in Illinois hire Mr. Kluever to represent them in connection with their personal legal needs including both litigation and transactional matters.

Following graduation from law school, Mr. Kluever was a criminal prosecutor as an Assistant State’s Attorney under Richard Daley in Cook County, Illinois for four years from 1983 through 1987. During this time he tried hundreds of misdemeanor and felony cases throughout the Cook County criminal justice system and handled over twenty appeals in the Illinois First District Appellate Court and Illinois Supreme Court.

Denise Griffin, Esq. Senior Litigation Attorney Shapiro, Swertfeger & Hasty, LLP295 S. Culver Street, Suite BLawrenceville, GA 30046 Phone: 770-963-7147Fax: [email protected]

Denise Griffin has been a practicing litigation attorney since 1988. Ms. Griffin was of counsel with Shapiro & Swertfeger, LLP starting in 2002, and joined the firm as its senior litigation attorney in 2009.Her diverse legal background includes complex litigation involving mortgage lending and servicing, foreclosure, eviction, condemnation, quiet title, reformation, zoning and housing code matters, property owners association law, real property and title disputes, Georgia lien law, adverse possession, confirmation of sale and deficiency judgment actions, fraud, Truth-in-Lending Act, Fair Debt Collection Practices Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, construction and development law, equitable subrogation, eminent domain, predatory lending, bankruptcy and the like.She regularly litigates in the trial and appellate courts. Ms. Griffin has ample experience representing mortgage lenders and servicers, title insurance companies, law firms, appraisers, developers, real estate brokers and agents, builders, investors, realtors, contractors and individuals with real estate-related

issues. Ms. Griffin is a 1988 graduate of Georgia State University College of Law. She is a member of the Georgia Bar Association and the Federal Bar Association, and is a former member of the Bleckley American Inn of Court. She is admitted to all Georgia state and federal courts, the Eleventh Circuit Court of Appeals, and the United States Supreme Court.

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ALFN TE@CH Onsite Regional Training Seminar September 9, 2015 Hyatt Regency Jacksonville Riverfront Jacksonville, FL

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Jonathan E. Green Shareholder, Baker Donelson 404.221.6518 [email protected]

James V. Noonan Partner, Noonan & Lieberman, Ltd. 312.431.1455 [email protected]

Authors Linda S. Finley Shareholder, Baker Donelson 404.589.3408 [email protected]

Matthew C. Abad Attorney/Trustee, Kluever & Platt, LLC 312.201.6785 [email protected]

T. Robert Finlay Partner, Wright, Finlay & Zak, LLP 949.477.5056 [email protected]

Denise Rainwater Griffin Senior Litigation Attorney Shapiro Pendergast & Hasty, LLP 770.963.7147 [email protected]

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Denise Rainwater Griffin Senior Litigation Attorney, Shapiro Pendergast & Hasty 770.963.7147 [email protected]

Moderator Speakers Linda S. Finley Shareholder, Baker Donelson 404.589.3408 [email protected]

David C. Kluever Partner, Kluever & Platt, LLC 312.201.6677 [email protected]

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U.S. District Courts

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Hot Topics Across the Country

•  Standing •  Statutes of Limitation •  HUD Regulations •  Homeowner’s and Condo Associations are Becoming Aggressive •  Municipalities are Becoming Aggressive, Too •  Regulations! Regulations!

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FORECLOSURE ISSUES

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FORECLOSURE ISSUES – Standing

Casatagnaro v. Bank of New York Mellon, 772 F.3d 734 (1st Cir. Nov. 20, 2014). District Court issued certified question to New Hampshire Supreme Court. Found a question as to whether the foreclosing entities are required to hold both the mortgage and the note before it can exercise the power of sale under New Hampshire Law. Court found that RSA § 479.25 (Sale Under The Power statute) suggests that foreclosing entities may require both the note and mortgage, hence the certified question.

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Bank of New York Mellon v. Davies, No. 2014AP788, 2015 WL 2359826 (Wis. Ct. App. May 19, 2015) (final publication decision pending) A minor error in the identification of the trust on whose behalf the trustee is suing is not a bar to standing. Borrower challenged note and mortgage on grounds that the name of the trust on whose behalf the bank was acting was not stated consistently in the affidavit, the allonge, and in the records from the SEC. A typographical error on an allonge does not defeat a mortgagee’s right to enforce the note and mortgage so long as the trustee bank is clearly identified, regardless of the trust for which it is acting. Favorite quote: “We agree that the clerical error on the allonge does not defeat the bank’s right to enforce the note and mortgage. The Bank of New York Mellon is clearly identified. We are also not convinced that the lack of the word “MORTGAGE” in some of the documents defeats the bank’s standing. The bank was clearly identified as the payee, regardless of the trust for which it is acting.”

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Illinois – Standing – Is it necessary. . . NO! Standing is not a component of subject matter jurisdiction. Court will uphold a regardless of whether Plaintiff has standing unless the Defendant shows: The existence of a meritorious defense That substantial justice, plain error, or an issue of public importance required vacatur. Defendant first asserted plaintiff’s lack of standing after confirmation of the sale Argued that the note and mortgage never properly assigned to plaintiff

Plaintiff alleged it was the mortgagee and holder Note specially endorsed to Ohio Savings Bank, “ITS SUCCESSORS and/or ASSIGNS, Loan mod was with AmTrust. Plaintiff had no burden to plead standing

Nationstar Mortgage, LLC v. Canale, 2014 IL App (2d) 130676, 10 N.E.3d 229 (Ill. 2014)

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Illinois Does failure to plead standing deprive the trial court of subject matter jurisdiction?

To invoke court’s jurisdiction, an initial pleading need only state a justiciable matter. “A claim for foreclosure, even if defectively stated, presents a justiciable matter.”

Deustche Bank National Trust Company v. Petitti, 2014 IL App (2d) 130607-U *unpublished*

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FORECLOSURE ISSUES - Standing

Georgia Johnson v. Bank of America, N.A., No. A15A0688, 2015 WL 4231861 (Ga. Ct. App. July 14, 2015). The Georgia Court of Appeals held the borrower who claimed that his security deed had been relinquished, had standing to sue for quiet title to remove it and its assignments from his title.

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FORECLOSURE ISSUES – Statutes of Limitation

Deutsche Bank Trust Co. Americas v. Beauvais, 40 Fla. L. Weekly D1 (Fla. 3d DCA Dec. 17, 2014).

Statute of limitations barred second foreclosure action because that action was filed more than five years after the initial foreclosure complaint was filed/accelerated, and the first foreclosure was dismissed without prejudice so that the acceleration caused by the filing of the first complaint was not decelerated, so that the statute of limitations continued to run. The court certified conflict with Evergrene from the 4th DCA. However, the court also stated that, while the loan could not be foreclosed due to the SOL, the mortgage lien remained under Fla. Stat. 95.281(1)(a) until 5 years past the maturity date of the loan (i.e., the year 2041). This case is not final as the bank moved for rehearing and rehearing en banc but has not been ruled upon. Arguably, trial courts in the Third DCA should be following Evergrene until Beauvais is final, under Pardo v. State, 596 So.2d 665 (Fla. 1992).

LNB-017-13, LLC v. HSBC Bank USA, 2015 WL 1546150 (S.D. Fla. Apr. 7, 2015).

Federal judge sharply criticizes Beauvais’ SOL holding and ruled that such directly conflicts with cases “with the overwhelming amount of authority” in the Southern and Middle Districts of Florida and decisions from Florida courts.

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FLORIDA - U.S. Bank Nat. Ass'n v. Bartram, 140 So. 3d 1007, 1008 (Fla. Dist. Ct. App. 2014) review granted, 160 So. 3d 892 (Fla. 2014)

The trial court granted summary judgment finding that the note and mortgage should be cancelled based on a failed attempt to foreclose the same note and mortgage in a prior foreclosure action filed by the Bank. The Bank appealed.

On appeal, the issue decided was whether acceleration of payments due under a note and mortgage in a foreclosure action that was dismissed pursuant to rule 1.420(b), Florida Rules of Civil Procedure, triggered application of the statute of limitations to prevent a subsequent foreclosure action by the mortgagee based on payment defaults occurring subsequent to dismissal of the first foreclosure suit. The District Court of Appeals concluded that the statute of limitations does not bar the subsequent foreclosure action. Review has been granted in Bartram v. U.S. Bank Nat. Ass'n, 160 So. 3d 892 (Fla. 2014).

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U.S. Bank Nat. Ass'n v. Lamb, No. 14-1536 (Iowa Ct. App. May 20, 2015)(final publication decision pending). Although bank had rescinded early in rem judgment, borrower was unsuccessful in setting aside a foreclosure judgment on the basis that under Iowa Code section 615.1 any rights the bank as the mortgage and note holder held after it failed to enforce its judgment or file its notice of rescission within two years was nullified. Court ruled that this section applies only to judgment liens and notwithstanding it remains the rule that a creditor does not lose its lien on the debtor's property by taking a judgment. The mortgage remains a lien until the debt it was given to secure is satisfied. Thus, a mortgage is not affected by a judgment taken on the note.

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Slorp v. Lerner, Sampson & Rothfuss, 587 F. App'x 249, 260 (6th Cir. 2014).

Is continuing to prosecute a wrongful suit a continuing violation that tolls the statute of limitations?

Circuit court declined to apply the continuing-violation doctrine

Found that the filing of the allegedly wrongful foreclosure suit was the actionable event under the FDCPA.

“Although the subsequent prosecution of that suit may exacerbate the damages, the continued accrual of damages does not diminish the fact that the initiation of the suit was a discrete, immediately actionable event.”

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FORECLOSURE ISSUES – MERS

Illinois Deutsche Bank Nat. Trust v. Cichosz, 2014 IL App (1st) 131387, ¶¶ 16-17, 19 N.E.3d 134 In a foreclosure that was brought originally by MERS, the Illinois appellate court rejected the defense that the action was void because MERS was an unlicensed debt collector in violation of the Illinois Collection Agency Act. 225 ILCS 4251 et seq. Appellate court affirmed because the Act did not apply to MERS and the type of business MERS operates is not equivalent to debt collection.

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Lockhart v. HSBC Fin. Corp., No. 13 C 9323 (N.D. Ill. Aug. 1, 2014). According to at least one U.S. District Court in Illinois, MERS and MERSCORP are not creditors or assignees so plaintiff cannot proceed against them under TILA and HOEPA. However, if plaintiff’s rescission claim is successful in unwinding the transaction, and the parties are to be returned to the status quo, MERS and MERSCORP may be necessary parties for that to occur. They therefore remain in the case.

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Boyd Cnty. ex rel. Hedrick v. MERSCORP, Inc., No. 14-5647 (6th Cir. June 5, 2015). Forty-one of Kentucky's 120 counties brought suit against MERS alleging that assigned and continue to assigns mortgage liens among each other without recording those assignments, in violation of Kentucky law. The district court dismissed the lawsuit on the ground that the counties lacked the power to enforce the statute as lacking a private right of action. On appeal the dismissal was affirmed. The Sixth Circuit also refused to consider the counties “novel theory” that they have the power, as subdivisions of the state, to enforce mandatory provisions of Kentucky's recording statute through civil litigation, without support from the Kentucky courts. Court also refused to certify the question to the Kentucky Supreme Court.

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Plymouth County, Iowa v. Merscorp, Inc., 774 F.3d 1155 (8th Cir. Dec. 19, 2014); County of Ramsey v. MERSCORP Holdings, Inc., 776 F.3d 947 (8th Cir. Dec. 19, 2014). Where there is no duty to record a mortgage county recorder county has no claim for unjust enrichment against MERS. No claim for civil conspiracy can lie either because in the absence of a mandatory recording requirement, there is no unlawful conduct.

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FORECLOSURE ISSUES – Wrongful Foreclosure

Georgia Ames v. JP Morgan Chase Bank, N.A., No. 2013-CV-230620 (Apr. 30, 2013), cert. granted, No. S-15-G1007 (Sept. 2015).

Georgia Supreme Court will examine whether a borrower lacks standing to challenge the assignment of a security deed.

Could result in a reversal of a key line of cases which held that a debtor who is not a party to an assignment does not have standing to challenge it because the assignment was a contract and the debtor was not a party to the contract. See, Montgomery v. Bank of Am. (321 Ga.App. 343, 740 S.E.2d 434 (2013).

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FORECLOSURE ISSUES – Wrongful Foreclosure

Georgia Stewart v. SunTrust Mortg., Inc., 331 Ga. App. 635 (Ga. Ct. App. Mar. 27, 2015).

Reversed grant of dismissal of wrongful foreclosure claim because allegation that lender mislead borrower by stating that the foreclosure would be postponed suggested a breach of a legal duty.

Applied standard of care for a fiduciary to the lender based on the Power-of-Sale clause appointing lender as attorney-in-fact.

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FORECLOSURE ISSUES – Miscellaneous

Fannie Mae v. Hicks, 2015-Ohio-1955.

Ohio – LOST NOTE AFFIDAVIT – Not the only thing that was lost!

A mortgage may be enforced only by a person who is entitled to enforce the obligation the mortgage secures. Only after the court determines liability on the underlying obligation, can it proceed to the foreclosure analysis under the mortgage.

FNMA could not establish it was entitled to enforce the note where the note was specifically endorsed to Fannie Mae FNMA was not in possession of the note when it was lost.

Ohio has not adopted an amended to section 3-309 of the U.C.C, which allows for enforcement “if the person either (A) was entitled to enforce the instrument when loss of possession occurred, or (B) has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred.”

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FORECLOSURE ISSUES – HUD Regulations

The Federal Housing Administration (FHA) under the Department of Housing and Urban Development (HUD) insures loans made by lenders to qualifying homebuyers. FHA requires certain servicing practices for FHA-insured loans. These servicing practices are described in HUD regulations set out in the Code of Federal Regulations ( C.F.R. ) at 24 CFR Part 203, Subpart C ( Servicing Responsibilities ) Litigation: There has been a substantial amount of foreclosure-related litigation whereby borrowers with FHA-insured loans sue their lenders for violating HUD regulations incorporated into their loan documents, or defend foreclosures on such basis. Primary litigation argument: Language in loan documents limits the lender s ability to accelerate and foreclose upon property in the event of default.

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Note 6. BORROWER'S FAILURE TO PAY

(B) Default If Borrower defaults by failing to pay in full any monthly payment, then Lender may, except as limited by regulations of the Secretary in the case of payment defaults, require immediate payment in full of the principal balance remaining due and all accrued interest. In many circumstances, regulations issued by the Secretary will limit Lender's rights to require immediate payment in full in the case of payment defaults. This Note does not authorize acceleration when not permitted by HUD regulations. As used in this Note, "Secretary" means the Secretary of Housing and Urban Development or his or her designee.

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Deed of Trust / Security Deed 9. Grounds for Acceleration of Debt. (a) Default. Lender may, except as limited by regulations issued

by the Secretary, in the case of payment defaults, require immediate payment in full of all sums secured by this Security Instrument if:

(i) Borrower defaults by failing to pay in full any monthly payment required by this Security Instrument prior to or on the due date of the next monthly payment, or

(ii) Borrower defaults by failing, for a period of thirty days, to perform any other obligations contained in this Security Instrument.

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Deed of Trust / Security Deed – Grounds for Acceleration of Debt – cont’d

d) Regulations of HUD Secretary. In many circumstances

regulations issued by the Secretary will limit Lender's rights, in the case of payment defaults, to require immediate payment in full and foreclose if not paid. This Security Instrument does not authorize acceleration or foreclosure if not permitted by regulations of the Secretary.

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Regulations § 203.500 Mortgage servicing generally. This subpart identifies servicing practices of lending institutions that HUD considers acceptable for mortgages insured by HUD. Failure to comply with this subpart shall not be a basis for denial of insurance benefits, but failure to comply will be cause for imposition of a civil money penalty, including a penalty under § 30.35(c)(2), or withdrawal of HUD's approval of a mortgagee. It is the intent of the Department that no mortgagee shall commence foreclosure or acquire title to a property until the requirements of this subpart have been followed.

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§203.602 Delinquency notice to mortgagor. The mortgagee shall give notice to each mortgagor in default on a form supplied by the Secretary or, if the mortgagee wishes to use its own form, on a form approved by the Secretary, no later than the end of the second month of any delinquency in payments under the mortgage. If an account is reinstated and again becomes delinquent, the delinquency notice shall be sent to the mortgagor again, except that the mortgagee is not required to send a second delinquency notice to the same mortgagor more often than once each six months. The mortgagee may issue additional or more frequent notices of delinquency at its option.

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24 CFR § 203.604(b) Contact with the mortgagor. [Face-to-face interview] With certain limited exceptions, the mortgagee must have a face-to-face interview with the mortgagor, or make a reasonable effort to arrange such a meeting, before three full monthly installments due on the mortgage are unpaid.


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EXCEPTIONS TO THE FACE-TO-FACE MEETING REQUIREMENT:

- The mortgagor does not reside in the property, - The property is not within 200 miles of the mortgagee,

its servicer, or a branch office of either, - The mortgagor has clearly indicated that he will not

cooperate in the interview, - A repayment plan consistent with the mortgagor's

circumstances is entered into to bring the mortgagor's account current thus making a meeting unnecessary, and payments thereunder are current, or

- A reasonable effort to arrange a meeting is unsuccessful.

24 CFR § 203.604(c)


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WHAT CONSTITUTES A REASONABLE EFFORT TO ARRANGE A MEETING? - at least one letter to the mortgagor sent by certified mail; and - at least one trip to see the mortgagor at the mortgaged property, unless the mortgaged property is more than 200 miles from the mortgagee, its servicer, or a branch office of either, or it is known that the mortgagor is not residing in the mortgaged property. 24 CFR § 604(d)


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24 CFR § 203.605(a) Loss mitigation performance. Before four full monthly installments due on the mortgage have become unpaid, the mortgagee shall evaluate on a monthly basis all of the loss mitigation techniques provided at § 203.501 to determine which is appropriate. Based upon such evaluations, the mortgagee shall take the appropriate loss mitigation action.

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24 CFR § 203.605(c). Loss mitigation performance. Assessment of civil money penalty. A mortgagee that is found to have failed to engage in loss mitigation as required under paragraph (a) of this section shall be liable for a civil money penalty as provided in § 30.35(c) of this title.


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24 CFR §203.606(a) Pre-foreclosure review.

Before initiating foreclosure, the mortgagee - must ensure that HUD-mandated servicing

requirements have been met - must, prior to initiating foreclosure, notify the

mortgagor in an approved format that mortgagor is in default and mortgagee intends to foreclose unless the mortgagor cures the default.

Mortgagee may not commence foreclosure for a monetary default unless at least 3 full monthly installments are unpaid after first applying any partial payments that may have been accepted.

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24 CFR §203.606(b) Pre-foreclosure review.

If any of the following apply, foreclosure may be initiated without the foreclosure delay required by §203.606(a): - The property has been abandoned, or has been vacant for more than 60 days;- The mortgagor, after being clearly advised of the options available for relief, has clearly stated in writing that he or she has no intention of fulfilling his or her mortgage obligation;- The property is not the mortgagor's principal residence and it is occupied by tenants who are paying rent, but the rental income is not being applied to the mortgage debt;- The property is owned by a corporation or partnership.

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RAMIFICATIONS OF FAILING TO COMPLY WITH HUD REGULATIONS PRIOR TO ACCELERATING AND FORECLOSING Litigation Claims / Defenses

Equitable defense Wrongful Foreclosure Breach of Contract / Failure of condition precedent Fair Debt Collection Practices Act Injunctive Relief Wrongful Eviction State Law Consumer Law Claims Class Action Claims

Penalties

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FLORIDA - Laws vs. Wells Fargo Bank, N.A., Florida District Court of Appeal, First District; Case No. 1D14-620 (Feb. 27, 2015) Appeal of order granting lender summary judgment in judicial foreclosure action. As an affirmative defense, borrower argued the lender’s failure to give HUD-mandated notice of intent to accelerate. Lender argued HUD regulations are not generally considered conditions precedent to foreclosure. Held: The issue is not whether Wells Fargo met all conditions necessary to initiate foreclosure, but whether summary judgment was proper despite this affirmative defense.

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Laws holding - cont’d. Since the note incorporated HUD regs requiring written notice of acceleration, Laws was entitled to raise failure to send such notice as a valid defense to foreclosure. See Real Estate Mortg. Network, Inc. v. Knight, 149 So.3d 121 (Fla. 4th DCA 2014) (holding a valid defense of noncompliance with HUD regulations that require a notice of acceleration existed, where the mortgage expressly provided that it “does not authorize acceleration or foreclosure if not permitted by regulations of the [HUD] Secretary.”) (citing Cross v. Federal National Mortgage Ass'n, 359 So.2d 464, 465 (Fla. 4th DCA 1978) (holding that non-compliance with HUD regulations may be asserted as an equitable defense in mortgage foreclosure proceedings)).”

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FLORIDA - Cross v. Fed. Nat. Mortgage Ass'n, 359 So. 2d 464, 465 (Fla. Dist. Ct. App. 1978)

It seems clear now that the HUD guidelines are not mandatory procedures constituting conditions precedent to foreclosure. Encarnacion Hernandez v. Prudential Mortgage Corporation, 553 F.2d 241 (1st Cir. 1977). However, a mortgage foreclosure is an equitable action and thus equitable defenses are most appropriate. Thus, it appears , as suggested in [FNMA] v. Ricks, 83 Misc.2d 814, 372 N.Y.S.2d 485 (S.Ct.1975), that given the purpose of this federal Act and the recommended efforts to obviate the necessity of foreclosure, any substantial deviation from the recommended norm might be considered by the trial court under the heading of an equitable defense.


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TEXAS - Sanchez v. Bank of Am., N.A., 3:14-CV-2571-B, 2015 WL 418084, at *8-9 (N.D. Tex. Jan. 30, 2015) Lender moved to dismiss borrower’s claims for specific performance and breach of contract. Borrower argued that Lender breached loan documents by failing to conduct a face-to-face meeting or make reasonable efforts to schedule the same; failing to inform of assistance options as required by 24 C.F.R. § 203.604(e)(2); and by failing to accept partial payments after default and to apply partial payments as mandated by 24 C.F.R. § 203.556(b)). Lender argued: Since the borrower admitted default, he could not show performance. Held: The HUD regs contemplate the borrower’s default and specify the lender’s obligations after such default.

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GEORGIA - Eleventh Cir. - Bates v. JPMorgan Chase Bank, NA, 768 F.3d 1126, 1131 (11th Cir. 2014) District Court ruled that because a borrower may not directly sue for violations of HUD regs, he may not claim breach of contract based on alleged violations thereof. The Eleventh Circuit Court of Appeals disagreed based upon its reading of Georgia law that powers of sale in deeds are to be strictly construed. Held: “We believe Georgia courts would hold that HUD regulations clearly referenced in a deed as conditions precedent to the power to accelerate and [foreclose] could form the basis of a breach of contract action.” Therefore, Bates had asserted a duty owed to her by the lender.”


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The following decision is entirely contrary to the Eleventh Circuit Court’s ruling in Bates. TEXAS - Klein v. Wells Fargo Bank, N.A., A-14-CA-861-SS, 2014 WL 5685113, at *5-6 (W.D. Tex. Nov. 4, 2014) aff'd, --- Fed.Appx. ----, 5th Cir.(Tex.), Aug. 20, 2015 Klein argued the lender violated HUD regs incorporated in her DOT by failing to have a face-to-face interview or making a reasonable effort to arrange such a meeting.

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Klein – cont d

The court considered an earlier Texas state court decision (Hornbuckle v. Countrywide Home Loans, Inc., 02-09-00330-CV, 2011 WL 1901975, at *5 (Tex. App. May 19, 2011)) wherein the borrower had argued the lender breached the DOT, among other things, by failing to obtain HUD approval before attempting to foreclose. In that case, the Texas appeals court had held that the borrower had no private right of action regarding the lender s alleged failure to follow HUD regulations, even those incorporated into the deed of trust.

On this basis (and because Klein admitted default), the Klein court denied her breach of contract claim reasoning that HUD regulations govern the relations between the lender and the government. Therefore, Klein could not argue the lender breached a duty owed to her.


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TEXAS – FIFTH CIR. - Johnson v. JP Morgan Chase Bank, 570 Fed. Appx. 404, 406 (5th Cir. June 4, 2014) Johnson argued her lender breached a contract by failing to comply with HUD regs incorporated in her loan documents by failing to conduct a face-to-face meeting, and by failing to perform loss mitigation.

Held: Although the HUD regulations were incorporated in the loan documents, since Johnson was already more than four months in default when Chase purchased the loan, and since Chase did not assume the liabilities of WAMU from which it acquired the loan, Chase could not be held responsible for WAMU’s alleged failure to comply with the relevant HUD regulations. The breach of contract claim thus failed.

45


OHIO - Bank of Am., N.A. v. Michko, 2015-Ohio-3137, Aug. 6, 2015, Ohio

Borrower argued BANA was not entitled to accelerate or foreclose unless it showed it complied with the HUD regs incorporated in her loan docs. The lender argued that since the Borrower did not specifically raise this defense, this was not made an issue, and it did not have to prove compliance with HUD regs on summary judgment. Held: When HUD regs are incorporated in the loan documents, compliance therewith is a condition precedent to foreclosure. Under Ohio law, the foreclosing lender must plead that conditions precedent have been satisfied. The borrower must then counter this allegation. But here, the borrower did not specifically and with particularity deny that the lender had failed to meet conditions precedent, so this was not made an issue in the case.

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TEXAS - Fifth Cir. - Rabe v. Wells Fargo Bank, N.A., 14-40931, 2015 WL 3918906, at *2-3 (5th Cir. June 26, 2015)

Borrowers argued WF was barred from accelerating and foreclosing because it failed to conduct or make a reasonable effort to arrange a face-to-face meeting. WF argued no meeting was required. WF argued that the regulation does not define “branch office,” and HUD’s web site explains that because such meeting must be conducted by trained staff, the regulation only applies to mortgagors living within 200 mile of a servicing office.

47


Rabe – cont’d. The borrowers did not challenge WF’s argument so the trial court held the borrower’s abandoned the argument. On appeal, though, the borrowers argued the face-to-face meeting was indeed required because WF’s web site identified branch offices within 200 miles of the property. They also argued that HUD’s web site now states “a face-to-face meeting is not required if ... [t]here is no office or branch office of the mortgagee or servicer within 200 miles of the mortgaged property.”

Held: Although the mortgagors’ argument has “persuasive force,” they waived it by not making this argument in the trial court.

48


VIRGINIA - Mathews v. PHH Mortgage Corp., 283 Va. 723, 738-41, 724 S.E.2d 196, 203-05 (2012) Pointing to HUD’s interpretation of the regulation, the lender argued a face-to-face meeting was not required because it did not have a “servicing office” within 200 miles of the property. The borrower argued that the term “branch office” is unambiguous, and there was a branch office within the 200 mile radius. Held: Despite the HUD interpretation, the term “branch office” is unambiguous. The meeting is required if the lender has any branch office within the 200 mile radius. If the staff at the branch lacks training, appropriately-trained staff can participate via video-conference, imposing a minimal burden on the lender while furthering the loss mitigation purpose of the reg.

49


Unless the failure to follow HUD regs proximately caused the injury, the borrower still may not prevail. Just days prior to the ALFN conference, this summary judgment ruling in favor of the lender was overturned by the Fifth Circuit Court of Appeals. However, it is included here because its logic may be adopted in an appropriate case where the borrower fails to present evidence of causation. VIRGINIA - Covarrubias v. CitiMortgage, Inc., CIV. 3:14-CV-157, 2014 WL 6968035, at *2-3 (E.D. Va. Dec. 8, 2014) Despite the fact that lender did not follow HUD regulations incorporated in the mortgagor’s loan documents, the Court held that this was not the cause of her losses. Rather, “[her] own actions caused the foreclosure and any resulting damages.”

50


Covarrubias – cont’d. The trial court found that she defaulted twice, had hardly worked in the 10 years prior to her foreclosure, and made no effort to find employment. Also, she admitted to using heroin at a time which coincided with the start of her financial troubles. Also, she was given special forbearance and still defaulted. The court consequently found that no reasonable jury could find that the lender’s violations of HUD regulations requiring a face-to-face meeting proximately caused her damages. Also, she did not allege how any loss mitigation measure would have affected her losses. The Court held that in any event, the mitigation measures are designed to cut HUD's losses, not the borrower’s. 24 CFR 203.501

51


PENALTIES - 24 C.F.R. § 30.35 Mortgagees and lenders. (a) General. The Mortgagee Review Board may initiate a

civil money penalty action against any mortgagee or lender who knowingly and materially: (10) Fails to service FHA insured mortgages, in accordance with the requirements of 24 CFR parts 201, 203, and 235;

(14) Fails to engage in loss mitigation as provided in § 203.605 of this title.

(b) Continuing violation. Each day that a violation

continues shall constitute a separate violation.

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PENALTIES - cont’d. (c) (1) Amount of penalty. The maximum penalty is $8,500 for each violation, up to a limit of $1,525,000 for all violations committed during any one-year period. Each violation shall constitute a separate violation as to each mortgage or loan application.

(2) Maximum penalty for failing to engage in loss mitigation. The penalty for a violation of paragraph (a)(14) of this section shall be three times the amount of the total mortgage insurance benefits claimed by the mortgagee with respect to any mortgage for which the mortgagee failed to engage in such loss mitigation actions.

53


Imler v. First Bank of Missouri, 451 S.W.3d 282 (Miss. Ct. App. 2014). (Missouri court applying Kansas statute) Missouri/Kansas – Compulsory counterclaim rule is not applicable to in rem proceedings Compulsory counterclaim rule requires Defendants

Raise any and all counterclaims Arise out of the same transaction

Estops the filing of any claims in separate proceedings. Exception

any and all in rem actions i.e., is there a personal deficiency sought in the Complaint? If not, foreclosures are in rem proceedings not subject to the Rule.

54


Bank of America v. Adeyiga, 2014 IL App (1st)

If you sent a statutorily required notice just say so!

Whether Defendant’s failure to assert a lack of receipt means a statutorily required Grace Period Notice was properly sent 735 ILCS 5/15-1502(c) Plaintiff’s form complaint did not specifically allege that one was sent

Form Complaint contained Deemed Allegations (enacted 19 years before Grace Period Notice Requirement)

Court held sending of this notice not part of deemed allegations under form complaint

Defendant never specifically denied receipt does not act as an admission, and cannot act as a waiver.

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SERVICER ISSUES

56

SERVICER ISSUES – Records

Hunter v. Aurora Loan Servs., 137 So. 3d 570 (Fla. 1st DCA Apr. 25, 2014).

Disapproves of common practice of having current servicer authenticate copies of documents contained in the servicer’s loan file which were created by the prior loan servicer

Burdshaw v. Bank of New York Mellon, 148 So. 3d. 819 (Fla. 1st DCA Oct. 13, 2014).

Witness’s testimony rejected as it lacked any knowledge about how the records were prepared or where the data came from.

57


Bank of New York v. Calloway, 157 So. 3d 1064 (Fla. 4th DCA 2015), reh'g denied (Mar. 3, 2015).

Where a business takes custody of another business's records and integrates them within its own records, the acquired records are treated as having been made by the successor business, such that both records constitute the successor business's singular business record. However, there is a two-step process to admit such records: (1) receiving servicer must board and rely on the prior records but reliance by itself is not enough; (2) there must also be some indicia of trustworthiness created either by (a) contractual obligation or business relationship that ensures a substantial incentive for accuracy by the prior servicer or (b) showing independent verification of those records by the receiving servicer as was done in WAMCO XXVIII, Ltd. v. Integrated Elec. Env’ts, Inc., 903 So.2d 230 (Fla. 2d DCA 2005).

58


Holt v. Calchas, LLC , 155 So.3d 499 (Fla. 4th DCA Jan. 28, 2015). The current servicer/note holder can produce at trial a certification from a prior servicer in accordance with Fla. Stat. section 90.902(11) as to the payment history maintained by each previous note holder, and then provide a witness to authenticate the records attributable to the current note holder—the records of payment history should be admissible. Such a procedure would assure compliance with all of the requirements for admission of a business record which relies in part on records from a prior note holder, and would also satisfy the personal knowledge requirement for records kept by the previous note holder. A subsequent note holder can also provide testimony consistent with that which was approved by the Second District in WAMCO, where the current note holder had procedures in place to check the accuracy of the information it received from the previous note holder. The court stressed that these, “permissible methods of satisfying the business records exception are not exhaustive. As long as the bank can provide sufficient testimony to lay the proper foundation, payment history documents should be admitted into evidence.”

59


Le v. US Bank, 2015 WL 2414456 (Fla. 5th DCA May 22, 2015).

Business records may be admitted where witness is generally knowledgeable about the industry and can testify about the prior servicer's practices, can testify the records were tested when boarded and can give specifics regarding the verification process by the current servicer, following WAMCO XXVIII, Ltd. v. Integrated Elec. Env’ts, Inc., 903 So.2d 230 (Fla. 2d DCA 2005).

Of interest, the witness was not employed by the prior servicer.

60


Bank of Am., N.A. v. Delgado, 40 Fla. L. Weekly D1080 (Fla. 3d DCA May 6, 2015).

The business records exception does not require the foundational witness to have been employed at the time all of the relevant entries. This case defeats the argument raised by many borrowers' counsel a witness cannot possibly be qualified to testify if they did not work for the bank or servicer for as long as it has serviced the loan at issue.

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Business Records of Prior Servicer

Ohio Appellate court in Secy. of Veterans Affairs v. Leonhardt, 2015-Ohio-931, 29 N.E.3d 1 (March 15, 2015) affirmed trail court’s ruling allowing employee of servicer to testify about prior servicer’s records including the records from prior loan servicers, which were incorporated into new servicer's records when it took over the servicing of the loan, finding that the witness could testify that the prior servicer’s records are what they purport to be and that they were made and kept in the ordinary course of the new servicer’s business.

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SERVICER ISSUES – Loan Mod / Estoppel

Granadino v. Wells Fargo Bank, N.A., 236 Cal. App. 4th 411 (2015) The alleged promise that no foreclosure sale was scheduled is unenforceable absent a signed writing by the Lender. No such writing existed. Therefore the claim is barred under the statute of frauds. Lender told BRs that the loan was under active mod review, and therefore, no foreclosure sale date had been scheduled. Less than two months later, the property was sold at a foreclosure sale. BRs allege they would have reinstated if they knew about the scheduled sale date. BRs sued alleging a single cause of action for Promissory Estoppel. Trial Court granted Lender’s MSJ. Trial Court held the oral promise was unenforceable under the statute of frauds, and that BRs failed to establish the elements of Promissory Estoppel. Court of Appeal affirmed.

63

SERVICER ISSUES – Loan Modification

Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal.App 4th 941 (2014) BAC agreed to review BRs for a HAMP mod. However, BAC failed to review the application in a timely manner, foreclosed while the loan mod app was pending, and mishandled their applications. This alleged mishandling consisted of BAC relying on mistaken or incorrect information in reviewing BRs’ application. Under a negligence cause of action, BRs argued BAC owed BRs a legal duty of care during this loan modification review process, and that BAC breached its duty based on the above conduct. Trial court sustained BAC’s Demurrer to this claim. Appeals Court reversed.

64

Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal.App 4th 941 (2014)

BAC argued that it owed no duty of care. The Appeals Court acknowledged that there is a general rule under that a financial institution owes no duty of care to a borrower within its conventional role as a lender of money. However, the general rule does not support the “sweeping” conclusion that a lender never owes a duty of care to a borrower. The Court held that key factors weighed in favor of applying a legal duty of care to BAC because it was entirely foreseeable that failing to timely and carefully process BRs’ loan mod applications could result in significant harm to BRs. The mishandling of the documents deprived BRs of the possibility of obtaining the requested relief. The Court also held that BRs’ lack of bargaining power pointed to moral blame against BAC, and that the recent passage of HOBR demonstrates a policy against dual tracking, and in favor of affording BRs a proper review of foreclosure prevention alternatives.

Loan Modification

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SERVICER ISSUES

•  ILLINOIS CASE LAW UPDATE- CitiMortgage, Inc. v. Hoeft, 2015 IL App (1st) 150459 (1st Dist. Aug. 17, 2015)

•  In this matter, the Illinois’ Appellate Court clarified an issue occasionally raised by borrowers attacking the sufficiency of acceleration letters sent out by lenders—that acceleration letters identifying both the amount required to cure a default and mentioning additional charges that might accrue (like regularly scheduled payments and late charges) creates ambiguity as to the amount required to cure the default. The court reasoned that because the borrower has not yet incurred the next monthly payment amount or additional late charges when the lender sends the acceleration letter, it is improper to include an itemization of such future charges and there is no ambiguity as to the amount that must be paid to cure the default.

66

Commerce Bank v. West Bend Mut. Ins. Co., A14-0247 (Minn. Ct. App. Sept. 22, 2014). Minnesota court rules that vandalism is an act of the insured so prior owner s actions in failing to secure the property did not negate the mortgagee s claim for coverage under a standard mortgage clause. Minnesota law provides that, under a standard mortgage clause, the insurance with respect to the mortgagee shall not be invalidated by the mortgagor's acts or neglect. The court rejected the reason given by the insurer was that [t]he non-coverage exists by the terms of the vacancy provision and not by any breach or violation by the property owner. But it was the owner's failure to occupy the property that comprised the acts or negligence causing the property to remain vacant for more than 60 days. The mortgagee did not breach the policy so the vacancy provision does not apply.

SERVICER ISSUES- Insurance Claims

67


Philadelphia Indemnity Insurance Company, v. Chicago Title Insurance Company v. Western Capital Partners LLC, Nos. 12-2525, 12-2612 & 12-2691 (7th Cir. November 13, 2014). The Seventh Circuit held that the “complete defense rule,” which requires an insurer to cover the costs of the entire litigation even if only one count triggers a duty to defend under the policy does not apply to title insurance. The duty to defend in a GL policy typically promises to defend for “any suit” seeking damages for acts, omissions, or occurrences covered by the policy. By contrast, the coverage available under a title insurance policy is much narrower. It insures risks associated with a defect in the property title. “Title insurance is fundamentally different from general liability insurance” in that it is aimed at risks that are already in existence on the date the policy is issued, as opposed to future risks.

68


Old Second Nat. Bank v. Indiana Ins. Co., 2015 IL App (1st) 140265. A Broker’s error in submitting insurance application representing that property was fully occupied, when it was in fact vacant, was not a “condition precedent” to coverage so innocent mortgagee was entitled to coverage.

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No longer are you limited to knowing about TILA, RESPA and the FDCPA. With the advent of the HAMP, CFPB and changes to long standing regulations It is a new game!

REGULATORY ISSUES

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REGULATORY ISSUES – TILA

Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 190 L. Ed. 2d 650 (2015)

IN A NUTSHELL—

Resolved a circuit split regarding whether a Borrower must file a lawsuit to rescind a loan within three years of the origination of said loan.

Found that Borrower only needed to give the Lender written notice of rescission within thee years of the loan origination.

Unanimous opinion drafted by Justice Scalia.

The Opinion leaves an open question about the deadline for Borrowers to file suit if a Lender fails to agree to rescission.

71


Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 190 L. Ed. 2d 650 (2015) Exactly three years after borrowing money from Lender to refinance their mortgage, BRs sent a letter to Lender purporting to rescind the transaction. Lender refused to rescind. One year and one day later (so, 4 years and 1 day after the original transaction), BRs filed suit seeking rescission. Dist. Ct. and 8th Cir. held that the BRs can only exercise their right to rescind their loan under TILA by filing suit within three years after the loan was consummated. U.S. Supreme Court – in a unanimous opinion written by Justice Scalia – overruled.

72


Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 190 L. Ed. 2d 650 (2015) A BR exercising his right to rescind under TILA need only provide written notice. The language of the statute is “unequivocal.” Section 1635(a) provides that a borrower “shall have the right to rescind by notifying the creditor of his intention to do so.” This language leaves no doubt that rescission is effected when the BR notifies the creditor of his intention to rescind. It follows that, so long as the BR notifies within 3 years after the transaction is consummated, his rescission is timely. The statute does not also require him to file suit within three years. This ruling ties into the 9th Circuit’s Opinion in Merritt v. Countrywide Fin. Corp., 759 F.3d 1023 (9th Cir. 2014), which held that a BR suing for rescission under TILA need not allege tender of the loan proceeds as a condition to seeking TILA rescission.

73


Fridman v. NYCB Mortgage Co., 14-2220 (7th Cir. Mar. 11, 2015). Seventh Circuit held that an online mortgage payment is deemed “received” under TILA on the date the customer authorizes the payment rather than on the date the lender receives the funds. The mortgagor asserted that the servicer’s practice of crediting online payments two business days after the payment is authorized violates 15 U.S.C. §1601 of TILA, which requires mortgage servicers to credit online payments on the day of authorization. The servicer argued that an “electronic payment authorization” is not one of the payment types defined under TILA. Rather, it is nothing more than the initiation of the process by which the servicer asks the mortgagor’s bank to make the actual payment. The dissent maintained that the court stretched the statute beyond its plain meaning and even suggested that, given this decision, servicers should either not accept online payments or reduce or eliminate grace periods all together in order to avoid similar issues.

74


15 U.S.C. §1635: Rescission Beukes v. GMAC Mortgage, LLC, No. 12-2146, (8th Cir. May 14, 2015). The mortgagee was granted summary judgment on the borrower’s TILA rescission claim, among other reasons, because if the finance charge was understated it fell within the applicable tolerance. The borrowers served the notice of rescission – thus “exercised rescission rights” - before the lender commenced foreclosure proceedings. This meant that the lower tolerance of Section 1635(i)(2) did not apply, and the general rule, which provides for a tolerance of one-half of one percent of the total amount financed, governed instead. The disclosed finance charge did not vary from the actual finance charge by more than one-half of one percent of the total amount financed so it was treated as accurate.

75


15 U.S.C. § 1641(f)(2): Servicer’s obligations

Justice v. Ocwen Loan Servicing, No. 2:13-CV-165 (S.D. Ohio Jan. 16, 2015). District court granted summary judgment to borrowers on a Section 1641(f)(2) TILA claim. Although servicer responded to borrower’s request to identify the owner of the note, it did not respond to the request for the address and telephone number of the owner of the note. Court said it was not enough that the servicer provide its address and telephone number as the statute requires providing information regarding either “the owner ... or the master servicer of the obligation.” 15 U.S.C. § 1641(f)(2). McMillen v. Resurgent Capital Servs., L.P., No. 2:13-CV-00738 (S.D. Ohio July 8, 2014). Servicers not liable under TILA for failing to respond to letter requested the name, address, and telephone number of the owner of their obligation. because, even though servicers are obligated to respond to such inquiries under 15 U.S.C. § 1641(f)(2), that provision creates no private right of action.

76

REGULATORY ISSUES – RESPA

Roth v. CitiMortgage Inc., 756 F. 3d 178 (2nd Cir. June 24, 2014).

Plaintiff’s attorney sent requests for information to Servicer alleging at trial that these communications constituted QWRs and Servicer's responses were in violation of RESPA. The district court below dismissed for failure to state a claim and this court affirmed, holding that the communications did not qualify because they were not mailed to the Servicer’s designated address.

In affirming the decision, the Court of Appeals explained that a Servicer is not limited to a single address for QWRs and that they can change the address.

77


Motions to Dismiss Granted Kilgore v. Ocwen Loan Servicing, LLC, 2015 WL 968108 (E.D.N.Y. Mar. 6, 2015).

RESPA claim dismissed because plaintiff failed to attach Notice of Error to Complaint or otherwise sufficiently plead. Court also found that Plaintiff failed to allege that his claim for actual damages arose from the failure to respond to the Notice of Error.

Nunez v. J.P. Morgan Chase Bank, N.A., 2015 WL 1638242 (M.D. Fla. Apr. 13, 2015).

Found that an inaccurate response to a Notice of Error stating that there was no error was not actionable. Duplicative Notices of Error are not actionable.

Wilson v. Bank of Am., N.A., 48 F.Supp.3d 787 (E.D. Pa. Sept. 24, 2014). RESPA claim survived motion to dismiss based upon allegation that servicer did not reasonably determine that requested documents were in the excluded category

78


Barrett v. Green Tree Servicing, LLC, No. 3:14-CV-297 (S.D. Ohio Dec. 2, 2014). The court overruled the servicer’s argument that the subject loan was no longer governed by RESPA because the borrowers later moved from the property and it is currently vacant. The servicer drew from this fact that the loan’s purpose was no longer for “personal, family or household purposes. The court held otherwise: “In determining whether the loan at issue is subject to the requirements of RESPA, the relevant question is the purpose for which the mortgage loan was made.

79

REGULATORY ISSUES – RESPA/QWRs

Justice v. Ocwen Loan Servicing, No. 2:13-CV-165 (S.D. Ohio Jan. 16, 2015). A U.S. District Court in Ohio rejected the argument that servicer’s failure to respond to QWR was not actionable because the borrowers were not “meaningfully deprived of information” as they already had the information sought in the QWR. In addition to supplying no evidence that the borrowers already possessed all the information sought by the QWR, the court held that RESPA imposes a duty on the servicer to respond to a QWR regardless of the utility of the information sought.

80


McKay v. JPMorgan Chase Bank, N.A., No. 2:14-CV-00512 (S.D. Ohio Nov. 3, 2014). McMillen v. Resurgent Capital Servs., L.P., No. 2:13-CV-00738 (S.D. Ohio July 8, 2014)(same). Relying on Marais v. Chase Home Fin. LLC, 736 F.3d 711 (6th Cir. 2013), the district court in McKay v refused to dismiss a QWR claim for failing to sufficiently plead damages. It may be reasonably inferred that the failure to correct or investigate misapplied payments caused the plaintiff to pay interest on a higher principal balance than she should have. In addition the costs incurred in preparing a QWR might be recoverable as actual damages.

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Diedrich v. Ocwen Loan Servicing, LLC, No. 13-CV-693 (E.D. Wis. Apr. 24, 2015). The Court held that Plaintiffs failed to sufficiently prove damages resulting from allegation that the failure to provide information requested by a QWR ruined their credit without proof that the information sought would have assisted them in repairing their credit. Plaintiffs did not show damages resulted from stress either where the proof consisted only of such statements as “The basis is everything that Ocwen has put us through over the three years of this lawsuit ... like I said, the stress and the having to constantly worry about this monthly.”

82


Hittle v. Residential Funding Corp., No. 2:13-CV-353 (S.D. Ohio Aug. 5, 2014). According to the court, the servicer does not have to respond to a QWR or correct the account when it was unable to tell from the correspondence what the error was. The letter says there were numerous charges that are “unexplained” or “strange” and the loan records show a large number of late fees, speed draft fees, as well as other adjustments. The borrowers disputed all the charges and gave essentially no reason at all for their broad allegations of error. “[C]onfronting a generic, all-encompassing, and clearly (at least partially) false error allegation, [servicer] was under no duty to respond to the QWR by correcting the account” or to explain why the account was correct. But see, Griffin v. Bank of Am., N.A., No. 2:14-CV-02335 (W.D. Tenn. July 15, 2014) (communication that demanded servicer conduct an audit on the account in order to “validate the debt so that it is accurate to the penny” constituted a QWR).

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Romero v. Bank of Am., NA, No. 13-4040-DDC (D. Kan. Jan. 21, 2015); In re Patrick, No. 13-61661 (Bankr. N.D. Ohio Dec. 22, 2014); Moody v. CitiMortgage, Inc., 32 F. Supp. 3d 869, 873 (W.D. Mich. July 14, 2014); Jestes v. Saxon Mortg. Servs., Inc., No. 2:11–59, 2014 WL 1847806 (M.D.Tenn. May 8, 2014). Where the servicer designates an address for receipt of QWRs for purposes of RESPA, and lists that address in the monthly billing statements, correspondence sent to other address does not trigger a servicer’s duties under RESPA.

84


Jones v. Wells Fargo Home Mortgage, Inc., No. 10 C 0008 (N.D. Ill. Aug. 12, 2014) . Court held that the servicer of a loan that is in default is not “servicing” the loan under RESPA and therefore does not have to respond to a QWR. Compare, Tucker v. U.S. Bank, N.A., No. 1:13-CV-1260 (N.D. Ohio Aug. 21, 2014(motion for judgment on the pleadings where plaintiff does not allege any conduct by defendant that may create the inference that defendant is the servicer of his loan.) Cf. Hammer v. Residential Credit Solutions, Inc., No. 13 C 6397 (N.D. Ill. Sept. 11, 2014) (where servicer collected some payments after default it “received, at least on those dates, scheduled periodic payments” and thus plausibly servicing the loan.)

85

REGULATORY ISSUES – FDCPA

Douglass v. Convergent Outsourcing, 765 F.3d 299 (3d Cir. Aug. 28, 2014).

Window in envelope that revealed account number was a violation of FDCPA.

Acosta v. James A. Gustino, P.A., 2014 WL 5685540 (M.D. Fla. June 6, 2014).

Holding that communication directed only to borrower’s attorney was not actionable under the FDCPA.

86


HELLO/GOOD BYE Letters ARE NOT communications covered by the FDCPA!

Goodson v. Bank of America, N.A., 600 Fed.Appx. 422 (6th Cir. 2015)

The CFPB Rule (RESPA Hello/Goodbye) correspondence informed mortgagor of a change in servicer but misstated the loan balance - Not within the scope of the FDCPA.

Suit alleged that Hello letter sent by new servicer which incorrectly represented the amount she owed was in violation of §1692e of FDCPA.

Purpose of letter was to inform of service transfer rather than collect amounts due and thus were not collection activity.

Fact that letter contained boilerplate FDCPA warning did not transform the letter into debt collection activity.

Though the letter was sent by a debt collector who had had no relationship with Goodson prior to her default, and stated the balance owed as of June 30, 2011, the factors in favor of finding that it had been sent in connection with a debt collection activity end there.

87


Matmanivong v. Nat'l Creditors Connection, Inc., No. 13 C 5347, 2015 WL 536635 (N.D. Ill. Feb. 9, 2015) Decision relied heavily on Gburek v. Litton Loan Servicing, 614 F3d 380 (7th Cir 2010). Entity that conducts loss mitigation services, including interviewing borrowers, inspecting and photographing properties, and delivers and picks up loss mitigation documents facilitates the collection of debts and thus qualifies as a debt collector under the Act.

88

REGULATORY ISSUES - FDCPA

Davidson v. Capital One Bank (USA), N.A., 14-14200, 2015 WL 4994733, at *1 (11th Cir. Aug. 21, 2015). The Eleventh Circuit held that a person who does not otherwise meet the FDCPA’s definition of a debt collector under 15 U.S.C. § 1692a(6) is not subject to the FDCPA, even where the consumer's debt was in default at the time such person acquired the debt.

89

REGULATORY ISSUES – TCPA

Nigro v. Mercantile Adjustment Bureau, LLC, 769 F.3d 804 (2nd Cir. Oct. 16, 2014).

Summary judgment reversed because number was not provided during the transaction that created the debt. Decision based on specific limits placed by the FCC on automated calls by debt collectors in a declaratory ruling.

Mais v. Gulf Coast Collection Bureau, Inc., 768 F.3d 1110 (11th Cir. Sept. 29, 2014).

“Prior express consent” sufficient where cellphone number given as part of origination regardless of whether telephone number was given to the party that made the call.

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REGULATORY ISSUES – TCPA

Lary v. Trinity Physician Financial & Ins. Services, 780 F.3d 1101 (11th Cir. Mar. 13, 2015).

In order to show the “willful or knowing[]” conduct to authorize treble damages, the plaintiff must show that the violator knew it was “performing the conduct that violates the statute.” A prohibited activity under Section 227(b) of the TCPA can give rise to multiple violations for the purpose of determining damages.

91

HOA AND TAX FORECLOSURE ISSUES

92

Recent Series of Florida Cases

On August 2, 2015, 4th and 5th Florida District Courts of Appeal Rendered decisions regarding HOA issue. Main takeaway – do not file post-judgment motion to enforce unless you are in 4th DCA. Even then, a little iffy. Bank of America National Association v. The Enclave at Richmond Place Condominium Association, No. 2D14-3643 (Fla. 2d DCA Aug. 21, 2015) Second DCA held that association had waived issue of trial court’s lack of post-judgment continuing jurisdiction, citing Oceans Bank v. Caribbean Towers Condo Ass’n, Inc., 121 So.3d 1087, 1089-90 (Fla. 3d DCA 2013), & was forbidden by doctrine of waiver from contesting bank’s right to dues safe harbor when it had affirmatively pled in its answer in the foreclosure that bank was entitled to safe harbor. Court did not rule on the merits but quoted safe harbor statute and the association’s own Declaration that provided safe harbor to first mortgagees.

93

Recent Series of Florida Cases - cont’d

Grand Central at Kennedy Condominium Association, Inc. v. Space Coast Credit Union, 2D14-2740 (Fla. 2d DCA Aug. 19, 2015) – Association represented by Business Law Group appealed to Second DCA on issue of jurisdiction, and the Second DCA followed the Third DCA in Cent. Mortg. Co. v. Callahan, 155 So.3d 373 (Fla. 3d DCA 2014) and the Fifth DCA in Cent Park A Metrowest Condo Ass’n v. AmTrust REO I, LLC, No. 5D14-1511 (Fla. 5th DCA Aug. 17, 2015), and the First DCA in Montreux at Deerwood Lake Condo Ass’n v. Citibank, N.A., 153 So.3d 961, 962 (Fla. 1st DCA 2014), in holding that unless the foreclosure judgment specifically reserves jurisdiction on dues/safe harbor issue (as they normally do on writs or deficiency judgment), then foreclosure judge doesn’t have post-judgment jurisdiction to determine the issue and a separate lawsuit must be filed. Second DCA in a footnote requested that trial courts do so, saying this is a “prevalent issue.”

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Recent Series of Florida Cases- cont’d

Central Park A Metrowest Condo Ass’n v. AmTrust REO I, LLC, No. 5D14-1511 (Fla. 5th DCA Aug. 17, 2015 Association represented by Business Law Group appealed on issue of jurisdiction and the Fifth DCA commented that the trial court correctly ruled on the merits, but followed the Third DCA in Cent. Mortg. Co. v. Callahan, 155 So.3d 373 (Fla. 3d DCA 2014) and the First DCA in Montreux at Deerwood Lake Condo Ass’n v. Citibank, N.A., 153 So.3d 961, 962 (Fla. 1st DCA 2014), in holding that unless the foreclosure judgment specifically reserves jurisdiction on dues/safe harbor issue (as they normally do on writs or deficiency judgment), then foreclosure judge doesn’t have post-judgment jurisdiction to determine the issue and a separate lawsuit must be filed. So the 5th DCA was “constrained” to reverse.

95

Recent Series of Florida Cases- cont’d

Citation Way Condominium Association, Inc. v. Wells Fargo Bank, N.A., No. 4D-14-2667 (Fla. 4th DCA Aug. 19, 2015) Association represented by BLG appealed trial court’s ruling that Fannie Mae, who purchased at the sale, was entitled to safe harbor when it was Wells Fargo that had obtained the judgment. The 4th DCA ruled the trial court had post-judgment jurisdiction and that Fannie Mae as owner of the loan was entitled to safe harbor. In ruling the lower court had jurisdiction the 4th DCA departed from Callahan, Montreux, Central Park and Grand Central, although the opinion doesn’t state if the reservation was general or specific. Certainly that is BLG’s position because it has already moved for rehearing. In ruling that the issue of safe harbor was litigated in the foreclosure, the court departed from Montreux, but implicitly agreed with Bank of America v. The Enclave.

96


SFR Investments Pool 1 v. U.S. Bank, 130 Nev. Adv. Op. 75 (Nev 2014) Nevada Supreme Court sent shockwaves through the lending industry when it ruled that the non-judicial foreclosure on a HOA lien wiped out an otherwise 1st Deed of Trust.

Eliminating an $885,000 lien for $6,000 was NOT deemed commercially unreasonable.

Mortgage Protection Clause in the CC&Rs deemed irrelevant

97


SFR Investments Pool 1 v. U.S. Bank, 130 Nev. Adv. Op. 75 (Nev 2014) Recent Federal Court decisions: Cano-Martinez v. HSBC Bank, et. al. (Nevada District Court 5/7/15): Judge Delaney holds that the “opt-in” Nevada notice statute is unconstitutional on its face. Other judges follow suit.

Saticoy Bay LLC v. SRMOF II 2012-1 Trust (Nevada District Court 4/30/15): Judge Mahan grants summary judgment in Lender’s favor, holding that the HOA’s foreclosure on a federally insured loan through the FHA violates the Property and Supremacy clauses of the U.S. Constitution.

Freedom Mortgage Corporation v. Las Vegas Development Group, LLC, et. Al. (Nevada District Court 5/19/15): Judge Dorsey reaches the complete opposite conclusion as Judge Mahan did in Saticoy Bay. Property and Supremacy clause do not apply to or protect federal insured loans.

98


Chase Plaza Condo. Assoc., Inc. v. J.P. Morgan Chase Bank, 98 A.3d 166 (D.C. Aug. 28, 2014).

Held that an HOA foreclosure sale extinguished mortgage lien on property.

Ruling based on interpretation of Section 42-1093.13 of the D.C. Code, which gives super-priority to the most recent six months of condominium assessments over any other lien.

99


Fannie Mae v. Villa Del Lago Condo. Ass'n, No. 315459 (Mich. Ct. App. July 29, 2014); Fed. Nat. Mortgage Ass'n v. Lagoons Forest Condo. Ass'n, 305 Mich. App. 258, 852 N.W.2d 217 (2014). Fannie Mae is not liable for unpaid assessments prior to taking title regardless of the fact that Fannie Mae’s assignor violated a Michigan statute which requires the plaintiff in a foreclosure to request a written statement from the association before it obtains title. A different statute is more specific, and thus controlling. It provides that where the mortgagee purchases the property at foreclosure all prior unpaid assessments are extinguished.

100


1010 Lake Shore Ass'n v. Deutsche Bank Nat. Trust Co., 2014 IL App (1st) 130962 (August 12, 2014).

An Illinois appellate court held that when a mortgagee who takes title to condominium property after a foreclosure sale and fails to pay current assessments then the preexisting lien for past due assessments will not be extinguished. (on appeal to state supreme court).

New Ctr. Commons Condominiums Ass'n v. Espino, No. 314702 (Mich. Ct. App. June 24, 2014).

Where state statute only gives the holder of a “first mortgage of record” priority over a condominium lien for unpaid assessments, the fact that first owner of first recorded mortgage had subordinated its interests to defendant mortgagee did not make defendant mortgagee the holder of a “first mortgage of record” for these purposes.

101

MISCELLANEOUS/ LIGHTNING ROUND

102

ALERT! Changes to Georgia Law RE Attestation of Security Deed

Modifies Georgia s rules for attestation of security deeds.

–  Establishes that a Security Deed which is acknowledged in front of a notary needs only one unofficial witness.

–  Removes argument that security deeds acknowledged in front of

notary was invalid when only witnessed by one unofficial witness. O.C.G.A. § 44-14-33 (effective July 1, 2015)

103

ALERT! Change to Georgia Law - Penalty for Late Filing of Foreclosure Deed

GEORGIA: Effective July 1, 2015, in Georgia all deeds under power are required to be filed by the holder of a deed to secure debt or a mortgage within 90 days of the date of the foreclosure sale. If the deed under power is not filed within 30 days after the 90-day time period expires, the holder of the deed to secure debt or mortgage must pay the Clerk a late filing penalty of $500.00 in addition to the usual filing fees. Such late filing penalty shall be collected by the clerk of the superior court before filing. O.C.G.A. § 44-14-160

104

MEDIATION

Missouri County enacted an ordinance that established a mediation program Failure to comply would subject one to criminal prosecution

Municipal regulations meant to address a national crisis Crisis affected every state in the country Not a matter of distinctly local concern Therefore outside the scope of the home-rule authority

Program Void Ab Initio Missouri Bankers Ass'n, Inc. v. St. Louis Cnty., 448 S.W.3d 267 (Mo. 2014

105

SERVICE OF PROCESS

Illinois – private process server must be certified Whether a private detective agency who is not licensed in the State of Illinois is eligible for appointment as a process server, where the agency is not licensed, but the owner is licensed?

Strict compliance with statute is required before a court can acquire personal jurisdiction Statute states private detective agency must be certified under Illinois Private Detective Act. Where agency is not certified, court lacks personal jurisdiction and default judgment obtained over defendant is void.

West Suburban Bank v. Advantage Financial Partners LLC 2014 IL App (2d) 131146

106

GRACE PERIOD NOTICE

Beal Bank v. Barrie, 2015 IL App (1st) 141157. ILLINOIS Whether borrower can argue lack of standing or failure to provide Grace Period Notice after a foreclosure sale?

Motion to vacate judgment denied where borrower did not raise argument until after sale After a sale has already occurred, the borrower must argue: fraud, misrepresentation, or another equitable defense that prevented defendant from raising defenses earlier

107

CONTRACTUAL WARRANTY

Fattah v. Bim, 2015 IL App (1st) 140171. Warranty of Habitability

A waiver of the implied warranty of habitability by the original purchaser cannot bind a subsequent purchaser who had no knowledge of the waiver.

An as-is clause without more does not amount to a knowing waiver of the warranty unless purchaser knowingly waived the implied warranty conspicuous provision fully discloses the consequences

109

Contact Information Linda S. Finley

Shareholder, Baker Donelson 404.589.3408

[email protected]

David C. Kluever Partner, Kluever & Platt, LLC 312.201.6677 [email protected]

Denise Rainwater Griffin Senior Litigation Attorney, Shapiro Pendergast & Hasty, LLP 770.963.7147 [email protected]

Session 2 (Track 1 & 3) – Judicial Foreclosure Updates River Terrace 2 Track 1: 9:45 a.m. – 11:00 a.m. Track 3: 2:45 p.m. – 4:00 p.m.

Speakers:• Jane Bond, Esq., Managing Partner, McCalla Raymer (ALFN Member in Florida, Georgia,

Alabama, Mississippi) – Discussion Leader• Antonio Scarlato, Esq., Managing Attorney, Felty & Lembright, LPA (ALFN Member in Ohio)• Ted May, Esq., Managing Partner, Sheldon, May & Associates, PC (ALFN member in New York)• Jill Rein, Esq., Managing Attorney, Pierce & Associates, PC (ALFN Member in Illinois)

Session Overview: • Jane Bond – Judicial Updates• Antonio Scarlato – Probate Court Land Sales of mortgaged property. In some judicial States there

is a statutory right for the Administrator of the Estate to file a Complaint to Sell Real Estate in theProbate Court. In these instances, the Probate Court can acquire exclusive jurisdiction over thereal property and prevent the filing of a foreclosure action by the Mortgagee. Lenders/Servicersshould be aware of a few important issues regarding Probate Court Land Sales: (1) the attorneyand fiduciary fees (which can be substantial) are generally paid from the sale proceeds before thefirst mortgage; (2) the Probate Court may be able to order a private sale (as opposed to publicsale), which eliminates the mortgagee’s ability to acquire the property as an REO asset; and (3)the Probate Judge may have discretion to set a minimum sale price irrespective of how much isowed on the mortgage, thereby forcing the mortgagee to accept whatever proceeds remain afterpayment of the costs of the sale (including the attorney/fiduciary fees), and ordering themortgagee’s lien released. Consequentially, Lenders/Servicers can be forced to absorbsignificant losses on these loans in Probate Land Sales as a result of these unique procedures.We will discuss what actions Lenders/Servicers can take in an effort to minimize such losses inProbate Court Land Sale matters.

• Ted May – Judicial Updates• Jill Rein - Judicial Foreclosure

Jane Bond, Esq. Managing Partner McCalla Raymer 225 E. Robinson St., Suite 660 Orlando, FL 32801 Phone: 407-674-1850 Fax: 321-248-0420 [email protected]

Education:• Michigan State University (B.A.)• Western Michigan University• Cooley School of Law (J.D.)

Ms. Bond is the Managing Partner of the Firm’s Florida Litigation Group. She has over 25 years litigation experience, with 20 years specifically devoted to business and real estate litigation involving the mortgage lending and servicing industries. Ms. Bond has experience representing both appellants and appellees in appellate proceedings before the District Courts of Appeal and the Supreme Court in Florida

and has participated in oral arguments before several of the District Courts. Her experience leads to frequently lecturing at training seminars, conferences and continuing legal education courses on real property issues including mortgage foreclosure, title issues, federal forfeiture, eminent domain and deficiencies.

Antonio Scarlato, Esq. Managing Attorney Felty & Lembright, LPA 1500 W. 3rd Street, Suite 400 Cleveland, OH 44113 Phone: 216-588-1500 Fax: 216-588-1492 [email protected]

Education University of Toledo; Bachelor of Science University of Toledo, College of Law; Juris Doctor

BarAdmissions

State of Ohio - 2001 U.S. District Court-Northern District of Ohio - 2005

Experience Tony currently serves as Managing Attorney for the firm’s real estate default practice. In this capacity, he oversees the daily operation of the firm's real estate default activities, ensures successful legal compliance with all applicable investor regulations (FNMA, FHLMC, FHA and VA), and ensure conformity with all applicable State and Federal laws, servicer requirements, and County-specific requirements. Tony also assists the firm's Chief Compliance Counsel with regulatory compliance matters, and collaborates with the firm's Litigation Counsel on all litigated matters.

Tony regularly counsels clients on legal and regulatory issues affecting the mortgage default industry, and provides periodic in-house training for mortgage servicers on wide-ranging topics. Tony has also previously spoken as a panelist at mortgage service industry conferences, and currently serves as a committee member of the Default Servicing Professionals Group for the American Legal and Financial Network (ALFN).

Ted May, Esq. Managing Partner Sheldon, May & Associates, PC 255 Merrick Road ~ Rockville Centre New York 11570Phone: (516) 763-3200Fax: (516) 763-3243 [email protected]

Ted E. May is the managing partner of Sheldon May & Associates, P.C. Default Servicing Group in the firm's Rockville Centre, New York office since 1997. He practices mainly in the area of Creditor's Rights specializing in mortgage banking and real estate title matters. He has extensive experience representing creditors in matters involving Contract Negotiations, Loss Mitigation, Litigation, Loan Modification, Foreclosure, Bankruptcy, Eviction, Due Diligence, Mortgage Closing, REO Closing, Collection and Business Analysis.

Mr. May has lectured on creditor's rights, mortgage bank and real estate title legal topics relating at numerous servicers, lenders, investors and hedge funds.

He earned his J.D. in 1996 from Nova Southeastern University, and his B.A., Magna cum laude, in 1991 from Syracuse University. He is admitted to the bars of the New York, New Jersey, Florida, Pennsylvania and the District of Columbia. In addition he is admitted in the Northern, Southern, Eastern and Western District of New York; Middle District of Florida, and the District Court of New Jersey.

Jill Rein, Esq. Managing Attorney Pierce & Associates, PC 1 N. Dearborn St., 13th Floor Chicago, IL 60602 Phone: (312) 476-5156 [email protected]

Jill D. Rein is a shareholder and Managing Attorney of the Foreclosure Department at Pierce and Associates, PC. Jill concentrates her practice in all areas of foreclosure, default servicing and related litigation. She is a graduate of IIT-Chicago Kent College of Law and was admitted to the State of Illinois and Federal bars in 1990. Jill is a member of the Chicago Bar Association, the Illinois Mortgage Bankers Association, the MBA, USFN and ALFN. She is a regular panelist and guest speaker at numerous industry related events including conferences for the Illinois Mortgage Bankers Association, the USFN and the ALFN. In addition, Jill conducts numerous in-house training seminars for clients and is a regular panelist at client attorney summits on topics related to Foreclosure, Property Preservation, Evictions and Building Violations

JUDICIAL FORECLOSURE

SEPTEMBER 9, 2015 JACKSONVILLE FL

Foreclosure Rates – US –June 2015

U.S. 1 in every 1128 Top 5 States Florida 1 in every 486 Maryland 1 in every 531 New Jersey 1 in every 584 Nevada 1 in every 677 Indiana 1 in every 857

Jill Rein Managing Attorney Pierce & Associates, P.C. [email protected] Illinois

SESSION SPEAKERS

Jane E. Bond Managing Partner McCalla Raymer, LLC [email protected] Florida

Antonio J. Scarlato Managing Attorney Felty and Lembright Co,. LPA [email protected] Ohio

Ted Eric May, Esq. Managing Partner Sheldon May & Associates, P.C. [email protected] New York

IILLINOIS

Presented by Jill Rein

Managing Attorney Pierce & Associates, P.C.

THE PERFECT REFERRAL

Documents Information Title

FIRST LEGAL/FILING THE COMPLAINT (PETITION)

Necessary Defendants Documentation that must be attached Lis Pendens/Notice of Foreclosure

SERVICE ON DEFENDANTS

Who Performs Service How is it Performed

APPEARANCES/ANSWERS/RESPONSES

Appearances Answers/Defenses Counterclaims

REDEMPTION

Pre-Sale vs. Post Sale When does exemption period expire

SALE

Who Conducts Can the Sale be Postponed or Cancelled Information/Documentation Needed

CONFIRMATION OF SALE

When Does This Occur Appearance Before the Court Required? What Does the Confirmation of Sale Accomplish

OOHIO

Presented by Antonio J. Scarlato Managing Attorney

Felty and Lembright Co., LPA

GENERALLY

A fiduciary generally does not have the power to sell a decedent’s real estate without a Court Order.

Instead, a fiduciary may bring a civil action in Probate Court to sell decedent’s real property if the personal property of the decedent is insufficient to pay the debts of the Estate.

Two exceptions: • Decedent’s Will expressly gives power to fiduciary to sell

decedent’s real property without need for a Court Order (often referred to as “power of sale.”)

• All Heirs give written consent

UNIQUE ISSUES IN PROBATE LAND SALES

I. JURISDICTIONAL MATTERS II. CIVIL PROCEDURE III. ATTEMPTS TO INVALIDATE MORTGAGE

LIEN IV. PUBLIC SALE OR PRIVATE SALE V. JUDICIAL DISCRETION TO FIX SALE

PRICE VI. PRIORITY AND DISTRIBUTION OF SALE

PROCEEDS

JURISDICTIONAL MATTERS

Concurrent Jurisdiction over real property in the Estate • Courts of general jurisdiction (e.g., Common Pleas) and

Probate Court. • First to obtain service on all parties generally acquires

exclusive jurisdiction.

Necessary Parties • Probate Land Sale:

o spouse, heirs, lienholders, others having an interest in the property.

• Foreclosure: o Estate is not a necessary party to foreclosure action if

solely in rem (only if seeking money judgment against the Estate).

o Heirs and/or will beneficiaries are necessary parties to Foreclosure action/ Interest automatically vests upon death.

CIVIL PROCEDURE

Civil Rules: • Apply to Land Sale proceedings “except to the extent

that by their nature they would be clearly inapplicable.”

Local Court Rules: • Most Probate Courts have their own unique set of

Local Rules. • Often contain specific rules addressing attorneys’

fees and/or fiduciary compensation. • May also contain specific procedural requirements

ATTEMPTS TO INVALIDATE MORTGAGE LIEN

Servicers often fail to refer these matters to counsel to file an Answer in a timely manner. • Reasons? • Treat as normal estate paperwork?

As a result, when late referrals are received by firms, the Answer date for the is usually expired. • The lender/servicer may have already been defaulted. • Sale may have been ordered absent the mortgage lien. • Fiduciary may have obtained a specific Order invalidating the

mortgage lien.

PUBLIC OR PRIVATE SALE

May have a choice between a Public Sale or a Private Sale in Probate Court.

Private Sale: • Court order to sell for no less than appraised value. • Fiduciary usually requests a Private Sale because it

provides a better opportunity to realize full market value. • May not be in the Servicer/Investor’s best interests.

Public Sale: • Requires a minimum bid of 2/3 of the appraised value.

JUDICIAL DISCRETION TO FIX SALE PRICE

Probate Court may fix the price for which the property may be sold if: • Private Sale - if no sale has been effected after one bona fide

effort to sell; or • Public Sale - the property remains unsold for lack of bidders,.

The Judge is given full discretion to set the sale price at this point. • The Sale price set by the Judge will be based upon current

value, even if less than the mortgage loan balance. • A sale ordered in this manner will include a Court-ordered

release of the mortgage lien regardless of the amount of proceeds the bank ends up receiving.

PRIORITY OF PAYMENT OF DEBTS FROM SALE PROCEEDS

The most significant difference between a Probate Court Land Sale and a Judicial Foreclosure Sale is the Order of Priority of payment from the distribution of proceeds.

Judicial Foreclosure: 1. Court Costs 2. Taxes 3. First Lienholder

Probate Land Sale: 1. Court Costs 2. Taxes 33. Attorney Fees (earned directly in connection with the sale) 4. Fiduciary Fees (earned directly in connection with the sale) 5. Appraisal Fee and any other expenses specifically related to the sale 6. First Lienholder

HOW TO MINIMIZE LOSSES

I. ATTEMPT TO SECURE EXCLUSIVE JURISDICTION IN THE GENERAL DIVISION

II. AGGRESSIVELY CONTEST ATTEMPTS TO DEFAULT OR EXTINGUISH THE MORTGAGE LIEN

III. MOVE FOR A PUBLIC SALE IV. CLOSELY SCRUTINIZE PROPOSED

DISTRIBUTION OF PROCEEDS AND DISPUTE WHEN NECESSARY

ATTEMPT TO SECURE EXCLUSIVE JURISDICTION IN GENERAL DIVISION

Why do we want jurisdiction to be in the general division? Judicial Foreclosure: Probate Land Sale:

1. Court Costs 1. Court Costs 2. Taxes 2. Taxes 3. First Lienholder 33. Attorneys Fees

4. Fiduciary Fees 5. Other sale expenses 6. First Lienholder

How do we ensure that general division obtains exclusive jurisdiction? • File Judicial Foreclosure even if aware that Land Sale

Complaint will be filed or has been filed, but service not yet perfected.

• Beat the Estate in the race to obtain service on all named Defendants.

CONTEST ATTEMPTS TO DEFAULT OR EXTINGUISH THE MORTGAGE

Answer date expired and the lender/servicer may have already been defaulted and/or had their lien ordered extinguished. Options available to combat:1. Closely analyze proceedings in effort to locate any non-

compliance with Civil Rules, Local Rules, and/or State Statutes. • Were dispositive motions filed? • Failure to name all required/correct parties in the Complaint. • Statutes exempting creditor from making claim/filing answer if

lien is properly recorded in the public records. • Proof of Service of subsequent pleadings.

2. Case law protecting rights of secured creditors in Probate Courts. • “Probate statutes should not be used to circumvent the rights

of secured creditors.” 3. Motion for Relief from judgment based upon “Corporate excusable

neglect” in mishandling the summons and complaint.

MOVE FOR A PUBLIC SALE Reasons to request a Public Sale: • The Private Sale at the appraised value will result in

(substantially) less than a full payoff to the servicer/investor. • The servicer/investor would like an opportunity to bid on the

property and potentially acquire as REO asset. o Critical to include “credit bid” language in the JE Ordering

Sale

How and when to request a Public Sale: • Look to statutes/local rules (e.g., in Ohio statute says that if

not sold within 30 days, any party with an interest in the proceeds may file a motion requesting a public sale).

• Negotiate a consent entry with the Plaintiff.

SCRUTINIZE PROPOSED DISTRIBUTION OF PROCEEDS AND DISPUTE WHEN NEEDED

The most significant areas of abuse by Estate Attorneys: 1. Attempts to have costs and expenses that are statutorily

junior in priority, paid ahead of the first mortgage. 2. Attempts to pay attorneys’ fees and fiduciary fees earned

in connection with administration of the entire Estate ahead of the mortgage (especially where Estate is insolvent). • Only those “fees, costs, and expenses earned in

connection with the sale of the property” are entitled to priority over the first mortgage; Estate attorney must itemize and separate.

3. Inflated Attorneys’ Fees and/or Fiduciary Fees • Request an itemization; inspect the hourly rate and time

entries for reasonableness. • Attorneys’ Fees can be challenged and a hearing held to

determine reasonableness

APPLYING THESE TIPS EXAMPLE #1

SSALE PRICE: $36,000.00

Order of Priority and Distribution requested by Estate: 1. Court Costs: $225.00 2. Expenses of Administration $485.50 3. Funeral Expenses $6,000.00 4. Fiduciary Fee $1,440.00 5. Attorneys’ Fees $8,000.00 6. First Mortgage $19,849.50

Order of Priority granted after disputing: 1. Court Costs: $175.00 2. Expenses of Administration $260.50 3. Attorneys’ Fees (sale only) $8,000.00 4. Fiduciary’s Fee $1,440.00 5. First Mortgage $26,124.50

Savings to Servicer/Investor of $6,275.00

APPLYING THESE TIPS EXAMPLE #2

SSALE PRICE: $130,000.00

Order of Priority and Distribution requested by Estate: 1. Court Costs: $250.00 2. Fiduciary’s Fee $4,000.00 3. Appraisal Fee $200.00 4. Misc. Admin. Expenses $8,740.94 5. Attorneys’ Fees (entire Estate) $6,000.00 6. Funeral Expenses $2,882.10 7. Medical Expenses $1,421.74 8. First Mortgage $106,505.22

Order of Priority granted after disputing: 1. Court Costs: $250.00 2. Attorneys’ Fees (sale only) $1,500.00 3. Fiduciary’s Fee $4,000.00 4. Appraisal Fee $200.00 5. First Mortgage $124,050.00


APPLYING THESE TIPS

EXAMPLE #3 SSALE PRICE: $110,000.00

Order of Priority and Distribution requested by Estate: 1. Court Costs: $660.00 2. Closing Costs $16,289.00 3. Executor Expenses $16,898.07 4. Executor’s Fees $4,500.00 5. Attorneys’ Fees (entire Estate) $16,000.00 6. Appraisal Fee $200.00 7. First Mortgage $55,452.93

Order of Priority after disputing: 1. Court Costs: $328.00 2. Closing Costs $16,289.00 3. Executor Expenses $7,200.72 4. Attorneys’ Fees (sale only) $5,166.00 5. Executor’s Fees $4,300.00 6. Appraisal Fee $200.00 7. First Mortgage $76,516.28


MY CONTACT INFORMATION

AANTONIO J. SCARLATO MANAGING ATTORNEY – REAL ESTATE

DEFAULT FELTY & LEMBRIGHT CO., LPA (OHIO)

216-588-1491 [email protected]

FFLORIDA

Presented by Jane E. Bond Managing Partner, FL Litigation

McCalla Raymer, LLC

FORECLOSURE RATES -FL- JUNE 2015

Florida 1 in every 486 Top 5 Counties Pasco 1 in every 238 Bradford 1 in every 254 Flagler 1 in every 263 Nassau 1 in every 295 Wakulla 1 in every 297

FLORIDA CASE FILINGS

FLORIDA CASE INITIATIVE FILINGS

January 2015 = 5,380

February 2015 = 5,800

March 2015 = 6,100

April 2015 = 6,238

AGE OF ACTIVE PENDING FORECLOSURE CASES

PENDING FORECLOSURE CASES

June 2012 = 377,707

June 2013 = 329,171

June 2014 = 159,491

April 2015 = 90,535

SENIOR JUDGE CHANGES As of July 1, 2015, the Senior Judge funding was eliminated.

Hearing dates changed: most hearings with the Senior Judges were cancelled to be scheduled with the Circuit Court Judges.

Many of the Judges, only have limited days for hearings.

Is this Good or Bad?

Will the cases move more slowly or more quickly?

FIVE STEPS OF A FL FORECLOSURE

COMPLAINT FILED

SERVICE COMPLETED

JUDGMENT ENTERED

SALE HELD

CERTIFICATE OF TITLE ISSUED

Florida Case Law – Breach Letters

1. Paragraph 22 of the Mortgage states: Lender shall give notice to Borrower prior to acceleration following Borrower’s breach.

The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured.

2. Language Compliance (a) To bring an action vs. foreclosure action may be filed against you. (b) Judges mat not like: PLUS ANY PAYMENTS, FEES, COSTS, etc.

Florida Case Law – Breach Letters

3. Mailing compliance a. Change of address issues: send to mortgage address unless instructed in writing. b. Send to both addresses if more than one.

4. Any prejudice to the Borrower: a. Gorel and Vasilevskiy

5. Standard: Strict Compliance vs. Substantial compliance a. Must contain all information required under paragraph 22. b. Language may vary, as long as it contains all information required

OBTAINING JUDGMENT

1. Contested Cases: a. Motion for Summary Judgment b. Non-Jury Trial

2. Uncontested options a. Default Judgment under FL Statute 702.065 b. Certification of Business Records FL Statute

UPDATE ON THE FL STATUTE OF LIMITATIONS

Bartram Oral Argument: November 4, 2015

Beauvais Oral Argument: November 12, 2015

Recent Rulings and Best Practices

APPEALS

Timing: Notice of appeal must be filed within 30 days of the order entered which is being appealed Must pay clerk $300 filing fee and lower court $100 filing fee for records transfer Initial brief due 70 days after Notice of Appeal Response to initial brief due 20 days after initial brief filed Reply to response due 20 days after Response to initial brief Court is taking between 6 months to 1.5 years to issue a decision. Extensions of time are routinely granted and most of the above timelines can be extended by months (1-5)

NNEW YORK

Presented by Ted Eric May, Esq. Managing Partner

Sheldon May & Associates, P.C.

New York Foreclosure Update

• FFocus: Standing to Foreclose and Statute of Limitations • Servicers/Lenders must be aware of these issues which

continue to be “hot button” topics before the Court and must be handled with care by attorneys on the behalf of their clients.

• Careful analysis must be taken to (1) ensure proper proceedings within the foreclosure action, (2) protect both the attorney and servicers/lenders from incurring unfavorable Court decisions, and (3) to best manage fees and costs.

Standing to Foreclose, cont. • Standing continues to be a persistent issue

before the NY Courts. • It is imperative to demonstrate not only

ownership but also the timeline for transfers. • Best practice is to always apply basic

information-gathering: • WWho transferred and WWho received? • When did it take place? • How did it happen (was it documented

properly)? • Must conclusively demonstrate lawful holder of

both note and mortgage && when ownership occurred.

SStanding As a general rule a mortgage is an incident to a note and will be transferred with the note when it is assigned. See, Bank of New York v. Silverberg, 2011 WL 2279723 at 4; see also Mortgage Electronic Registration Systems, Inc. v. Coakley, 41 A.D.3d, 674 (2007); and Federal Natl. Mtge. Assn. v. Youkelsone, 303 A.D.2d 546 (2003).

Thus, the NNOTE is vital to standing.

• Note ownership is governed by the Uniform Commercial Code (UCC).

• Note is payable to bearer or holder. UCC Section 3-202(1).

• May also be negotiated by indorsement (special or blank) or by an allonge. UCC Section 3—202(2),(3), & (4)

Standing, cont.

• Indorsements: Makes the NOTE “payable to the order of…” and needs delivery with the indorsement. Must be attached to the Note firmly to become part thereof. It is effective only if it conveys the entire instrument. The words and form are not important. UCC Section 3—202(2),(3), & (4)

Holder may convert a blank indorsement into special by writing over the signature of indorser. UCC section 3-204(3).

• SSPECIAL: specified person to whom or to whose order it makes the instrument payable; may only be further negotiated by the indorsement of the special indorsee. UCC section 3-204(1).

• BLANK: no particular indorsee & may consist of mere signature; payable to bearer & may be negotiated further by delivery alone (until specially endorsed). UCC section 3-204(2).

Standing, cont. • What is an allonge? • A piece of paper

which has been attached to a contract, a check or any promissory note, on which to add signatures because there is not enough room on the main document.

• Key phrase? • “attached to” • NYS requires any transfer of

the note “be attached to the Note firmly to become part thereof”

• UCC Section 3—202(2).

• Practice Notes: – Always consider the Note &

Allonge one; – There must be ONE (1) version

used throughout FC, BK, and eviction.

Standing to Foreclose, cont. • Mortgage Transfer • It is well settled that standing to commence an instant

foreclosure action may be delivered by the owner's indorsement of the note and its written assignment of mortgage to the plaintiff. Federal Natl. Mtge. Assn. v. Youkelsone, 303 A.D.2d 546 (2003) 755 N.Y.S.2d 730.

• Describes the loan being transferred, the property encumbered, and the mortgage chain history.

• Recorded on the Clerk’s records to serve as constructive notice.

• “Race State” meaning that the first claim filed on the records has the first priority against the property; it does not matter the date of the document.

Standing to Foreclose, cont. • RED FLAGS *The Assignor

* Is it the same as the last Assignee?

*The Assignee * It is exactly the same as Plaintiff?

*The Mortgage Info * Assigning the right mortgage? * Is the chain recited correctly? * Is the AOM dated before the mortgage recording and have the

recording info?

*The Dates * Was it signed and notarized on the same day? * Does the date make sense? Check the chain to see if the assignor

owned the loan when it signed the AOM * NO EFFECTIVE DATES

Statute of Limitations • CCivil Practice Law and Rules 213

provides for a 6 year statute of limitations (SOL). • It states in relevant part: “The following actions

must be commenced within six years: … (4) an action upon a bond or note, the payment of which is secured by a mortgage upon real property, or upon a bond or note and mortgage so secured, or upon a mortgage of real property, or any interest therein;”

• The statute of limitations is a bar to sstarting a suit after that six year period expires.

• The lawsuit itself can take as long as needed.

uit

Statute of Limitations, cont.

BBEFORE acceleration AFTER acceleration • Statute of limitations

applies to the default on each installment payment individually.

• Example: If the borrower defaulted June 1, 2004, then on June 1, 2014, the statute of limitations will have run on each payment due on or before June 1, 2008, bbut any installments due after June 1, 2008 would not be barred from recovery.

• Statute of limitation applies to the entire mortgage balance from the date of acceleration.

• Example: If the borrower defaulted on June 1, 2004 and the mortgagee accelerated the loan on June 1, 2005, tthen recovery on the entire loan amount is barred as of June 1, 2011.


• So SOL begins to run: 1. On installment payments which accrue

a separate cause of action for each installment not paid and begins to run on the due date for each installment; or

2. Demand for full payment by an entitled mortgagee (e.g., Demand letter); or

3. An action is brought by filing Summons and Complaint


• Items of Note: 1. Demand for full payment must be

made by an eentitled mortgagee, therefore, a mortgagee must have standing for proper acceleration.

2. Demand must be made in accordance with the acceleration clause in the mortgage.

3. Debate- automatic acceleration upon default vs mortgagee’s option to exercise.


• How is it raised? • Defendants must raise the SOL as an affirmative

defense in their answer or pre-answer motion to dismiss.

• Technically, the SOL is waived if not pleaded in answer or pre-answer motion to dismiss.

• However, some NY Judges will refuse to grant a judgment if the suit was started after the statute of limitations period— eeven if the borrower failed to raise the defense.

• Defendants may be allowed by the Judge to submit a late answer or amend an answer at any time in the litigation, at which point the defense could be raised.


• Tolling the SOL • A Court order staying foreclosure proceedings. • CPLR allows for the SOL to be tolled for an

automatic stay imposed upon the filing of a bankruptcy petition.

• CPLR 205 dismissal will actually toll the SOL for 6 months and allow for recommence based on same transaction or default. In other words, under certain circumstances, a suit that would be otherwise barred by the SOL may be brought again if filed promptly after a dismissal within 6 months. Not all dismissals qualify: (1) voluntary discontinuance, (2) lack of personal jurisdiction, (3) failure to prosecute, or (4) final judgment on merits.

Statute of Limitations, cont. • How can SOL be reset?

• Partial Payment- alone is not sufficient. NY General Obligations Law 17-101 • Must be made by borrower or agent • Must acknowledge the debt • Must acknowledge the continued need to pay

• Explicit acknowledgement of the debt with an unconditional promise to repay the debt, e.g., a signed loan modification. NY General Obligations Law 17-105

• Mortgagee may revoke the acceleration of the loan (within the SOL) through an affirmative act provided that the borrower has not changed his/her position in reliance of the acceleration.

• Chapter 13 Plan which provides for de-acceleration & payment of arrears.

Statute of Limitations, cont. • Concerns about an aged portfolio: • While foreclosure actions may already be commenced on older

loans, there is concern about what happens if the actions is dismissed or needs to be dismissed.

• For example, if you have an aged loan where the statute of limitations has run and there has been no movement in the case for years, if the Plaintiff moves for an Order of Reference without a reasonable excuse for is delay in making this motion, then the court may dismiss the action as abandoned pursuant to NY CPLR 3215(c). If the action is dismissed as abandoned, then the tolling provision discussed above will not be available.

• However, it should be noted that in our experience very few actions are dismissed due to statute of limitations issues. It is more common that clients choose not proceed with re-filing foreclosure actions when an action for an aged loan is dismissed by the Court due to other considerations.

Session 3 (Track 1 & 3) – Bankruptcy Updates River Terrace 3 Track 1: 9:45 a.m. – 11:00 a.m. Track 3: 2:45 p.m. – 4:00 p.m.

Speakers:• Joe Circelli, Esq., Managing Attorney, Codilis Stawiarski & Moody, PC (ALFN member in

Missouri) - Discussion Leader• Susan Hendrick, Esq., Attorney, Klatt, Augustine, Sayer, Treinen & Rastede, P.C. (ALFN Member

in Iowa)• Cynthia M Talton, Esq., Florida Bankruptcy Attorney, McCalla Raymer, LLC

Session Overview: • Joe Circelli - Supreme Court decision on chapter 7 strip offs, Early Returns on Rule 3002.1, New

Rules and Model Plan• Susan Hendrick - Recent U.S. Supreme Court decisions and the likely impact and the FDCPA in

bankruptcy: Where we are and concerns for the future.• Cynthia M Talton, - Bankruptcy Updates.

Joe Circelli, Esq. Managing Attorney Codilis Stawiarski & Moody, PC 222 S. Central Ave. #800 Clayton, MO 63105 Phone: 630-794-5276 Fax: 630-794-5277 [email protected]

Mr. Circelli is the Managing Attorney of Codilis, Stawiarski & Moody, P.C. (MO). He is a member of the Mortgage Bankers Association, American Bankruptcy Institute, United Trustees Association, American Legal and Financial Network and Phi Alpha Delta Legal Fraternity. Mr. Circelli is the author of Exemptions in Chapter 7 and Dischargeability of Debts in A Clean Slate: Discharging Debt With Chapter 7 Bankruptcy Procedures in Florida, National Business Institute, September, 2005 and he is co-author of ³Empty Promises or Creditor Salvation: Early Returns on Bankruptcy Reform² appearing in REO Magazine (Spring, 2006). Education: University of Illinois, Urbana-Champaign (B.A. 1990), John Marshall Law School (J.D. 1994). Bar Admissions: State of Illinois, United States District Courts for the Northern, Central and Southern Districts of Illinois, 7th Circuit Court of Appeals, State of Florida, United States District Courts for the Northern, Middle and Southern Districts of Florida; State of Missouri; United States District Courts for the Western and Eastern Districts of Missouri.

Susan J. Hendrick, Esq.AttorneyKlatt, Augustine, Sayer, Treinen & Rastede, P.C. 925 E. 4th Street Waterloo, Iowa 50703 Tel: 303-353-2965 [email protected]

Susan J. Hendrick is an attorney at Klatt, Augustine, Sayer, Treinen & Radeste, P.C. Her practice focuses on all areas of foreclosure, real estate, bankruptcy, and related litigation and appeals in both state and federal court. Ms. Hendrick has presented seminars on bankruptcy through the Colorado Bar Association, and been a panelist at the American Bankruptcy Institutes Annual Rocky Mountain Conference. Ms. Hendrick is admitted to practice before the State of Colorado, the United States District

Court for the District of Colorado, and the United States Tenth Circuit Court of Appeals. Ms. Hendrick earned her B.A. from Brandeis University, and her J.D. from the University of Denver.

Cynthia M Talton, Esq.Florida Bankruptcy Attorney McCalla Raymer, LLC 225 E. Robinson Street, Suite 660 Orlando, FL 32801 Phone: (407) [email protected]

Ms. Talton is an associate with McCalla Raymer’s Florida Bankruptcy Group. She has 11 years of litigation experience. Prior to joining Mcalla Raymer, Ms. Talton was an Assistant State Attorney in Florida for approximately 6 years during that time she served as the prosecutor on over 50 jury trials from voir dire to verdict with an 85% success rate. Her trials included first degree murders as well as other capital and first degree felonies and high profile cases. Ms. Talton was the first prosecutor in Seminole County, Florida to successfully prosecute a criminal gang case. In addition, to Ms. Talton’s trial work, she also represented the State of Florida in appellate proceedings before the Circuit Courts of Florida and the Fifth District Court of Appeals and she has participated in oral arguments before the Fifth District Court of Appeals in Florida.

After leaving the State Attorney’s Office Ms. Talton began a career in the area of real estate litigation involving the mortgage lending and servicing industries. Prior to joining McCalla Raymer, Ms. Talton practiced in the areas of both foreclosure litigation and bankruptcy at her prior firm. Ms. Talton has 5 years of experience in representing major lenders and servicers in federal bankruptcy proceedings in Chapter 7 and 13 including non-standard motion and adversary proceedings. Ms. Talton is also experienced in handling Chapter 11 cases including commercial and multiple properties cases.

EDUCATIONMs. Talton graduated from the University of West Florida in 1999, with a Bachelor of Arts. In 2004, Ms. Talton graduated from the Barry University School of Law with a Juris Doctor where she was a research assistant to a law professor. Upon graduation, Ms. Talton joined the Office of the State Attorney where she obtained 6 years of litigation and jury trial experience. In 2010, Ms. Talton began her career in real estate litigation and bankruptcy. In 2011, Ms. Talton graduated from the University of Central Florida with a Maters of Science. In 2015, Ms. Talton joined McCalla Raymer.

ADMISSIONS Florida, 2004 District of Columbia, 2005 U.S. District Court, Northern District of Florida, U.S. District Court, Middle District of Florida, U.S. District Court, Southern District of Florida.

PROFESSIONAL & COMMUNITY INVOLVEMENT Ms. Talton’s professional affiliations include the Central Florida Bankruptcy Lawyers Association and the Real Property, Probate & Trust Section of the Florida Bar. In her community, she donates her time to the American Diabetes Association and their main fundraiser Tour De Cure. Ms. Talton is also very active in the running and triathlon community, where she is a participating athlete in a variety of Half Marathons and Half Ironman Events.

BANKRUPTCY UPDATES

SEPTEMBER 9, 2015 JACKSONVILLE, FLORIDA

Joe Circelli Managing Attorney Codilis, Stawiarski & Moody [email protected]

SESSION SPEAKERS

Cynthia M. Talton Florida Bankruptcy Attorney McCalla Raymer, LLC [email protected]

Susan J. Hendrick Attorney Klatt, Augustine, Sayer, Treinen & Rastede, P.C. [email protected]

RULE 3002.1 PPost-Petition Fee Notices

Effective 12/1/11, a residential mortgage creditor must file a notice of any post-petition charges to be placed on the loan within 180 days

of the charge being incurred or the charge will not be recoverable.

This notice must be filed as a supplement to the Proof of Claim. Debtor or Trustee may bring motion to determine is the amount is

really chargeable to the loan

RULE 3002.1 PPost-Petition Payment Changes

Effective 12/1/11, a residential mortgage creditor must file a notice of any post-petition payment changes. Notice must be filed at least 21 days before change is effective This notice must be filed as a supplement to the Proof of Claim.

RULE 3002.1 NNotice of Final Cure

Effective 12/1/11, trustee will send residential mortgage creditors a “notice of final cure” at the end of the case indicating that the trustee assumes the loan is now current. Within 21 days claimant must file a response that it either agrees or disagrees regarding currency. Response must detail any remaining pre or post petition default. Trustee or Debtor may file a motion asking the court to make a determination of the amount due. If the claimant either fails to timely respond to a Notice of Final Cure, they MUST treat the loan as current as of the date of that Notice even if the debtor is actually in default under the terms of the note and mortgage.

Proof of Claim Changes A new proof of claim form is expected to be approved at the September, 2015 Judicial Conference. It is expected that current form 10A will be replaced by Form 410A. Form 410A requires a detailed, full payment history dating back to the date of default. If passed, the changes will go into effect December 1, 2015

National Model Chapter 13 Plan [T]he Advisory Committee [on Bankruptcy Rules] . . . has undertaken a multi-year project to create an official form for plans in chapter 13 cases. The chapter 13 plan form project is intended to eliminate the current anomaly of a major aspect of consumer bankruptcy practice

not having a national form for presenting essential information to parties in interest. The Committee sees the adoption of a form for

chapter 13 plans as bringing greater coherence to the presentation of information in chapter 13 cases and improving the procedures for preparing, reviewing, and confirming chapter 13 plans. The form

(Official Form 113) was published for public comment in August 2013 along with related amendments to nine of the Bankruptcy Rules (Rules 2002, 3002, 3007, 3012, 3015, 4003, 5009, 7001, and

9009). After considering the public comments, the Advisory Committee has proposed a number of changes to the plan form and

rule amendments. Accordingly, the Advisory Committee seeks republication of both the

plan form and the package of accompanying rule amendments."

Chapter 7 Strip Offs

Bank of America v. Caulkett Bank of America v. Toledo-Cardona

U.S. Supreme Court held that debtors in chapter 7 bankruptcy could NOT strip off wholly unsecured liens. Held that the holding in Dewsnup (prior Supreme Court case) applies in Chapter 7 context.

7th Circuit Case

Claims Bar Date Applies to Secured Creditors

On May 11, 2015, the Seventh Circuit Court of

Appeals issued its opinion in the case of In re Edward J. Pajian, 7th Circuit case number 14-20152. The

issue before the court was whether or not the Proof of Claim filing deadline described in Federal Rule of Bankruptcy Procedure 3002(c) applies the secured creditors. The 7th Circuit overrules the bankruptcy

court and held that the bar date does apply to secured creditors.

POSSIBLE RULE CHANGE – POC DEADLINE

Although not discussed in the PPajian opinion, it is worth noting here that in addition to these changes the claim filing deadline, the timing of the deadline

itself will be changed. The deadline under the current rules is 90 days after the date set for the meeting of creditors. Under the amended rule, the deadline in Chapter 12 or Chapter 13 cases would be 60 days

after the petition is filed (or after the conversion of a case). The amended rule would permit a creditor with a claim secured by the debtor’s principal residence to

file the claim in two parts. The proof of claim and mortgage attachment (Attachment A) must be filed

within the 60 day time limit, but additional claim documentation could be filed as supplements within

120 days of the filing of the petition.

Undistributed Chapter 13 Plan Payments

Harris v. Viegelahn, 135 S. Ct. 1829 (May 18, 2015)

Undistributed chapter 13 plan payments made by a debtor from his or her wages and held by the chapter 13 trustee at

the time of conversion of the case to Chapter 7 must be returned to the debtor and not distributed to creditors.

Surrender in Chapter 7 and Chapter 13

In re Metzler, 530 B.R. 894 (Bankr. MD. Fla. May 13, 2015) (Williamson, J)

The bankruptcy court interpreted the meaning of the term “surrender” in the context of both a chapter 7 case (interpreting § 521 of the

code) and a Chapter 13 case (interpreting §1325(a)(5)(C)). The court holds that “surrender” means that a debtor must relinquish secured property and make it available to the secured creditor by refraining

from taking any overt act that impedes a secured creditor’s ability to foreclose its interest in secured property.

In re Dolan, 2015 WL 3462430 (Bankr. SD Fla. April 13, 2015)

(Hyman, P)

Notice of Post-Petition Fees & Costs

Ogden v. PNC Bank, N.A. (In re Ogden) 532 B.R. 329 (Bankr. CO April 3, 2014)

Adversary proceeding raising the question of whether or not a

servicer / lender waives post-petition fees and costs incurred by failing to file the required notice.

Session 4 (Track 2 & 4) – Regulatory & Legislative Updates Conference Center B Track 2: 11:15 a.m. – 12:30 p.m. Track 4: 4:15 p.m. – 5:30 p.m.

Speakers:• Jason Whitacre, Esq., Jason Whitacre, Esq., Attorney, Law Offices of John D. Clunk (ALFN

Member in Ohio) - Discussion Leader• Corey Danzig, Esq., Compliance Counsel, Felty & Lembright (ALFN member in Ohio)• Michael Barker, Esq., Managing Partner, Quintairos, Prieto, Wood & Boyer, P.A. (ALFN Member

in Florida)• Steven Eisenberg, Esq., Managing Shareholder, Stern & Eisenberg, PC (ALFN Member in

Pennsylvania)

Session Overview:• Jason Whitacre - Complex Lit AND settling and resolving counterclaims in the CFPB era. How

counsel and the servicer need to handle the resolution of borrower counterclaims to judicialforeclosure actions where those borrowers have applied for, and received, a loan modification.Under the CFPB consent orders with multiple large servicers, the servicer can no longer mandatethe borrowers dismiss their counterclaims as a condition to accepting a loan modification offer.This presents a number of challenges, which, though not insurmountable, must be handledappropriately in order to avoid an unpleasant situation. The presentation would highlight theprocedural issues involved, as well as the practical considerations necessary to resolve the casefavorably to the servicer.

• Corey Danzig - how to comply with applicable laws and regulations when working withsuccessors-in-interest to a deceased borrower; Servicers have increasingly approached us onwhat to do when the borrower dies and a spouse/beneficiary/heir contacts the servicer or our firm.There are some competing interests here. One the one hand, there are legal risks due to theGramm Leach Bliley’s restrictions on sharing NPI with unaffiliated third parties (unless there areexceptions) and FDCPA concerns regarding speaking to a family member about assuming adecedent’s debts. On the other hand, there is legislation (Garn-St. Germain) and now proposedrules from the CFPB essentially encouraging communication with decedent’s heirs. Investorssuch as Freddie Mac and Fannie Mae also have regulations and bulletins addressing mortgageassumptions and modifications for non-borrowers.

• Michael Barker – Oversight Over Vendors• Steven Eisenberg - With a relatively stable judicial process in place, now the Courts look to keep

cases proceeding with new lack of prosecution dismissals. Additionally, how will the statute oflimitations impact loans when they get dismissed?

Jason Whitacre, Esq., AttorneyLaw Offices of John D. Clunk

• Case Western Reserve Law School (J.D. 2003)• Mount Union College (B.A. 2000)• Licensed in the Ohio State and Federal Courts since 2004.

Corey Danzig, Esq. Compliance Counsel Felty & Lembright1500 West 3rd Street, Suite 400 Cleveland, OH 44113 Phone: (216) 472-2511 Fax: (216) 472-2517 [email protected]

Corey Danzig is Chief Compliance Counsel for Ohio-based default services law firm, Felty & Lembright. Danzig originally joined the Firm as an Associate in Felty & Lembright’s foreclosure practice, handling foreclosure and real estate title matters throughout Ohio's 88 counties.

In her current role, Danzig’s responsibilities include coordinating the Firm's compliance with all Federal and State laws, managing the Firm's relationships with its vendors, and handling the Firm’s clients’ due diligence and audit requests. Corey's experience also includes bankruptcy law and commercial and construction litigation. Corey received her undergraduate degree from Boston University and her J.D. from Cleveland State University, Cleveland-Marshall College of Law.

Michael Barker, Esq. Managing Partner Quintairos, Prieto, Wood & Boyer, P.A. One Independent Drive Suite 1650 Jacksonville, FL 32202 Phone: 904-226-3660 [email protected]

Michael J. "Mike" Barker is a partner at Quintairos, Prieto, Wood & Boyer, P.A. and heads up the firm’s Business, Financial Services & Real Estate Division in Jacksonville, Florida. He is a Jacksonville native and represents clients throughout Florida and beyond. Mr. Barker represents clients engaged in the default servicing, banking, mortgage lending and mortgage servicing, construction and development, and title insurance industries in both transactional and litigation matters. Primarily, his practice focuses on residential and commercial foreclosures, asset recovery, REO real estate transactions and title insurance, title insurance claims, construction disputes, evictions, creditors' rights in bankruptcy, documentation of leases, loans and secured transactions, evictions, and collection matters.

Prior to joining QPWB, Mr. Barker was founding shareholder of Barker & Barker, P.A. and Barker Land Title & Escrow, Inc. Mr. Barker is licensed to practice law in Florida and a member of The Florida Bar. He is admitted in the U.S. District Court for the Northern District of Florida, U.S. District Court for the Middle District of Florida, and U.S. District Court for the Southern District of Florida as well as the United States Bankruptcy Court for the Northern, Middle, and Southern Districts of Florida. Mr. Barker is a Board Certified Specialists as recognized by The Florida Bar Board of Legal Specialization and Education and

REGULATORY & LEGISLATIVE UPDATES

September 9, 2015 – Jacksonville, FL

SESSION SPEAKERS

Jason A. Whitacre Lead Litigation Attorney The Law Offices of John D. Clunk Co., LPA [email protected]

Michael J. Barker Managing Partner Quintairos, Prieto, Wood & Boyer, P.A. [email protected]

Corey S. Danzig Compliance Counsel Felty & Lembright Co., LPA [email protected]

Steven K. Eisenberg Managing Shareholder Stern & Eisenberg PC [email protected]

RESOLVING COUNTERCLAIMS IN THE CFPB REGULATORY ERA

Jason A. Whitacre, Esq. – The Law Offices of John D. Clunk Co., LPA

Counterclaims in the CFPB Era Consumer Finance Protection Bureau (CFPB) is an executive

branch regulatory agency that is part of the federal government.

Regulatory agencies enforce their rules in a multitude of ways; though many use notice-and-comment formal rulemaking, the CFPB uses informal advisory letters and targeted enforcement actions.

Though those actions each only involve one defendant, they provide a roadmap for future compliance and points of conflict.

Contested Judicial Foreclosures A judicial foreclosure is a civil lawsuit

Defendants can, and do with increasing frequency, file countersuits

Some are very legitimate claims, but others are chess pieces used to negotiate a more favorable settlement

In these cases the parties to the contract appear in court before a judge, arbiter or mediator and attempt to resolve their issues either amicably or through litigation

Servicers often seek to settle foreclosure disputes with loan modifications.

Modifications and Counterclaims Ideally, a loan modification results in a global dismissal of

claims

However, many loan modifications, such as those available under the federal HAMP program, are available without regard to the ligation position of a defendant

The CFPB seems to believe that defendants who may have been wronged in some way should not see their claims evaporate simply because they received a HAMP modification

Makes sense, right? Maybe in a vacuum.

CFPB Consent Orders Included within the typical CFPB consent order is language

barring a servicer from requiring a defendant who already otherwise qualifies for a loan modification from dismiss affirmative claims in exchange for the implementation of that modification

Provision has been broadly and regularly included in consent orders against mortgage servicers

No reason to believe future consent orders will not contain that language

Does not apply to specifically-negotiated and litigated settlements

Further Complicating Factors In many cases, the borrower often readily admits the default

condition

The borrower, after filing the counterclaim, typically commences the review by proactively sending in modification applications

Servicer loss mitigation policies require the application of a waterfall

CPFB regulations broadly prohibit and restrict dual-tracking while mandating timely review of modification applications

Even More Complicating Factors Parties loathe spending on litigation while loss mitigation and

settlement negotiations are ongoing

State courts have timelines (EX: The Ohio Supreme Court expects a foreclosure to complete within 12 months of filing)

Between the typical judicial case timelines, time to process modification applications and the length of trial modifications, a case may be ten months old or more

What is the doomsday scenario?

The Doomsday Scenario Borrower is already on a modification, and foreclosure claims

are resolved

No time to properly conduct discovery or litigate against the counterclaims

Trial is rapidly approaching and defendant has almost no reason to dismiss his or her claims without monetary consideration

Defendant’s counsel is probably owed fees by a client who now is obliged to make monthly mortgage payments and cannot pay both

What To Do COMMUNICATE. Really, a simple open line of communication

from the beginning will help. You and your counsel will have an idea on how the borrower views his or her claims.

Many will flatly agree, even before loss mitigation, to dismiss claims if the loan is modified.

That agreement might be in writing. Helpful to prevent the other side from later manufacturing larger

damages claims

STAY WITHIN THE LITIGATION SCHEDULE. Send a small set of discovery, push for answers and seek to exclude evidence that is not turned over timely. Give fair extensions, but always keep the eventual trial date in mind.

REVIEW THE FILE. Know whether there is a real issue you must handle.

Moral of the Story Defendant countersuits are increasing and historical

settlement tools may no longer be available.

Respect the counterclaims and treat them as though they have at least some possible merit.

Keep control of the case!

Issues Presented with Increased Vendor Management Oversight and Compliance

Michael J Barker

SESSION DATE & LOCATION

Overview

•In the aftermath of the financial meltdown, there has been a tremendous increase in pressures from governmental agencies and regulatory authorities on both the state and federal level to ensure that all vendors in the default servicing supply chain are operating clean business enterprises. “Clean” can be defined as utilizing best practices in operational management, risk avoidance, financial responsibility and downline compliance and oversight of vendors

Who Regulates

•There are various state and federal regulators depending on the type of entity being regulated. The primary difference in determining what regulator an entity falls under is whether the entity is a bank or non-bank entity. Of course, all entities that provide consumer financial products or services could fall under the umbrella of the Consumer Financial Protection Bureau (CFPB) and it is the regulator that is of most concern to the mortgage servicing industry. How was the CFPB created: Through legislation known as the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)

Who is Subject to CFPB Regulation?

•CFPB’s authority •Dodd-Frank Act: “Any person that provides a material service to a covered person in connection with the offering or provision by such covered person of a consumer financial product or service” This includes SERVICE PROVIDERS such as:

- entities and individuals that offer or provide mortgage-related

products or services as well as ttheir service providers.

Who is a Service Provider?

•as of January 2, 2013, any party with greater than $10 million in annual receipts from consumer debt collection activities will be subject to the Bureau's supervisory authority. The consumer debt collection market covered by the rule includes three main types of debt collection: (1) firms that buy defaulted debt and collect the proceeds for themselves; (2) firms that collect defaulted debt owned by another company in return for a fee; and (3) debt collection attorneys that collect through litigation. The rule marks the first time that attorneys will be subject to direct federal supervision.

How Does CFPB Impact Vendor Management

- Supervised entities must oversee service providers in a “manner that ensures compliance with Federal consumer financial law, which is designed to protect the interests of consumers and avoid consumer harm”

- Purpose: To avoid unwarranted risks to consumers. - There is no one size fits all: One of the complexities in complying

with oversight requirements of the CFPB is that the requirements aren’t simply a list of rules or mandates that can be referenced. Differences in an entities organizational structure, size, revenue, and complexity of vendor network can dictate the type of risk management process that would protect against unsound business practices.

Unanimity on vendor management

•FDIC FIL-44-2008 (6/6/08) •FFIEC continues to update its guidance (e.g., IT Exam Handbook – Supervision of Technology Service Providers (10/12)) •FHFA Advisory Bulletin 2014-07 •Enforcement actions targeting third-party risk management deficiencies (e.g., the National Mortgage Settlement and the add-on consent orders) •OCC Comptroller Curry’s speeches on cybersecurity

What is the CFPB looking for in Oversight Requirements

•CFPB establishing “compliance management systems” as primary compliance consideration •Vendor management •Complaint management •Policies and procedures, training •Oversight, monitoring, and testing •Investors and counterparties requiring same

What is the CFPB looking for in Oversight Requirements

- How does a Servicer ensure that it engages in appropriate risk management over a third party:

•Developing an appropriate risk management plan for the third-party relationship •Conducting appropriate due diligence of the third party •Entering into an appropriate contract with the third party that gives monitoring and other rights appropriate to monitor and control the third-party risks going forward •Engaging in appropriate ongoing monitoring of the third party after entering into the contract •Assigning clear roles and responsibilities within the risk management system for each of these risk management processes (including appropriate oversight by senior management and the board of directors) •Conducting periodic independent reviews of these risk management processes by internal audit or another independent party •Documenting the plan for, and performance of, these risk management processes in its risk management system documentation

CFPB Enforcement

•CCFPB Enforcement – responsible for conducting Bureau investigations and, when necessary, bringing enforcement actions •Broader jurisdiction than Supervision •Authority to bring action against “any person,” regardless of size and charter, that violates a Federal consumer financial law •Authority to investigate “any act or omission that, if proved, would constitute a violation of any provision of Federal consumer financial law” •Authority to obtain information from “any person” the Bureau has reason to believe is “in possession, custody, or control of any documentary material or tangible things, or may have any information, relevant to a violation”

Best Practices: Due Diligence & Third Party Selection

•Areas for focus: •Legal and regulatory compliance •Fee structure and incentives •Risk management systems •Depth of diligence review should be commensurate with identified and expected risks •Onsite review •Discussions with management •Review of key corporate and operational information •Review of regulatory actions and complaints •Document internal assessment or risks relating to third parties in general, and intended third party in particular

Best Practices: Roles & Responsibilities

•Roles and responsibilities •Board and senior management involvement is expected and critical to success of vendor management program •Board can delegate duties, but remains primarily responsible •Senior management key to design, implementation, monitoring, and enforcement of vendor program •Best practice is to establish one individual or team to manage relationships with clear lines of authority •All relevant employees should be knowledgeable about the vendor framework

Best Practices: Document Efforts

•Document, document, document! •Document oversight program and maintain adequate reports and records •Inventory of all vendor relationships and related contracts •Due diligence results and findings •Ongoing oversight/monitoring reports •Reporting to senior management and board •Periodically report results of oversight activities to the Board or a designated committee

Best Practices: CFPB Enforcement

- What should you do if the CFPB comes knocking?

- Work with examiners, even when you disagree with them. - Choose the appropriate time and manner to disagree with the

CFPB when necessary. - It is important to remember that the same attorneys that may be

supporting a supervisory exam by the CFPB may also be involved in enforcement actions. You want them to have a good reflection of how the exam was conducted.

- Don’t go it alone. Even if you feel that your general in house counsel is prepared to handle this situation, engage outside counsel immediately. You will want the protection of the attorney / client relationship.

Working with Successors-in-Interest to Deceased

Borrowers

SEPTEMBER 9, 2015 JACKSONVILLE, FL

WWorking with Successors-in-Interest to Deceased Borrowers

Can a Servicer/Lender discuss a deceased Borrower’s mortgage loan with third parties?

What should a Servicer/Lender consider when the mortgaged Property is transferred to a Successor-in-Interest of a deceased Borrower?

CCan a Servicer/Lender discuss a deceased Borrower’s mortgage loan with third

paarties?

1. The Gramm-Leach-Bliley Act

2. The CFPB Mortgage Servicing Rules

3. The Fair Debt Collections Practices Act


paarties?

The Gramm-Leach-Bliley Act (“GLBA”) and its implementing regulation, Regulation P, prohibit a financial institution from disclosing nonpublic personal information (“NPPI”) to a nonaffiliated third party unless: (1) the institution has provided certain GLBA-compliant notices

regarding privacy practices and the ability to opt-out; (2) the institution has given the consumer the reasonable

opportunity to opt-out; and (3) the consumer does not exercise the right to opt-out.

*This general rule against disclosure is subject to certain exceptions. 15 U.S.C. § 6802(a) 12 CFR §1016.10


paarties?

Under the GLBA, NPPI is personally identifiable financial information that is:

Provided by a consumer to a financial institution; Resulting from any transaction with the consumer or any service performed for the consumer; or Otherwise obtained by the financial institution.

15 U.S.C. § 6809(4)

15 U.S.C. § 6802(a).


paarties?

Examples of personally identifiable financial information:

Information a consumer provides on an application to obtain a loan, credit card, or other financial product or service Account balance information, payment history, overdraft history, and credit or debit card purchase information The fact that an individual is or has been a customer or has obtained a financial product or service from the institution Any information about the consumer if it is disclosed in a manner that indicates that the individual is or has been a consumer Any information that a consumer provides to an institution or that the institution or its agent obtains in connection with collecting on, or servicing, a credit account Any information collected through an Internet ‘‘cookie’’ (an information collecting device from a web server) Information from a consumer report

12 CFR §1016.3(q)(2)(i)


paarties?

Exceptions: NPPI can be disclosed to nonaffiliated third parties without having to comply with the opt-out provisions (& without providing initial privacy notices to consumers who are not “customers”) in these instances:

15 U.S.C. § 6802(e)(2), (e)(3)(D)-(E) 12 CFR § 1016.15

Consumer gives consent

or at Consumer’s

direction

Persons holding a legal or beneficial

interest relating to the

consumer

Persons acting in a fiduciary or representative

capacity on behalf of the

consumer


paarties? Note on state privacy laws and GLBA:

Pre-emption as to inconsistent state privacy laws State privacy laws providing greater protections than GLBA are not preempted

CCan a Servicer/Lender discuss a deceased Borrower’s mortgage loan with

third paarties? Executor, administrator, or personal representative of a deceased Borrower’s estate

For example, in Ohio, an executor, administrator or other personal representative to an estate is a fiduciary. Fiduciary duties include collecting the estate assets, paying debts, and making distributions. In re Estate of Usiak, 874 N.E.2d 838, 846 (Ohio Ct. App., Mahoning County, June 15, 2007) (citations omitted); see also In re Estate of Hoppes, 2014-Ohio-5749, *P14 (Ohio 2014) (citations omitted). Ohio Revised Code §2109.01: “Fiduciary” is “any person…appointed by and accountable to the probate court and acting in a fiduciary capacity for any person, or charged with duties in relation to any property, interest, trust, or estate for the benefit of another.” On this basis, a Servicer/Lender could release NPPI of a deceased Borrower, such as account information, to an executor or administrator, who acts in a fiduciary capacity.

Named legatees/devisees, heirs, and beneficiaries If a Borrower dies intestate (without a valid will), then state intestacy law applies to determine heirs to an estate. In Ohio, the statute of descent and distribution is O.R.C. §2105.06. Releasing NPPI of the deceased Borrower to legatees, devisees, heirs, and beneficiaries under GLBA’s “legal or beneficial interest relating to the consumer” exception.


paarties? The CFPB Mortgage Servicing Rules – specifically, 12 C.F.R. 1024.38(b)(1)(vi) (aka “successor-in-interest provision”) – currently require Servicer/Lender to have policies and procedures “promptly” identifying and facilitating “communication with the successor in interest of the deceased borrower with respect to the property secured by the deceased borrower’s mortgage loan.”


paarties? CFPB Bulletin 2013-12 (October 15, 2013)

This Bulletin discusses compliance with its “successor-in-interest provision” by describing 6 components of what policies and procedures should include AAND 2 best practices for a servicer to consider. For instance, a servicer’s policies and procedures should allow for:

Promptly giving to a purported successor-in-interest a list of all required documents/evidence (reasonable in light of the jurisdiction) to establish ((1) death of borrower AAND (2) identity and legal interest of the Successor-in-interest. Promptly giving a Successor-in-Interest information regarding the loan, e.g.:

the status of the loan as current or delinquent; eligibility of Successor-in-Interest’s ability to continue making payments on the loan; whether a trial modification or loss mitigation option existed at the time of Borrower’s death; whether there is a planned or pending foreclosure; any loss mitigations options for the Successor-in-Interest; and information on assuming the loan with simultaneous loan mod or loss mitigation option.

As a matter of best practice, the CFPB says servicers should evaluate whether to postpone/withdraw any foreclosure proceedings to allow the successor a reasonable opportunity to establish ownership rights and pursue assumption of the loan or loss mitigation options.


third paarties? CFPB Proposed Amendments to Mortgage Servicing Rules (December 15, 2014)

3 sets of rules changes regarding Successors-in-Interest.

1 set of proposed changes describes how a servicer must confirm a Successor-in-Interest’s identity and ownership interest in the property, effectively modifying:

(1) 12 C.F.R. §1024.36 (Requests for Information) (2) 12 C.F.R. §1024.38(b)(1)(vi)

79 FR 74176 (December 15, 2015)


third paarties? Federal Trade Commission’s Statement of Policy Regarding Communications in Connection with the Collection of Decedents’ Debts (July 27, 2011)

Under the Fair Debt Collections Practices Act, a debt collector can communicate with the consumer’s executor or guardian if the consumer is deceased. See 15 U.S.C. § 1692c(d). FTC recognizes that an estate may not necessarily have an executor or guardian. Debt collectors may have limited contact with decedent’s family members and friends to identify the person who has “the authority to pay the decedent’s outstanding bills from the decedent’s estate.” Yet, there are caveats:

(1) Debt collector must state he is looking for person responsible for paying decedent’s outstanding bills “from the decedent’s estate.”

(2) Until it is established that the debt collector is talking to the person designated with that authority, he cannot reveal the decedent owes a debt.

(3) Debt collector must disclose to the designated person that he/she is not required to use personal assets to pay the decedent’s debt.

(4) The designated person stands in the shoes of the “consumer” and must be given notice that he is entitled to proof of the debt and the right to contest it.

76 FR 44915 (July 27, 2011)

CConsiderations when the mortgaged property is transferred to a Successor-in-

Interest of a deceased Borrower

1. Who is considered a “Successor-in-Interest”?

2. The Garn-St. Germain Depository Institutions Act of 1982 (“Garn- St.Germain”) and due-on-sale clauses

3. Assumption of Mortgage Loan: Investor Guidelines

4. CFPB’s Regulation Z: Ability to Repay Rule

5. FDCPA/UDAAP Implications


Interest of a deceased Borrower “Successor-in-Interest” Definition:

Mortgage/Deed of Trust: Any party that has taken title to the Property, whether or not that party has assumed Borrower’s obligations under the Note and/or this Security Instrument.

Freddie Mac/Fannie Mae Uniform Security Instruments; FHA Model Mortgage 9/14

CFPB: A successor in interest is the spouse, child, or heir of a deceased borrower or other party with an interest in the property.

CFPB Bulletin 2013-12, pg. 2, fn. 7


Interest of a deceased Borrower Garn-St. Germain* generally permits due-on-sale clauses contained in mortgages.

Pre-empts state laws restricting due-on-sale clauses. Due-on-sale clause: a term that allows a lender, at its option, “to declare due and payable all sums secured” by the mortgage if the secured property is sold or transferred without the lender’s prior written consent. Example clause: “If all or any part of the Property or any Interest in the Property is sold or transferred (or if Borrower is not a natural person and a beneficial interest in Borrower is sold or transferred) without Lender’s prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument. However, this option shall not be exercised by Lender if such exercise is prohibited by Applicable Law.”

*12 U.S.C. §1701j-3


Interest of a deceased Borrower HOWEVER, as to mortgages* securing residential real property (less than 5 dwelling units), under Garn-St. Germain, certain events may not trigger the due-on-sale clause, thus prohibiting the lender to accelerate the mortgage:

*For purposes of this presentation, we are assuming the Mortgage is closed-end, senior mortgage, not taking into account reverse mortgages

Transfer by devise, descent, or

operation of law on the death of a

joint tenant or tenant by the

entirety

Transfer to a relative resulting

from the death of a borrower

Transfer where spouse/children of

the borrower become an owner

of the property


Interest of a deceased Borrower Garn-St. Germain’s exemptions raise the questions: Can a relative, for example, who has inherited property continue to retain it as long as they continue to make payments? Does the relative still have to assume the mortgage?

Resources to consider include: Applicable state law, the terms of the note and mortgage, and any investor guidelines


Interest of a deceased Borrower Besides considering state law and terms of the note and mortgage, the servicer/lender should consider applicable investor guidelines.

Freddie Mac Bulletin 2013-3 (February 15, 2013): “Freddie Mac recognizes that the death of a Borrower could result in the unnecessary displacement of a person with a legal or beneficial interest in the Mortgaged Premises such as a surviving spouse, unless the Servicer undertakes prompt loss mitigation activities…Upon receiving notice that all Borrowers on a delinquent Note are deceased or upon receiving notice of a transfer requiring acceleration of a Note, the Servicer must comply with all requirements of the Guide and, as appropriate, cconduct loss mitigation activities, including efforts to obtain right party contact. Servicers must provide loan information to transferees that the Servicer has confirmed have a legal or beneficial interest in the Mortgage as necessary to allow the transferee to continue making Mortgage payments or to process a request by transferee to assume the Mortgage, if applicable.”


Interest of a deceased Borrower Freddie Mac

Mortgage is current: Chapter 60 (Transfers of Ownership) applies. Recognizes that Servicer cannot exercise due-on-sale clauses for exempted transfers under Garn-St. Germain: transfer to a relative after borrower’s death, transfer to a spouse, domestic partner, or child (although Freddie does generally require the Successor occupy the property); transfer to joint tenant/tenant by entirety. For these transfers, Servicer cannot evaluate for creditworthiness, require a Successor to assume a Mortgage, or require its/Freddie Mac’s approval. If the Successor wishes to assume the mortgage, then Servicer must review creditworthiness and follow requirements in Sections 60.7-60.8.

Successor does not meet Ch. 60 assumption requirements or Mortgage is delinquent: Servicer must consider in following order:

Chapter A65 (Reinstatement/Relief Options) Chapter B65.27-B65.34 (Workout Mortgage Assumption)


Interest of a deceased Borrower Freddie Mac

Section B.65.28 –SSimultaneous Assumption and Modification. Under the Home Affordable Modification Program (Chapter C65) or Freddie Mac Standard Modification Requirements (Sections B65.11- B65.26):

Borrower Response Package required Servicer must evaluate as if applicant were the borrower Servicer must obtain Freddie Mac approval If Freddie Mac does not approve Simultaneous Assumption and Modification, then Servicer must provide Adverse Action Notice and ensure compliance with the Truth-in-Lending Act, the Equal Opportunity Act, and the Fair Credit Reporting Act (Section 53.8)

See Freddie Mac Bulletin 2014-10 (June 3, 2014)


Interest of a deceased Borrower Fannie Mae

Similar to Freddie Mac, Fannie Mae recognizes certain transfers are exempted from the due-on-sale clause, including:

Transfers to surviving party in the event of death of joint tenant/tenant by the entirety Transfer to the relative of deceased Borrower as long as transferee occupies property Transfer to spouse, children, parent, sibling, grandparent, grandchild as long as transferee occupies propert (Section D-1-4.1-02).

Service must process these transactions without reviewing or approving the terms of the transfer (unless previous borrower requests a release from liability). If mortgage loan is delinquent and transferee cannot bring it current: (D-1-4.1-02)

Servicer must evaluate the transferee for all available workout options (Chapter D2-2, Requirements for Contacting a Borrower) and Chapter D2-3, Fannie Mae Home Retention and Liquidation Workout Options. Fannie Mae must provide written approval.


Interest of a deceased Borrower FHA/VA/MHA

FHA: If transfer is by devise or descent, property can be freely assumed without any restrictions. HUD Handbook § 4330.1 Rev-5, Chapter 6.

VA: Recognizes that a holder of a VA loan cannot declare it due and payable if the transfer is a result of Garn-St. Germain exemptions. 38 C.F.R.§36.4508

MHA: For non-GSE loans, it addresses Successors-In-Interest can be considered for HAMP: contemporaneous processing of assumption and loan modification. MHA Handbook, Vol. 4.5, Section 8.8

If a TPP is pending when a Borrower dies, MHA addresses how options for a Successor. Section 8.9.2


Interest of a deceased Borrower CFPB’s Regulation Z: Ability to Repay Rule (ATR Rule)

The ATR Rule generally requires a creditor to make a reasonable and good faith determination that a consumer has the ability to repay at or before consummation of the mortgage (covered under the ATR Rule). The CFPB Interpretive Rule: ATR Rule does not apply when a successor takes on an existing mortgage loan secured by the property that the successor previously acquired.

12 C.F.R. §1026.43(c); Application of Regulation Z’s Ability-to-Repay Rule to Certain Situations involving Successors-in-Interest, Docket No. CFPB-2014-0016 (July 11, 2014)

Note on the December 15, 2014 Proposed Changes to Mortgage Servicing Rules

Another proposed change is to apply all of the Mortgage Servicing Rules to Successors-in-Interest. For example, loss mitigation procedures (12 C.F.R. §1024.41) would formally extend to Successors-in-Interest.


Interest of a deceased Borrower FDCPA/UDAAP Implications

FDCPA prohibits debt collectors from using any false, deceptive, or misleading representation or means in connection with the collection of any debt. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, covered entities are prohibited from committing unfair, deceptive, or abusive acts or practices. Thus, communications with a Successor about the decedent Borrower’s loan, Successor’s responsibilities, obligations, and rights must be accurate and not misleading in order to avoid running afoul of these laws

15 U.S.C. § 1692e, 12 U.S.C. §§ 5531, 5536; CFPB Bulletin 2013-07: Prohibition of Unfair, Deceptive, or Abusive Acts or Practices in the Collection Debts (July 10, 2013)

References throughout this presentation rely on: Richard Gottlieb and Andrew Grant, Succession Planning Part 2: Communicating with Family Members after the Death of a Customer, Illinois Banker Magazine, February 24, 2015. See also Sarah Mancini and Alys Cohen, Surviving the Borrower: Assumption, Modification, and Access to Mortgage Information after a Death or Divorce (February 27, 2015). Pepperdine Law Review, Vol. 43, 2016, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2498188 or http://dx.doi.org/10.2139/ssrn.2498188

MY CONTACT INFORMATION

CCOREY S. DANZIG COMPLIANCE COUNSEL

FELTY & LEMBRIGHT CO., LPA (OHIO) 216-472-2511

[email protected]

TRID and the Error Resolution Process

Steven K. Eisenberg, Esq. – Stern & Eisenberg, P.C.

Loan Origination 1026.37

Closed ended residential mortgage transactions secured by real property (other than HELOCs, reverse mortgages and mobile homes) are required to follow the new procedures, effective 10/3/2015 regarding RESPA & TILA disclosures.

Must be provided within three (3) days business days from submission of the application What is the application and when is it submitted (§1026.2(a)(3)):

Consumer’s name Consumer’s Income Consumer’s SSN (credit report) Address of Property Estimated value of Property Amount of Requested Loan

If circumstances change then can change the estimate, but must do so timely (within 3 days of change)The contents of the loan estimate are controlled by 1026.37 and the form urges the borrower(s) to save the form to compare it to the Closing Disclosure


The loan estimate should be provided no less than seven (7) business days (3 day wait tacked on where change made to estimate) before consummation of the loan…consummation does not always mean the actual closing, but the time at which the borrower is contractually obligated to the lender (typically the closing of the loan/transaction).

The Loan estimate provides the basic expectations of the terms of the loan including…

Loan Terms: Loan Amount & Interest Rate (Pre-payment & Balloon) Projected Payments: P+I; Escrows (taxes, MI and escrow)…also, what’s included in the escrow.

If Adjustable, Negative Amortization, etc…then there are versions of the form for appropriate disclosure.

Details of Closing Costs (including transfer taxes, title, all other fees and costs, including what you can and cannot shop for…) and Cost of the Loan over time.

The contents of the loan estimate are controlled by 1026.37 and the form urges the borrower(s) to save the form to compare it to the Closing Disclosure…essentially look for issues and potential claims…


The Closing Disclosure is the HUD, TILA and more rolled into one and MUST be available and provided to borrowers at least three (3) days before closing (1026.19(f)(1)(ii)(A)).

The Closing Disclosure Covers: Loan Terms: Loan Amount & Interest Rate (Pre-payment & Balloon) Projected Payments: P+I; Escrows (taxes, MI and escrow)…also, what’s included in the escrow. Closing Costs (including transfer taxes, title, all other fees and costs) Cash to Close Summary of the Transaction (the former HUD) Loan Disclosures (Demand feature, late charge, neg. amortization, partial payments, security interest) Loan Calculations (the former TILA) Contact Information for those who assisted in the transaction…

Confirmation of Receipt – Borrowers need to acknowledge they got the form, not that they agreed to the loan…that is controlled by state law.

Loan Origination 1026.19(e)(3)

The Closing Disclosure must not stray from the loan estimate, at least not be higher in many circumstances:

10% aggregate variance allowed on third party services so long as they are not paid to the creditor or an affiliate of the creditor Reasonable efforts to estimate pre-paid interest; property insurance, escrow and vendors selected by borrowers If rate is not locked then need to provide revised estimate when rate is locked.Other items in control of lender are subject to zero tolerance.1026.19(e)(3)(i) – if over tolerance, then creditor has 60 days to refund the excess after consummation


Once the closing has occurred…the loan consummated…then the lender (and successor servicer) must retain documentation for a period of time (1026.25) from date of consummation.

Three year retention of the estimate Five year retention of closing disclosures and documents But can keep electronic copies…so why not retain indefinitely?

Loan Inquiries

(a) The notice has to be a written notice from the borrower (or agent) and enables the servicer to identify the account.

Has to written…can be email, fax, etc… just has to be written… Has to allow the servicer to identify the account (i.e. Loan number) Must set forth the error that the borrower believes occurred… If from an agent, there should be sufficient authorization to confirm the authority. CFPB has standard forms for the borrowers to utilize.

Once received, the servicer has to react quickly…

Written Request – Error Resolution 1024.35

Loan Inquiries

1024.35(d) servicer has five (5) business days to acknowledge the error resolution request in writing. Get the acknowledgement out regardless of validity of claim.1024.35(e) servicer needs to respond to the error request by:

(1) Correct the error and provide the borrower with written notification of the correction and the effective date of the correction; After reasonable investigation, provide a written response that the servicer concluded there was no error. AND, if the servicer’s investigation reveals other errors not raised, then the servicer must correct those errors and notify the borrower of what it found and corrected. (2) servicer can request documentation from borrower in connection with an investigation, but cannot condition the investigation or findings on borrower’s failures to respond.


Loan Inquiries

Errors are 1024.35(b): 1 – Failure to accept payments in accordance with servicer policies; 2 – Failure to accept a regular payment; 3 – Failure to credit payment on the date received in accordance with 1026.36(c)(1)(i);4 – Failure to time pay (1024.34(a)) or refund (1024.34(b)) escrow amounts being handled by the servicer by agreement of the parties; 5 – Imposition of an improper fee or late charge; 6 – Failure to provide accurate payoff (1026.36(c)(3). 7 – Failure to accurately provide loss mitigation and foreclosure options;8 – Failure to timely and accurately transfer the file to new servicer; 9 – Bringing foreclosure action before 120 days in default (1024.41). 10 – Moving for judgment, sale order or sale (1024.41(f) or (j)). 11 – Any other error relating to servicing of a borrower’s mortgage.


Loan Inquiries

1024.36(a) notice has to be in writing by borrower and/or agent with information sufficient to identify the account. Agent is an attorney, POA or authorized third party. (b) Servicer can designate a specific address for these inquiries.(c) Must acknowledge within five (5) business days (d) Two different time frames for response…

10 days if the request is limited to information regarding the owner of the loan30 days for all other requests


has served as a member of The Florida Bar Construction Law Committee, Real Property Probate and Trust Law Section. Additionally, Mr. Barker is a member of NAIOP, the Commercial Real Estate Development Association and Mortgage Bankers Association (MBA).

Mr. Barker received his Juris Doctor from Loyola University New Orleans College of Law in 1999 and his B.A. from the University of Florida in 1996.

Mr. Barker has attained an AV® Peer Review Rating from Martindale-Hubbell, the highest rating for ethics and legal ability.

Steven Eisenberg, Esq. Managing Shareholder Stern & Eisenberg, PC1581 Main Street, Suite 200 Warrington, PA 18976 Phone: (215) 572-8111 [email protected]

Steven K. Eisenberg is the managing shareholder of Stern & Eisenberg, PC. He is a graduate of Cornell University (B.A.), Temple University School of Business (MBA, Valedictorian) and Temple University School of Law. He is admitted to Practice law in the State of New Jersey (1995) and Commonwealth of Pennsylvania (1995). Steven is also a licensed Title Agent. Steven has practiced across the different areas of default representation during his 20 years of practice. Stern & Eisenberg has offices in NY, NJ, PA, MD, DE, DC, VA, WV and SC.

Session 5 (Track 2 & 4) – Non-Judicial Foreclosure Updates River Terrace 2 Track 2: 11:15 a.m. – 12:30 p.m. Track 4: 4:15 p.m. – 5:30 p.m.

Speakers:• Ron Deutsch, Esq., Partner, Cohn, Goldberg & Deutsch, LLC (ALFN Member in Maryland) -

Discussion Leader• Joe Camillo, Esq., Managing Partner, Shechtman Halperin Savage, LLP (ALFN member in

Massachusetts) • Grady Ingle, Esq., Managing Partner, Shapiro & Ingle, LLP (ALFN member in North Carolina)

Session Overview: • Ron Deutsch - discussion of the new rules facing various jurisdictions and the heightened court

involvement as well the mediation process • Joe Camillo – Non-Judicial updates • Grady Ingle – Non-judicial Updates

Ron Deutsch, Esq. PartnerCohn, Goldberg & Deutsch, LLC 600 Baltimore Ave Towson, MD 21204 Phone: 410-296-2550 Fax: 410-296-2558 [email protected]

Ronald S. Deutsch - Born Washington, D.C.; holds a Bachelor of Arts Degree, cum laude, from the University of Maryland (B.A. 1979), a law degree from The National Law Center, George Washington University (J.D. 1982) and a Master in Taxation Law also from The National Law Center, George Washington University (LL.M 1985). Ronald S. Deutsch is a member of Cohn, Goldberg & Deutsch, LLC in Towson, Maryland. He is a frequent lecturer at various industry conferences as well as the University of Maryland and the Professional Development Institute. Mr. Deutsch maintains memberships with the Maryland and District of Columbia Bar Associations. He has served in a number of industry leadership positions including the Chairman of the Maryland State Bar Association’s Real Property Council and the former Chairman of the Maryland State Bar Association’s Foreclosure Committee. Mr. Deutsch is currently serving on the Board of Directors of the USFN and was a former Board member of REOMAC.He also served on the Governor’s Task Force that helped re-write the State foreclosure law. Mr. Deutsch has obtained a nationally recognized reported decision in Island Financial v. Ballman, 607 A.2d 76 (1992) and has been extensively published in several national periodicals.

Joseph A. Camillo, Jr, Esq.

Partner & Managing Attorney – Default ServicingShechtman Halperin Savage, LLP1080 Main Street Pawtucket, RI 02860 Phone: 401.272.1400 [email protected]

Mr. Camillo is a partner and managing attorney of SHS’s Default Servicing Practice Groups. Mr. Camillo has over 20 years of experience in the areas of Banking, Creditors’ Rights, Bankruptcy, Foreclosure, Real Estate, Litigation, Regulatory Compliance and Condominium Law. Mr. Camillo also has extensive experience in representing public sector/quasi governmental agencies such as Massachusetts Housing Finance Agency; Rhode Island Housing; Fannie Mae; Freddie Mac; HUD, USDA and the Veterans Association. He is admitted to practice law in all state and federal courts in Massachusetts and New Hampshire, US District Court for the District of Vermont and the United States Court of Appeals for the First Circuit. Mr. Camillo earned his J.D. from the Massachusetts School of Law in 1994, and his B.A. from St. Bonaventure University in 1989. Mr. Camillo lectures extensively throughout the country on topics such as foreclosure, bankruptcy, eviction, condominium law, mediation and litigation. Mr. Camillo serves as corporate counsel for the New England Adjustment Managers Association (NEAMA); a Conference Faculty member of Massachusetts Continuing Legal Education (MCLE) as well as a faculty member of the Real Estate Bar Association (REBA).

Grady Ingle, Esq. Managing Partner Shapiro & Ingle, LLP 10130 Perimeter Parkway, Suite 400 Charlotte NC, 28216Phone: 704-831-2217Fax: [email protected]

Education - University of North Carolina Greensboro - University of North Carolina School of Law

Bar Admissions - State Bar of North Carolina, 1989 - United States District Court for the Western District of North Carolina, 1989 - United States District Court for the Eastern District of North Carolina, 1990 - United States District Court for the Middle District of North Carolina, 1990 - Fourth Circuit Court of Appeals, 1991

Mr. Ingle has been with Shapiro & Ingle, LLP since 1990. He was named managing partner in 1997. In this role he oversees the firm’s default management practice. Shapiro & Ingle, LLP operates statewide in North Carolina providing foreclosure, title, eviction, and REO closing and settlement services for mortgage lenders and servicers. The firm handles bankruptcy representation and most default related litigation, as well as mobile home title resolution. The firm is cognizant of mortgage investor and insurer guidelines and industry expectations.

Mr. Ingle is a member of the real estate and bankruptcy sections of the North Carolina Bar Association. He is also a member of the American Legal & Financial Network (AFN), Legal League 100, Mortgage Bankers Association, Mortgage Bankers Association of the Carolinas, North Carolina Bankers

Association, and REOMAC.

Non –Judicial and Quasi Judicial Foreclosure

Maryland, Massachusetts, Rhode Island, New Hampshire, Alabama, North Carolina, and

Tennessee

September 9, 2015 - Jacksonville, FL

Ron Deutsch Partner Cohn, Goldberg & Deutsch, LLC [email protected]

SESSION SPEAKERS

JJoseph A. Camillo, Jr., Esq. Managing Partner - Default Shechtman Halperin Savage, LLP Email [email protected]

Grady Ingle Partner Shapiro & Ingle LLP [email protected]

Quasi Judicial Court Involvement

- Maryland

September 9, 2015 - Jacksonville, FL

Notice of Intent-Pre Filing • Breach Letter • Notice of Intent (NOI) – Breach letter can be combined • FDCPA Letter • (If FNMA) FNMA Loss Mitigation solicitation letter • Copy of NOI to the Commissioner of Financial Regulation • NOI includes date of most recent payment, name, license

number and telephone number of the secured party; name and phone number of the mortgagor servicer, if applicable; name and license number of the mortgage originator (if available); a Loss Mitigation Application; Instructions, Eligibility Requirements, the cure amount and pre-printed return envelopes to the Loss Mitigation Department.

• NOI sent to the Mortgagor as well as record owner (person holding title to the property as of 30 days before the date the NOI is sent.

FILING PROCESS • Appointment of Substitute Trustees • Order to Docket – Loan must be a minimum of 120 days in

default • Originating Lender Name and License Number and Secured

Party Name & License Number listed. • Filing Fee of $465.00-$485.00 • If HAMP eligible loan, official HAMP application and

instructions from MHA website can be utilized.

Filing Process -Continued • If loss mitigation analysis has been completed • A Final loss mitigation affidavit in the form adopted by the

Commissioner of Financial Regulation must be filed; • A pre-printed envelope must be provided to the mortgagor

with the address of the Clerk of Court so that mediation may be requested per included request form

• Mediation is non-binding • A pre-printed envelope must also be provided to the

mortgagor with the address of the foreclosure attorney to facilitate any mediation request.

• Loss mitigation analysis is not complete if the reason for the denial or determination of ineligibility is due to either the inability to establish communication with the mortgagor or to obtain all information and documentation necessary to conduct the analysis.

Filing Process • If no or incomplete loss mitigation analysis, a preliminary loss

mitigation affidavit is filed. • Copy of NOI filed • If a preliminary loss mitigation affidavit is filed, the secured

party must, at least 30 days before the date of the foreclosure, send the mortgagor by first class and certified mail a copy of the final affidavit and a request for mediation form and envelopes as noted earlier.

• If a final loss mitigation affidavit is filed after a preliminary affidavit, it cannot be filed any earlier than 28 days after the foreclosure documents are served.

Affidavits, Affidavits, Oh My Seventeen Affidavits are required: 1. Affidavit as to Copy of Appointment of Substitute Trustees 2. Affidavit of Ownership of Debt Instrument 3. Affidavit of Statement of Debt and Right to Foreclosure 4. Affidavit as to Pre-sale Notice to Occupants 5. Affidavit as to Mailing Notice of Intent to Foreclose 6. Affidavit of Default 7. Affidavit of Non-Military Status 8. Affidavit of Preliminary Loss Mitigation 9. Affidavit of Final Loss Mitigation Completed 10. Affidavit of Notice of Sale 11. Affidavit of Service of Process 12. Affidavit of Pre-Sale Publication 13. Affidavit of Post Sale Publication – Order Nisi

Affidavits Continued 14. Affidavit of Purchaser 15. Affidavit of Auctioneer 16. Affidavit – Report of Sale by Trustees 17. Affidavit of Sale Notice to all Interested Parties.

Service of Process • Two good faith attempts of Service • Anyone of suitable age and discretion • Posting on Door after two good faith attempts fails to

accomplish personal service. • Affidavit completed and sent to court • Copies mailed by certified and regular mail.

Mediation • Mediation may be requested by a Mortgagor for a loan

secured on owner occupied residential property not later than 25 days after service of the Final Loss Mitigation Affidavit (mailing date).

• A Motion to Strike can filed with a showing of good cause as to why mediation is not appropriate. Filed within 15 days of the request.

• Mediation must be held within 60 days after the request is transmitted by the Court. Non binding – document exchange.

• For good cause the Office of Administrative Hearing may extend the time for completing a mediation for a period not exceeding 30 days, unless all parties agree to a longer period. (Usually 45-60 days).

• A representative of the secured party who has authority to settle must be present (telephonic).

• No release document given. A docket entry of no agreement reached is entered by some courts. No copy of the report is provided.

Notice, Advertis ment • Notice (Mortgagor, Junior Lienholders, Occupants, County) –

not earlier than 30 days nor later than 10 days before the sale.

• Advertisement – Once a week for three weeks and sale mustbe set out a minimum of 45 days from the completion of Service; terms include risk of loss, re-sale profit, no warranties, as-is, where is, IRS right of redemption

• Trustees report of sale• Post Sale Advertisement to start the Court ratification

period.

Property Registrations • Within thirty (30) days of the foreclosure sale, the purchaser

must register the property with the Commissioner of Financial Regulation Foreclosure Registry $50, which includes contact information (Initial Registration)

• Within thirty (30) days after a deed is recorded a final registration must be completed which includes the ratification date, the deed recordation date; owner contact information as well as a responsible maintenance contact (Final Registration);

• A copy of the ratification order must be filed with the local supervisor of assessments along with their proscribed form.

• County, Town – Local Jurisdiction filings.

Final Steps • Trustee’s Deed • Lien Certificate • Some counties may require a wavier of deficiency • Protection of Tenants in Foreclosure Act • Motion for Judgment of Possession (pre-ratification) • Writ of Possession

Caveat: Consumer and residential loans are not necessarily what you may believe. “Residential” is a characteristic of the property. The property is deemed residential for foreclosure procedures even if the borrower is a commercial borrower.

Developments Non-Judicial Eviction – Post Nickens V. Mount Vernon Realty A party claiming the right to possession may take possession of residential property from a resident without a judicial proceeding only if: 1. Reasonably believes the protected resident has abandoned

or surrendered possession of the property based on a reasonable inquiry into the occupancy status.

2. Provides notice by posting on the front door of the residential property and mailing by first-class mail addressed to “All Occupants” as the address of the residential property a written notice as proscribed by the statute.

3. Receives no responsive communication to that notice within 15 days after the later of posting or mailing.

Stale NOIs – Granados case When does a NOI become stale? • The Court refused to set a bright line rule on the staleness

of NOIs after the passing of a particular period of time. • The Court did say- where the prior NOI had been sent, and

the case which was predicated upon it was thereafter dismissed, a new one should have been sent before filing a new case.

• Decision is poorly worded so there is a possibility that a judge may find an NOI to be “stale” if a significant period of time has passed between the sending of the NOI and the docket date, even where there has been no change in the template or change in information in the NOI.

Statute of Limitations Courts and Judiciary Proceedings Article 5-102 • 12 year Statute of Limitations for specialties to exclude an

action on a “deed of trust, mortgage or promissory note” signed under seal.

• New law, 3 years • Motion for deficiency is now also three years from ratification

of the auditor’s report • Phased in -With respect to a cause of action that arose

before July 1, 2014 and is not already barred by that date, the 12 year rule applies if it expires before July 1, 2017. If it expires after July 1, 2017, the case must be filed by that date.

NON-JUDICIAL FORECLOSURE UPDATE

Massachusetts-Rhode Island-New Hampshire

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JOSEPH A. CAMILLO, JR., ESQ. Managing Partner Default Servicing

LOCATIONS RRHODE ISLAND: 1080 Main Street Pawtucket, RI 02860 MASSACHUSETTS: 275 Grove Street, Suite 2-400 Newton, MA 02466

NEW YORK: One North Broadway White Plains, NY 10601 MAINE: Falmouth Station 190 US Route 1 Falmouth, ME 04105 VERMONT: 205 Main Street, Suite B Brattleboro, VT 05301 CONNECTICUT: 1266 E. Main Street, Suite 200 R Stamford, CT 06092

REGIONAL NEW ENGLAND COVERAGE

ME

NH VT

MA

CT RI

SERVICES

• SShechtman Halperin Savage, LLP: Full-service regional law firm offering high-quality legal services in an innovative, cost-effective manner. The Firm utilizes its 30 years of mortgage banking expertise to provide a single-source for:

Foreclosure, Bankruptcy, Eviction, Reo, Lender/servicer complex litigation

Our attorneys are professional, responsive, creative, knowledgeable and possess years of legal and business experience resulting in added value and benefit to our clients.

SUMMARY OF FORECLOSURE PROCESS

MASSACHUSETTS • Quasi-Judicial State • Non-restart state (Depending)

Massachusetts Methods of Foreclosure: a. Entry (244 § 1); b. Sale (244 § 14).

Upon receiving referral: • Run searches (SSDI, SCRA, PACER) • Order and review title • Ensure all requisite assignments have been recorded • Review all documents provided • Review 150 Day RTC to ensure compliance with M.G.L.

Chapter 244 Sec. 35A • Review Right to Mortgage Modification Notice to ensure

compliance with M.G.L. Chapter 244 Sec. 35B

SSERVICEMEMBERS CIVIL RELIEF ACT: • Chapter 57 of the Acts of 1943 sets forth the procedure:

o The complaint can be filed in either the Land Court or the Superior Court in the county where the property is located.

o The judgment only establishes conclusively that no person is subject to the benefits

of the SCRA and the defendant cannot assert any collateral issues challenging the propriety of the foreclosure itself (Beaton v. Land Court, 367 Mass 385 (1975.)

o No Judgment necessary if the Owner (holder of the equity of redemption) is a:

• Corporation • Limited Partnership (LLP, LLC) • Business trust with transferrable shares • General Partnership

PProcedure:

1. Complaint is filed with the Land Court with two orders of notice, the mortgagee’s affidavit and a redacted copy of the 150 day RTC notice.

• Pursuant to the decision, HSBC Bank USA, N.A. v. Jodi B. Matt, only a “mortgagee” can file a SCRA complaint

2. Court will return order of notice with a return day which is approximately 6 weeks from the

issue date. 3. Order of notice must be served by:

A. Publication not less than 21 days prior to return day B. Served by sheriff/certified mail not less than 14 days prior to return day C. Recorded at registry of deeds any day prior to return day

4. Return is made with proof of all service; Motion for Judgment

and Military Affidavit. 5. Judgment enters.

Prior to Proceeding Sale • Prior to publishing a Notice of Sale, the creditor shall certify

compliance with 35B mortgage modification statute and 35C certifying they are the holder o the mortgage note in an affidavit recorded in the Registry of Deeds

SSTATUTORY POWER OF SALE

• Statutory Notice of Sale M.G.L. 244 § 14 :

o Mortgagee must send notice to each of the owners of the equity of redemption (“owner”) by certified/registered mail at least 14 days prior to sale.

o Mortgagee must send notice of sale to any party having an interest in title that is recorded at least 30 days prior to sale and is junior to the mortgage being foreclosed at least 14 days prior to sale.

• Statutory Notice of Deficiency M.G.L. 244 § 17B:

o In order for the mortgagee to preserve it right to collect a deficiency under the promissory note in the event the proceeds of the sale are not enough to satisfy the indebtedness it must send out a deficiency notice in the form supplied by the statute.

• FFORECLOSURE BY ENTRY: • This sale is pursuant to 244 § 1 and requires that at the time of

sale: o Open peaceable and unopposed entry be made on the

property by the Mortgagee or its representative for the purposes of foreclosing on the property for breach of the conditions of said mortgage.

o It must be witnessed by two competent witnesses and notarized.

o After, the entry is made it must be recorded with the registry of deeds.

o This triggers a three year waiting period, after which all rights of redemption are extinguished so long as the possession has been continuous, peaceable and unopposed.

• Following the foreclosure sale, the following documents will be prepared and executed:

o Foreclosure Deed o Affidavit of Sale o Eaton affidavit (certifying that the foreclosing mortgagee held the note or acted on

behalf of the note holder of the time of sale) o Power of Attorney

• These documents, along with the Certificate of Entry completed at the time of the foreclosure sale, will be recorded in the Registry of Deeds

Milestones • 1150 Day Right to Cure Notice:

o Per Bravo – executed assignment needed prior sending the RTC. o 35B notice (right to loan mod. for “certain mortgages”) sent simultaneously with 150 day

• Prior to filing a Complaint o Per Matt, must be a “mortgagee”

• Prior to Publishing & Mailing Notice of Sale: o Section 1 : Clear record chain of mortgage assignments must be recorded at the Registry

and recited in the 244 § 14 notice of sale.

• Prior to Publishing Notice of Sale: o 35B Affidavit: Certification that Mortgagee either complied with sec. 35B (i.e. sent notice

and conducted the analysis described therein) or that 35B is not applicable (i.e. not a “certain mortgage loan” or loan financed by MassHousing or originated through programs administered by MassHousing Partnership Fund).

o 35C Affidavit: Certification that Mortgagee was the note holder or acting on behalf of the note holder at the time of publishing the 244 § 14 notice.

• At sale: o Eaton Affidavit : Certification that Mortgagee was the note holder or acting on behalf of

the note holder at the time of sale.

MASSACHUSETTS LEGISLATIVE YEAR IN REVIEW

• Schumacher Decision - Massachusetts

o SJC held that 150 day right to cure notice NOT part of the statutory power of sale and strict compliance is not required

o However, if the violation of 35A rendered the foreclosure fundamentally unfair, the foreclosure sale can be set aside in a post-foreclosure eviction action

• Easthampton Savings Bank Decision - Massachusetts

o Mortgage foreclosure regulation traditionally has been a matter of State, and not local, concern

o Springfield mediation ordinance is pre-empted by state law o City of Lynn repealed its ordinance with the exception of the eviction

provision (requiring “just case” to evict former owners and other non-tenants)

• Drummer Boy – Massachusetts

o The Massachusetts Condominium Act gives condominium associations a “super” priority lien for unpaid common fees and the related costs of collection.

o In the Drummer Boy decision, the Appeals Court held that the current practice of “rolling the lien” to protect the “super” priority status of more than one six month period at a time is nnot permitted.

• PPinti v. Emigrant Mortgage Co, SIC 11742: July 17, 2015,

• The Supreme Judicial Court issued its opinion in which it held that because a default letter issued by a lender pursuant to Paragraph 22 of the standard FNMA/FHLMC mortgage did not strictly comply with the terms of Paragraph 22 of said mortgage, the foreclosure sale was void.

• The Borrowers raised several arguments, including that Emigrant had failed to strictly comply with

Paragraph 22 of the mortgage in sending out its default notice. The notice Emigrant sent out on September 29, 2009, advised Borrowers that they had “the right to assert in any lawsuit for foreclosure and sale the nonexistence of a default or any other defense [they] may have to acceleration and foreclosure and sale.” As Massachusetts is a non-judicial foreclosure state, however, Paragraph 22 of the standard Fannie Mae/Freddie Mac mortgage for use in non-judicial states required that borrowers be notified of “the right to bring a court action to assert the non-existence of a default or any other defense . . . to acceleration and sale.” In reliance on the 2014 Supreme Judicial Court decision in U.S. Bank Nat’l Ass’n. v. Schumacher, 467 Mass. 421 (2014), which held that the pre-foreclosure notice of default required to be sent out by M.G.L. 244 Sec. 35A was not a part of the statutory power of sale and that the lack of strict compliance with that statute did not void the foreclosure sale, the Superior Court granted Wilion’s motion for summary judgment quieting title in him and granted Emigrant’s Motion to Dismiss. The Borrowers appealed to the Massachusetts Appeals Court and the Supreme Judicial Court thereafter took the case sua sponte. The case was argued in January of 2015.

• The Court ruled that the decision will have prospective effect only, meaning Paragraph 22 letters sent

dated July 17, 2015 or prior are not affected by this ruling.

RHODE ISLAND • NNon-Judicial State • Restart state • Order and review title • Run PACER • Run SCRA searches • Have your assignment

SSTATUTORY POWER OF SALE

Statutory Advertisement of Notice of Sale:

• Requires publication of notice in some public newspaper at

least once a week for three (3) successive weeks before the sale

o first publication at least 21 days before the day of sale, including the day of the first publication in the computation

o third publication no fewer than 7 and no more than 14 days before the original date of

sale listed in the advertisement o sale may take place no more than fourteen 14 days from the date on which the third

successive notice is published, including the day of the third publication in the computation

o newspaper to be used is governed by RIGL 34-11-22 (statutory power of sale)

SStatutory Notice of Sale R.I.G.L. § 34-27-4 • Requires written notice of the time and place of sale by certified

mail return receipt requested at the address of the real estate and, if different, at the mortgagor's address listed with the tax assessor's office of the city or town where the real estate is located or any other address mortgagor designates by written notice to mortgagee at his, her, or its last known address, at least twenty (20) days for mortgagors other than individual consumer mortgagors, and at least thirty (30) days for individual consumer mortgagors, days prior to the first publication, including the day of mailing in the computation.

• Consumer mortgagor is not defined in statute; therefore it is

prudent to provide 30 days to ALL mortgagors.

• Requires continued publication if the sale is adjourned, unless adjourned sale held during the same week as originally scheduled

o publication of the notice of the adjourned sale, together with a notice of the

adjournment must be continued at least once each week commencing with the calendar week following the originally scheduled day of sale

o adjourned sale must take place during the same calendar week in which the last

notice of the adjourned sale is published, at least one day after the date on which the last notice is published.

RHODE ISLAND LEGISLATIVE YEAR IN REVIEW

Rhode Island Mediation • SSeptember 13, 2013, R.I.G.L. §34-27-3.2 went into effect. The 2013 version of the

statute stated that on 1-4 family owner occupied dwellings “when a mortgage is not more than one hundred twenty (120) days delinquent, the mortgagee…shall provide to the mortgagor written notice…that the mortgagee may not foreclose on the mortgaged property without first participating in a mediation conference.” Under this version of the statute, any loan that was over 120 days delinquent as of September 13, 2013 was exempt from sending the notice of mediation. If a Notice of Mediation was not sent, then the lender lost its rights to foreclose non-judicially.

• July 8, 2014, the Governor signed legislation amending the statute to clarify that process. It took effect October 6, 2014 Under the new law, a mortgagee may alternatively still proceed with mediation and non-judicial foreclosure and any mediation notices that are not sent within 120 days of the default date are subject to penalties at a rate of $1,000 per month. These penalties are assessed to the servicer/mortgagee and must be paid in order to obtain a Certificate Authorizing Foreclosure. Servicers were also afforded the opportunity to pay a one time penalty of 125,000.00

• October 6, 2014 : The statute was further amended on, eliminating the language

which limited its applicability to only those mortgages that were over 120 days delinquent as of September 12, 2013. The 2014 version of the statute, subsection (d), provides that “The mortgagee shall, prior to initiation of foreclosure of real estate pursuant to 34-27-4(b), provide to the mortgagor written notice…that the mortgagee may not foreclose on the mortgaged property without first participating in a mediation conference”.

• MMay 15, 2015: Fountain v. USBank National Association: The

decision held mediation notice is required to be sent on all loans, regardless of the date of default. In making this decision, the court determined that since the exemption for loans over 120 days delinquent was left out of the final version of the October 6, 2014 amended statute, the intent of the General Assembly was to require notice of mediation to be sent to all mortgagors.

• July 2, 2015: Statute Amended again: o Mortgages with default dates prior to May 16, 2013 are exempt from the mediation law. o Failure to comply with mediation renders a foreclosure sale voidable. Under the previous

version of the statute, failure to comply with mediation rendered the foreclosure void. o SCRA protections were added, requiring lenders to wait sixty days after SCRA protections

are no longer applicable to mail the mediation notice. o Although R.I.G.L. §34-27-3.2 has been amended to eliminate the requirement for sending

mediation notices on loans with default dates prior to May 16, 2013, the statute does not apply retroactively. Therefore, any loans that went to sale after the last amendment on October 6, 2014 and prior to the new amendments on July 2, 2015 will need to be evaluated on a case by case basis for possible re-foreclosure.

NEW HAMPSHIRE • NNon-Judicial State • Restart state • Order and review title • Run PACER • Run SCRA searches • Have your assignment

SSTATUTORY POWER OF SALE:

R.S.A. 479 § 25: • Statutory Advertisement of Notice of Sale:

o Published 3 consecutive weeks in a newspaper published in or with a general circulation in the town where the land is located. If no paper exists matching that criteria then a paper in the county.

o First publication must occur at least 20 days prior to the sale date excluding the first notice’s publication and the date of sale.

• SStatutory Notice of Sale R.S.A. 479 § 25 :

oMortgagee must send notice to each of the mortgagors by certified/registered mail at least 25 days prior to sale.

oMortgagee must send notice of sale to

any party having an interest in title that is recorded at least 30 days prior to sale and is Junior to the mortgage being foreclosed at least 21 days prior to sale.

• A special one year statute of limitations prohibits any challenge to the sale by the mortgagor or any recorded lienholder after one year and one day from the recording of the foreclosure deed.

• The foreclosing mortgagee must record a deed and affidavit within sixty (60) days of the foreclosure sale, failure of which results in the survival of any liens and other encumbrances recorded between the day of the sale and recording of the deed.

• As a result of the Ibanez decision New Hampshire

foreclosures are being contested based on when the assignment was executed. See First Horizon Home Loan v. Trotter Rockingham County Superior Court No 09-C-0591 where the court adopted the Ibanez ruling from Massachusetts.

• These contests are being raised at the eviction

stage in the form of a plea of title. A plea of title seeks to have a matter transferred from the district court to the superior court to contest the validity of the sale.

NEW HAMPSHIRE LEGISLATIVE YEAR IN REVIEW

RSA 479:25 AMENDED • New Hampshire legislator passed SB50 which was signed by the Governor on June 26, 2015. This

Bill will take effect January 1, 2016, and alters RSA 479:25, which governs the statutory power of sale. Among the changes to the statute, is a revision in the text of the notice of sale sent to the mortgagors. With respect to owner-occupied 1-4 family residential dwellings, the notice must now include the name and address of the mortgagee’s agent for service of process and contact information for the New Hampshire banking department. The contact information will be contained in a mandatory statement:

• ““For information on getting help with housing and foreclosure issues, please call the foreclosure information hotline at ____ [phone number to be provided by the department]. The hotline is a service of the New Hampshire banking department. There is no charge for this call.”

• In addition, the notice of foreclosure must be sent at least 45 days from the date of sale to the mortgagor (increased from 25 days prior to sale under the current version of the statute). Furthermore, notice must also be sent to anyone with an interest recorded at the applicable Registry of Deeds at least 50 days prior to the sale.

• The statute only recites an effective date of January 1, 2016. It is silent about whether the triggering event is the date of sale or the date of when notices are sent. Thus we expect as the year comes to an end, title insurance companies will opine as to whether the statute will be applied to all matters where sales take place after January 1, 2016 (and notice was sent prior to that date) or will apply to sales where notices are sent after January 1. Until clarification is received, the best practice will be have all sales on or before December 31, 2015 comply with the current statute and for any sales held after January 1, 2016 comply with the new amendment. At this time a prudent approach would be to conclude any sales by year end and initiate new sales after January 1, 2016, to avoid sending notice in 2015 for a sale date on or after January 1, 2016.

• provide the following information to counsel for inclusion in notices to comply with the statute.

• ((b) Notice of the sale as served on or mailed to the

mortgagor shall include, for owner-occupied dwellings of 4 or fewer dwelling units:

• (1) The address of the mortgagee for service of process

and the name of the mortgagee’s agent for service of process;

QQUESTIONS AND ANSWERS

NON-JUDICIAL FORECLOSURE UPDATE

Alabama – North Carolina- Tennessee

TE@ch

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Alabama Foreclosure Process REFERRAL

(Day 1)

FDCPA VALIDATION LETTER(Day 1)

(30 days to dispute debt)

** FDCPA DEBT **Validation Period

(30 days) PUBLICATIONCounty specified: 3 weeks

County NOT specified: 4 weeks

SALE/DEED RECORDED (Day 34)Pub. County specified: 18 days prior

Pub. County NOT specified: 24 days prior

Also day 34: 10 Day Vacate Letter

OCCUPANCY CHECK (Day 44)

IF NOT VACANTForfeit One Year Redemption;

Initiate Circuit Court Eviction Suit

IF VACANTRetain 1 Year Redemption Rights;

Immediately transfer property to REO

NotVacant

Vacant

Alabama Foreclosure A Primer

AAlabama: Type of Foreclosure • What type of foreclosure? • Judicial v. Non Judicial

Initial Default • 120 Day Delinquency • Initial loss mitigation/collection calls • Demand

First Legal = The Notice of Sale • Title Curative measures are identified • Assignments MERS • Who is the Noteholder (Servicer vs Noteholder relationship) • Payoff Statement

Alabama Foreclosure A Primer

TThe Foreclosure Sale • Bidding: Total Debt v. specified bids • 3rd party sales - $ 5,000.00 deposit; Funds collected within 24 hours • Redemption - 1 year following sale • Are foreclosure sales rescindable

in AL? Generally, a consent order is required

Evictions • Complaint • Service • Judgment • Writ • Lockout - total timeline 90 – 120 days

North Carolina Foreclosure Process

North Carolina Foreclosure – A Primer NNorth Carolina: Type of Foreclosure • What type of foreclosure? • Judicial v. Power of Sale • North Carolina: MODIFIED Power of Sale: Requirement of hearing

Initial Default • 30-90 Day Delinquency • Initial loss mitigation/collection calls.

North Carolina Pre-Foreclosure Notice • 45 Days before first legal. • Send 45 Day Pre-foreclosure notice including detailed reinstatement quote. • State Home Foreclosure Prevention Project:

• Loss mitigation promotion by the Commissioner of Banks. • Subprime Loans: Registration with the Commissioner of Banks.

North Carolina Foreclosure – A Primer FFirst Legal = The Notice of Hearing • Substitution of Trustee. • Title curative measures are identified.

• Examples: Mobile Homes, unperfected interests, prior liens, etc.

• Role of Trustee: Neutral 3rd party. • Our office partners with FNMA to solicit loss mitigation information from homeowners.

• Who is the Noteholder (Servicer vs. Noteholder relationship) • Servicer acting as agent for Noteholder; power of attorney issues.

• Compliance: Any borrower inquires have been responded to in the past 2 years.

• Certificates regarding registration with the Commissioner of Banks. • Payoff Statement.

North Carolina Foreclosure – A Primer TThe Hearing • 6 Elements:

1. Is there a valid debt? (mortgage) 2. Is it in default? 3. Did the parties receive notice? 4. Do the documents contain a power of sale clause? 5. Is the loan a home loan and, if so, have the time periods under the SHFPP elapsed? 6. Is the foreclosure barred because the borrowers are in a period of, or within 90 days of a

period of active duty military service?

• Contested Foreclosures: • Separate attorneys required for the trustee and the lender/servicer when the foreclosure

becomes contested. • Separate evidence will be required, such as analysis of the payment history. • Foreclosures can be appealed within 10 days.

• Grounds or filings NOT required. • Disposition before the Superior Court.

• Lawsuits can be filed to enjoin foreclosure if a defense does not fall within the above 5 elements.

• Legal Aid of North Carolina: MORTGAGE FORECLOSURE DEFENSE PROJECT. • Challenge every aspect of a foreclosure just to challenge and/or force a workout. • Review of volume foreclosure files by LANC & NC Justice Center.

• Extensions of time often granted in uncontested foreclosures upon appearance or request of homeowners.

North Carolina Foreclosure – A Primer TThe Foreclosure Sale • Bidding: Total debt v. specified bids. • Upset bid period = 10 days. • Rights of the parties become fixed at the end of the upset

bid period. • Are foreclosure sales rescindable in NC? Competing

viewpoints. • Before the upset bid period closes: Usually not a problem. • After upset bidding closes: More problematic; may require judicial

action.

Eviction • Typically, 10 day notice to vacate; 90 days for tenants under

the Protecting Tenants in Foreclosure Act (“PTFA”). • Sheriff serves writ of possession on holdover tenants.

Standing Update TThe “Holder” North Carolina Court of Appeals has given guidance regarding the evidence required to prove the party seeking to foreclose is the “holder”. In re Adams (2010) • Holder is defined by the UCC, which states that the holder is

the party in possession of the Note endorsed in blank or a named party.

• Copies of the Note are fine, unless the borrower challenges its authenticity.

• Assignments? North Carolina is not an assignment state. Assignments are not necessary, but they can be used as evidence of the parties’ intent.

Standing Update PPossession Recent cases have created a schism with regard to what evidence is required to prove the party has possession. • In re Gilbert: Court of Appeals reversed foreclosure order despite counsel

having the original Note in Court. • Note was endorsed to the Trustee without the named beneficiary. • Foreclosure brought in the name of the Trustee for the benefit of the beneficiary. • Court of Appeals disregarded affidavit regarding possession because of allegations the affiant

did not have personal knowledge of its contents.

• Dobson v. Wells Fargo: Court of Appeals held it was a question for the jury whether Wells Fargo had possession of the Note. AAffirmed by the NC Supreme Court.

• Original not presented; only affidavits and copies of Note. • Trial court errantly granted Plaintiff/borrower summary judgment on this issue because Wells

Fargo had raised an issue of fact as to possession.

• What this means for You? • Expect more requests for original documents and servicing agreements until these cases can be

sorted through.

Standing Update OOther Standing Issues • In re Bass: NC Supreme Court overruled a Court of Appeals

case stating specific challenge to the authority of the person signing the endorsement to execute it rebuts the presumption that the signatures are authorized and valid. Affirms the axiom that specific evidence is required to show the endorsement was NOT authorized or authentic.

• In re Carver Pond I: Proof of merger is prima facie evidence that the successor entity is the holder of the note.

Loss Mitigation Courts may consider loss mitigation efforts to grant more time, but cannot deny foreclosure for failure to offer loan modifications. Litigation can ensue, however, separate and apart from the foreclosure based on allegations that the lender did not negotiate in good faith. Trial Plan Issues: Borrowers are frequently contesting foreclosures based on not being offered a permanent modification. In these instances, your litigation counsel will need to interface with the loss mitigation departments to clarify for the Courts exactly what happened.

Tennessee Foreclosure Process

Tennessee Foreclosure

OOverview and Procedures To expedite the process of completing the first legal in Tennessee, the following items are needed: • Copy of Note including all Endorsements/Allonges Copy of Recorded

Deed of Trust • Default Figures: Payoff, Principal Balance, Due Date, Monthly

Payment Amount, Late Charge Amount & current interest rate

• Copy of any demand letters sent AFTER default • Name to foreclose in • Mortgagor Social Security Numbers • All known mailing addresses • Substitution of Trustee • Assignments, if required


National PACER and Department of Defense websites are checked upon receipt of the referral and the title search is ordered. FDCPA letter is first mailed to all known obligors and any missing documents or figures are requested. FNMA clarified the Post-Referral Solicitation Letter requirements imposed by SVC – 2011-08R Announcement. Although clients are anxious to put the process in place, Fannie made clear that this directive shall apply only to loans that go into default after October 1 so that the soonest these letter will be required will be in January/February. Also note, that Post-Referral Solicitation Letter might be sent later, than within 5 days of foreclosure referral, if it is necessary to comply with the requirements of the applicable laws. Upon receipt of the title work, the search is reviewed for title defects. The examiner will also check for delinquent taxes, UCC liens, and identify any subordinate mortgages, liens, and/or judgments. The results of the title review are reported accordingly. First legal action will not occur if there is a known title defect.


If an Assignment out of MERS has not been recorded, it will be prepared and submitted for execution. Once the Assignment has been executed, the Substitution of Trustee (SOT) is prepared and sent for execution. The first legal action, or publication, cannot occur until the SOT has been executed. Before the publication is scheduled, PACER is checked to ensure there are no active bankruptcy cases. The publication must run three consecutive weeks prior to the foreclosure sale. The Notice of Sale is mailed to all parties by certified and regular mail.


Prior to July 1, 2011, Tennessee did not have a statute providing for adjourning sales. Now the statute allows adjournments for up to one year of the original sale date. Each adjournment must be announced at the time and location of the scheduled sale to a new date and time certain. If the adjournment is more than 30 days, notice of the new sale date and time must be mailed prior to the new date. Title underwriters, however, have indicated they may restrict the time allowed for adjournments to less than the statutory allowance of one year. Prior to the sale, the bidding instructions are prepared and reviewed. PACER and the Department of Defense is checked once again prior to sale. Once the sale has been cried, generally on the courthouse steps, the sales results are reported and the deed is prepared. PACER is checked prior to sending the deed for recording to ensure there have been no post-sale bankruptcy filings. Tennessee is a one deed state and there is no redemption period. FFNMA Timeframe: 120 days


FFive Most Common Title Issues 1. Prior Mortgages 2. Defective Notary Acknowledgements 3. Defective Legal descriptions 4. Marital Interest not waived on Deed of Trust 5. Mobile Homes Prior Deed of Trusts • A prior Deed of Trust usually results when during loan origination the closing attorney

does not properly follow up on any mortgages that were paid off at the time of closing. A release must be recorded in the Register of Deeds office within 45 days of a Deed of Trust being paid off.

Defective Notary Acknowledgements 1. No notary seal 2. Date the notary signed the document is omitted 3. Names of the mortgagors are missing

• The best way to cure this defect is by preparing a notary affidavit. This must be signed by the original notary and recorded in the Register of Deeds office.


DDefective Legal Description • Legal descriptions are deemed defective primarily because

of typographical errors. A number may be transposed and you have an invalid Deed of Trust. For example, you should have Lot 12 and it was typed 21 in error. One of the most common mistakes is omitting the Exhibit “A” from the Deed completely. When this occurs you must get the original Deed of Trust and re-record with the legal description. If there is a second mortgage you will also have to get a subordination agreement referencing your corrected Deed of Trust.


MMarital Interest • A title defect occurs when the spouse does not waive his/

her marital interest on the Deed of Trust. Only one member of the party has to sign the note, but the spouse must waive his/her marital rights by signing the Deed of Trust. If they do not sign, then an indemnity letter from the title company insuring the deed of trust must be obtained.

Manufactured Homes 1. Affixed to the land (meaning the wheels, tongue, and axle

are removed) 2. The manufactured home is taxed with the land in the tax

assessors’ office. 3. The manufactured home is not titled. 4. You must have the serial number or the HUD tag number


HHelpful Documents in Title Curative • Copy of the Title Policy • Copy of the HUD-1 Settlement Sheet • Copy of Appraisal • Copy of Hazard Insurance (manufactured homes) • Copy of Mobile Home Title Senior Lien Monitoring • Assignments are not required by law in the state of Tennessee.

Locating the senior lien holder may be near impossible! Our firm utilizes a vast array of resources to locate and communicate with the senior lien holder, including good relationships with other default attorneys. Though not bound by law in Tennessee, we file a Request for Notice in the Register of Deed’s Office so that we may be served copies of any foreclosure proceedings. We file such documents in hopes that our competitors will assist us in good faith.

Session 6 (Track 2 & 4) – Post Foreclosure, Vacant/Abandoned Property & Evictions UpdatesRiver Terrace 3 Track 2: 11:15 a.m. – 12:30 p.m. Track 4: 4:15 p.m. – 5:30 p.m.

Speakers:• Michelle Gilbert, Esq., Managing Partner, Gilbert Garcia Group, PA (ALFN member in Florida) -

Discussion Leader• Kris Murtha, Esq., Partner, KML Law Group, PC (ALFN member in Pennsylvania and New

Jersey)• John Hearn, Esq., Shareholder, Rogers Townsend & Thomas, PC (ALFN member in North

Carolina and South Carolina)

Session Overview: • Michelle Gilbert - Litigation doesn’t end with the sale Association issues; Borrower likely

defaulted on Association assessments; Associations desperate need of funds leads to negotiating and litigation; Impact of superlien/modified superlien state laws; Laws often do not address:

o late charges, interest, collection costs o attorney’s fees o special assessments o rolling superlien status o Declarations o lien priority versus first mortgage o Title Issues o Code enforcement liens attach to multiple properties

Example: Florida Statutes §162.09(3) A certified copy of an order imposing a fine, or a fine plus repair costs, may be recorded in the public records and thereafter shall constitute a lien against the land on which the violation exists and upon any other real or personal property owned by the violator other state issues will be researched and discussed

o Vacant Property Registration: by municipality often require registration upon default, whether or not vacant; Annual fee must be paid or penalty assessed; REO disposition registration and fee required in some municipalities

• Kris Murtha - fast track processes for vacant and abandoned properties, registration and municipal ordinances regarding vacant and abandoned property, including the increased, and increasingly expensive requirements, for securing in maintaining properties; PPTFA and current status

• John Hearn - high-level look at abandoned/vacant property legislation changes with an emphasis on those changes in the largest FC volume states.

Michelle Gilbert, Esq. Managing Partner Gilbert Garcia Group, PA 2005 Pan Am Circle, Suite 110 Tampa, Florida 33607 Phone: (813) 638-8920Fax: (813) 443-5089 [email protected]

Michelle has been admitted to the following practices and courts: Florida Bar, 1986; Middle District of Florida; 1988, Northern District of Florida; 2005, Southern District of Florida, 2006; U.S. Supreme Court, 2000; U.S. Court of Appeals, Eleventh Circuit, 2003. She matriculated at the University of South Florida (B.A., 1982, cum laude), and the University of Notre Dame (J.D., 1985). She is a member of the following groups: Greater Tampa Association of Realtors; Bay Area Real Estate Council, Inc.; Hillsborough County Bar Association, Real Property, Probate and Trust Law Section; Florida Bar, Real Property, Probate and Trust Law and Business Sections; American Legal and Financial Network; Legal League 100 (Advisory Board Member, 2014-15); REOMAC; MBA; Attorney Agent, Attorney’s Title Insurance Fund/ Old Republic; Fidelity National Title agent, and Stewart Title agent.

Michelle handles a wide variety of operational and legal matters for the firm, and has substantial litigation experience in both default and non-default cases, including jury and non-jury trials, motion practice, and appellate oral argument, throughout the state of Florida. She has managed the firm’s expansion into probate, estate planning, business transactional and corporate law, and oversees Sapphire Title & Escrow Company, launched in 2015..

She has practiced real estate and business law since 1989, specializing in default servicing legal work, including litigated foreclosures, real estate closings, evictions, and commercial litigation. Michelle works closely with the default industry by speaking at webinars and at conferences, as well as consulting on various issues relevant to the industry. She taught the Thirteenth Judicial Circuit Certified Process Servers Course from 1993 to 2014

Michelle enjoys travel with her family, and participates in the varied sport and academic activities of her husband and six children. She volunteers with her parish, St. Lawrence Catholic Church and School and with Quest, a nonprofit organization devoted to assisting severely developmentally disabled adults. She is on the Board of Directors of Directions for Living, a nonprofit organization dedicated to behavioral health well-being.

Kristina G. Murtha, Esq. Managing Attorney KML Law Group 216 Haddon Ave., Suite 406 Westmont, NJ 08018 Phone: 215-825-6353 [email protected]

Kristina G. Murtha has 20 years experience in representing lenders in mortgage foreclosure and related bankruptcy actions. She joined the predecessor firm of KML Law Group in 1999, became a shareholder in 2005 and has been the managing attorney of the New Jersey office of KML Law Group since 2012. Kris has extensive experience in foreclosure litigation, evictions, REO and workout/mediations. She is a frequent speaker on these and other topics related to mortgages and mortgage default, including vacant and abandoned property issues and complex title resolution. Kris is a graduate of Trinity College (Connecticut), with a B.A. in History, and was awarded a J.D. from the Widener University School of Law, where she was inducted into the Phi Delta Phi legal honor society. She is licensed in Pennsylvania and New Jersey. Outside of work, Kris enjoys spending time with her husband and son, quilting, reading and the great indoors. Kris can be reached at 215-825-6353 or by email at [email protected].

John Hearn, Esq.

AttorneyRogers Townsend & Thomas, PC Synergy Business Park 220 Executive Center Drive Columbia, SC 29210 Phone: 843.556.5656 [email protected]

John leads Rogers Townsend's Default Services Department. A seasoned litigator, his legal work has focused on resolution of title insurance claims, contested foreclosure matters, and property tax sale disputes. This experience provides a unique perspective to the operations of default servicing. In his career, John has managed a wide variety of business litigation matters, and has traveled the state defending claims against lenders. In that capacity, he managed a team of lawyers concentrating on those claims.

John has served on the Executive Committee of the Richland County Bar Association for five years and is a past-president of the RCBA. John also serves the SC Bar as a volunteer Attorney to Assist for the Office of Disciplinary Counsel, as a mentor for the Lawyers Helping Lawyers program, and as section delegate for the Bar's Consumer Law Council, the governing body of the Consumer Law Section. John serves on the firm's Technology Steering Committee.

John clerked for the Honorable J. Ernest Kinard, Jr. of the Fifth Judicial Circuit after law school.

Post Foreclosure, Vacant/Abandoned Property & Evictions

Updates

Michelle Gilbert, Esq. Managing Partner Gilbert Garcia Group, PA [email protected]

SESSION SPEAKERS

KKristina G. Murtha, Esq. Shareholder KML Law Group, PC New Jersey and Pennsylvania [email protected]

John Hearn, Esq. Attorney Rogers Townsend & Thomas, PC [email protected]

Vacant Property Registration • Typically imposed by the municipality • Usually related only to maintenance and security of the

exterior of the property • Registration fee usually required, may escalate by year.

Some in NJ go to $5,000/year or more. • Requirements, fines and penalties will vary, based upon

breadth of problem and municipality’s resources. • Multiple online sources for current lists, Five Brothers,

Community Champions, Safeguard Properties. Link for Safeguard: http://safeguardproperties.com/Resources/Vacant_Property_Registration/Default.aspx?filter=vpr

Vacant Property Registration The most significant challenge municipalities contend they face is inability of code enforcers to quickly identify responsible parties when code violations occur.

Conversely, mortgage lenders and servicers want to learn about code violations in a timely manner so issues could be addressed quickly to prevent further damage to vacant properties.

Safeguard maintains a list of code enforcement contact in each municipality: http://www.safeguardproperties.com/Resources/Code_Enforcement_Contacts.aspx (Other lists available)

MBA maintains a contact list of preservation contacts at major mortgage service companies:https://www.mba.org/audience/residential-mortgage-professionals/property-preservation-resource-center/property-preservation-servicer-contacts

Vacant Property Registration Local officials pioneered inventive solutions to nationwide problems of vacant property by implementing VPROs.

From 2000 to 2010, the total number of vacant housing units in the United States grew by over 4.5 million, an increase of 44 percent.

First wave: required property owners to provide their contact information if their property remained vacant for a specified amount of time, to enforce maintenance codes and prevent vacancies.

2003: Escalating fee schedules per year of vacancy (2003, Wilmington, Delaware) to encourage demolition or rehabilitation of vacant buildings, identified as a major contributor to crime.

2007: Chula Vista, California, first to adopt ordinance that required mortgage lenders—rather than merely property owners—to register property when it went into foreclosure and to ensure compliance with local housing codes throughout the foreclosure process. Chula Vista collected nearly $1 million from fees and code-violation citations during its program’s first year alone. Foreclosure-initiated registration programs spread like wildfire; relieved economic pressures on local government from the recession and became a fundraising mechanism.

2015: Number of local registration ordinances grew from under 20 in 2000 to more than 550 in 2012, an increase of more than 2,600%. By 2015, number of ordinances was over 1,000, many in states with high levels of foreclosures. Two states, Connecticut and Maryland, require statewide registration.

Federalism and Municipal Innovation: Lessons from the Fight Against Vacant Properties Benton C. Martin, Esq.

Vacant Property Registration Vacant property registration ordinances (VPROs) are important innovations for municipalities facing an abandoned house crisis. Financially able owners and parties legally responsible for housing conditions should not escape their legal obligation to maintain the condition of their real property and to comply with court orders requiring compliance after conviction or judgment.

It is essential that local lawmakers recognize the dominant role businesses entities play in housing markets and that some of these are huge and remote corporations with deep pockets and business plans to evade local laws and law enforcement. The Cleveland Municipal Housing Court’s innovative efforts to adjudicate and sentence absentee owners and defiant corporations over the past fifteen years have made national news on numerous occasions. Municipal courts in Memphis, Baltimore, Buffalo and Boston have had similar challenges over the years. Effective municipal courts are necessary to ensure the rule of law protects neighborhoods and communities.

Enforcement officers need to act strategically to obtain maximum compliance with the limited resources available. . . Assessing puny fines to close cases faster for the same repeat offender is not a solution. It permits lawless conduct at an affordable business expense.

Hard-pressed municipalities are trying to avoid being manipulated by private interests into absorbing losses and costs of mortgage failures. For instance, New Jersey enacted Senate Bill 1229 last year to give its municipalities more authority to regulate vacant residential property and to hold foreclosing creditors responsible for maintenance costs. A few municipal jurisdictions in Ohio and Massachusetts require a bond to be posted by mortgage foreclosure plaintiffs in order to guarantee the payment of maintenance costs until the vacant property is acquired by a new owner. These are new tools to protect taxpayers from subsidizing those who have engaged in a failed business transaction.

Perspectives on Abandoned Houses in a Time of Dystopia By Kermit Lind, Clinical Professor Emeritus, Cleveland-Marshall College of Law Probate & Property, vol. 29:2 (March/April 2015)

Vacant Property Registration Three basic types of VPROs: Vacancy and Abandonment Model, Foreclosure Model and Hybrid Model. The key difference is the event that triggers the requirement to register properties. Vacancy and Abandonment-Model: register after a certain length of vacancy. Foreclosure-Model: registration is triggered by a formal, state-required notice of default or intent to foreclose that is filed as a part of a judicial proceeding or advertised by the mortgagee or servicer as a part of a nonjudicial foreclosure process. Hybrid Model: triggered either by vacancy or by foreclosure-related actions. Many more recently enacted ordinances are of this type.

Vacant Property Registration Vacancy and Abandonment Model was the dominant model before 2008, with substantial growth during the 2000-to-2007 period.Foreclosure- and Hybrid-Model ordinances mushroomed in 2008 and 2009, (climax of the national subprime foreclosure crisis), although major growth was still occurring in Vacancy and Abandonment-Model ordinances. After 2009, the number of new ordinances slowed a bit, but more than 200 ordinances were adopted from January 2010 to April 2012.

Vacant Property Registration

Vacant Property Registration Sample: Westville, New Jersey

City/County State Fees Status Enacted Date Reg. Timeframe

Westville NJ $500; annually, escalating annual fee schedule

Enacted 7/8/2013

30 days following vacancy or assuming ownership, whichever is greater or 10 days following city notice

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SLIDE TITLE CLICK HERE TO ADD YOUR SLIDE CONTENT. PLEASE COPY AND PASTE THIS SLIDE AS-NEEDED

Vacant Property Registration

Vacant Property Registration What municipalities want:

1. Secure the exterior

2. Maintain the property (safety)

3. Maintain the property (appearance)

• The “Proximity to the Mayor’s House” Rule

Vacant Property Registration What to Know, What to Do:

Respond promptly to violation notices. Vast majority of municipalities are

looking for cure, not cash.

Work with local counsel to ensure violations are addressed timely.

Ensure Property Preservation Dept. has solid processes and procedures,

including escalation processes.

Update information as new municipalities or states adopt V&A legislation.

Vacant Property Registration Trends: • More states and municipalities with

V&A property issues are adopting and will adopt legislation to deal with V&A properties

• Fines and penalties will be significant • States with longest timelines have the

greatest incentives to press this issue • Possible constitutional challenge to the

pre-sale requirement?

Vacant Property Registration Not new, but worth mentioning:

Any property subject to an FHA-insured mortgage must be

maintained in accordance with the regulations of 24 CFR

203.377, when it comes to preserving and protecting the

property. The guidelines provided in ML 2010-18 outline some

guidance to the mortgagee as to how this is done but in no

way is it all inclusive. It is inherently the responsibility of the

mortgagee to take prudent actions to document property

condition when discovered vacant or abandoned, to secure

and to prevent further damage. It is not HUD’s intent to

prescribe to the mortgagee how this is done.HHUD ML 2010-18 FAQs

PPPTFA

Permanently Protecting Tenants at Foreclosure Overview: The Protecting Tenants at Foreclosure Act (“PTFA”) of 2009 upheld existing leases and required that tenants in foreclosed properties be given 90 days' notice before being evicted. • Provided when a “federally related” mortgage loan (a large

majority of loans) was foreclosed and lender bought the property back at the sale, most residential leases would survive—meaning the tenants could stay until the end of the lease.

• Under the PTFA, month-to-month tenants (with some important qualifications) were also entitled to 90 days’ notice before having to move out.

PPPTFA

• The PTFA was enacted in 2009 and was originally set to expire at the end of 2012. However, a provision of the Dodd-Frank Act extended the law until the end of 2014.

• Prior to the expiration of the PTFA (as extended), bills were introduced in both the House and Senate to make the law permanent. Called the Permanently Protecting Tenants at Foreclosure, (“PPTFA”), the text of the bill is simple: it repeals the sunset provision of the PTFA and establishes a private right of action to enforce compliance with the Act. Both Bills saw no action after introduction and expired at expiration of the Congressional session.

• The PPTFA was reintroduced in 2015-2016 session. However, with Republicans control of both houses of Congress, making the law permanent is extremely unlikely.

PPPTFA As burdensome as PPTFA could be, it might have been easier than the patchwork of state laws and local regulations that servicers must now maneuver around.

Roughly 30% to 40% of properties in foreclosure have tenants or renters, according to the National Low Income Housing Coalition.

Most state laws provide for a shorter time period to commence eviction proceedings after delivery of a pre-eviction notice.

9 states and Washington, D.C., currently offer the same protections as the expired federal law: CA, CT, DC, IL, MA, MD, MN, NJ, NY and RI.

4 states allow 60 days: NV, OR, VT and WA. 8 states allow 30 days: K S, MI, NH, OK, PA, TN, TX and WV. 12 states allow 3 to 10 days: AL, DE, HI, IA, ID, LA, MO, MT, NC,

ND, NE and OH. 17 states have no specific tenant protections or allow servicers to

evict immediately following a foreclosure sale: AK, AR, AZ, CO, FL, GA, IN, KY, ME, MS, NM, SC, SD, UT, VA, WI and WY.

Abandoned Property

Why? Why Not!

• Minimizes timelines

• Reduces exposure

• Prepares for REO and moves to REO faster

• Reduces loss to borrower by reducing deficiency

Abandoned Property - NJ

• N.J. Stat. Ann. § 2A:50-73 (West). • Effective as of August 15, 2014. • Residential real estate • Clear & Convincing evidence (proven by the

Mortgagee) that the property/mortgaged real estate is (1) Vacant and (2) has been abandoned or where a notice of violation has been issued.

• If no notice of violation is issued then property is vacant and abandoned if (court finds that) both:


Mortgaged Property is unoccupied (evidenced by lease agreement entered into prior to the service of a notice to commence foreclosure)

and

Two of fifteen conditions are met, including:


A property is NOT considered vacant and abandoned if:

There is an unoccupied building undergoing construction/renovation/rehabilitation that is proceeding diligently to

completion and the building is in compliance with all applicable ordinances, codes, regulations, and statutes; or

There is a building being seasonally occupied, but is otherwise secured; or

There is a building that is secure, but is the subject of a probate action, action to quiet title, or other ownership

dispute.

Abandoned Property - NJ • Lender (in addition to the standard service

rules) must show that process server made two unsuccessful attempts (72 hours apart and at different times of the day) to serve the mortgagor/occupant at the residential property.

• Lender is also required to serve notice that it is seeking to proceed summarily for entry of residential foreclosure judgment b/c property is vacant and abandoned.

Abandoned Property - SC

South Carolina Code § 29-3-625

[Passed 5/22/14; Signed by Governor

EXPEDITING FORECLOSURE OF ABANDONED PROPERTIES

Abandoned Property - SC Criteria for ‘abandoned’ status:

(1) Property must be unoccupied; and (2) Property must satisfy two of ten enumerated elements, which include, but are not limited to:

Broken and/or boarded-up windows and doors, utilities terminated for non-payment, acts of vandalism, hazardous materials and conditions present on property, or written statements from borrower that the property is abandoned.

(You from Joisey? I’m from Joisey!) The property must NOT be:

Under construction; Used for seasonal purposes; or Subject to a probate, quiet title, or ownership dispute action.

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Abandoned Property - SC Motion for Expedited Foreclosure

• If the property is believed to be abandoned, the servicer may move the court for an expedited hearing.

• The motion must be supported by an affidavit certifying that the property meets at least two of the criteria for abandonment set out in the statute.

• The motion may be filed and served at the time the foreclosure action is referred to a Master-in-Equity (or special referee) or any time thereafter.

Abandoned Property - SC Expedited Foreclosure Process

• Once the motion is filed, the foreclosure is said to be a “priority

matter” and a hearing should be set as quickly as possible. • At the hearing, the judge will: (1) determine if the property is

abandoned and (2) determine whether the servicer should be granted a judgment of foreclosure and sale. • Note that at the motion hearing, the servicer is also required to

present all of the evidence that would be required for an uncontested foreclosure hearing.

• The motion must be denied if the property is either (1) found not to be abandoned, or (2) a defendant has asserted a valid defense or objection to the foreclosure.

Abandoned Property - SC • Several judges report that they have no current

plans to have separate procedures for making these motions “expedited matters”.

• Obtaining affidavits is already time-consuming and this simply adds one more requirement on servicers and foreclosure counsel who elect to employ this procedure.

• Significant additional attorney fees to use this process.

• Net result? #epicfailatthestatehouse

Litigation doesn’t end with the sale…

• Borrower likely defaulted on Association assessments

• Associations desperate need of funds • Leads to negotiating and litigation • Impact of superlien/modified superlien state laws

on homeowners, lenders and associations

Litigation doesn’t end with the sale…

• Uniform Laws: limited priority over lien of first mortgage, date back to 1980s

• Uniform Condominium Act, 1977, amended 1980 • Uniform Planned Community Act • Uniform Common Interest Ownership Act, 1982,

1994, 2008 • http://uniformlaws.org/Acts.aspx

State of affairs • 66.7 million people live in association communities, 20.4% U.S.

population • Approximately 6.7 million mortgages with outstanding liens,

21% of association properties • About 335,000 associations in U.S. in 2015, from 10,000 in

1970 • 80% new construction have associations • No national group, no complete database • Non-escrow item • Lack of investor education • Florida highest # associations (47,100), California (43,300),

Texas (19,400), Illinois (18,150)

Various States of Affairs • “Super-lien” laws more than 30 years old, based on

uniform laws • 22 STATES: laws give priority to association liens • About 1/2 of these states give priority to condominium

assessments, about 1/2 give priority to both homeowners and condominium

• All except Oregon limit number of months having priority from 4-12 months

Various States of Affairs • Laws often do not address:

o late charges, interest, collection costs o attorney’s fees o special assessments o rolling superlien status o Declarations o lien priority versus first mortgage

Various States of Affairs: 22 states, DC and Puerto Rico

http://www.caionline.org/govt/advocacy/Pages/AssessmentPriorityLienStatutesbyState.aspx

Various States of Affairs: 22 states, DC and Puerto Rico

• Alabama, Arkansas, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Maryland, Massachusetts, Maine, Missouri, Nevada, New Hampshire, New Jersey, Oregon, Pennsylvania, Puerto Rico, Rhode Island, Tennessee, Vermont, Washington, West Virginia

Community Associations Institute (CAI) Pending Legislation- Priority Lien

July 21, 2015 http://www.cqstatetrack.com/texis/statetrack/insession/viewrpt/main.html?event=5154847b40

o FFLORIDA- ADJOURNED 2015; NEXT SESSION MARCH, 2016, PRE-SEESSION ACTIVITY

BEGINS SEPTEMBER, 2015.

Florida - Adjourned 2015 1 Bill

Number: FL [R] HB 975 - Updated (Status 05/19/2015)

Sponsor: Rep. Katie Edwards (DEM-FL)

Title: Residential Properties

Abstract: Revises & provides liability of certain condominium owners & homeowners' association unit owners.

Status: Died in Civil Justice Subcommittee - 04/28/2015



GGEORGIA- ADJOURNED 2015, NEXT SESSION MARCH, 2016 Number:

GA [R] SB 117 - Updated (Hearing 03/05/2015)

Sponsor: Sen. Jesse Stone (REP-GA)

Title: Property; require purchaser of a condominium development at a foreclosure sale take title subject to lien

Abstract:

A BILL to be entitled an Act to amend Code Section 44-3-109 of the Official Code of Georgia Annotated, relating to liens for assessments for condominium owners, so as to require the purchaser of a condominium development at a foreclosure sale to take title subject to a lien in favor of the condominium under certain circumstances; to provide for definitions; to provide for ...

Status: Senate Read and Referred - 02/17/2015



IILLINOIS ADJOURNED 2015 Number:

IL [R] HB 486 - Updated (Status 03/28/2015)

Sponsor: Rep. Kelly Cassidy (DEM-IL)

Title: CONDO ASSESSMNT-NONPAYMNT-LIEN

Abstract:

Amends the Condominium Property Act. Defines ""regular monthly assessments"". Provides that following a foreclosure sale, consent foreclosure, common law strict foreclosure, or the delivery of a deed in lieu of foreclosure, the mortgagee shall have the duty to pay to the association all moneys due to satisfy the lien held by the association, except for the 9 months of unpaid regular monthly assessments and associated attorney's fees which may be collected from the purchaser. Provides that the ...

Status: House Rule 19(a) / Re-referred to Rules Committee - 03/27/2015



IILLINOIS- CONTINUED Number:

IL [R] SB 1368 - Updated (Status 05/16/2015)

Sponsor: Sen. Heather Steans (DEM-IL)

Title: CONDO ASSESSMNT-NONPAYMNT-LIEN

Abstract:

Amends the Condominium Property Act. Defines ""regular monthly assessments"". Provides that following a foreclosure sale, consent foreclosure, common law strict foreclosure, or the delivery of a deed in lieu of foreclosure, the mortgagee shall have the duty to pay to the association all moneys due to satisfy the lien held by the association, except for the 9 months of unpaid regular monthly assessments and associated attorney's fees which may be collected from the purchaser. Provides that the ...

Status: Senate Rule 2-10 Committee/3rd Reading Deadline Established As May 31, 2015 - 05/15/2015

Community Associations Institute (CAI) Pending Legislation - Priority Lien


MMAINE- ADJOURNED 2015 Number:

ME [R] LD 994 - Updated (Status 04/30/2015)

Sponsor: Rep. Robert Foley (REP-ME)

Title: An Act To Create a Priority Lien Securing 6 Months of Assessments under the Maine Condominium Act

Status: (S) Pursuant to Joint Rule 310.3 Placed in Legislative Files (DEAD) - 04/29/2015

Number: ME [R] LD 994 - Updated (Status 04/30/2015)



NNEW JERSEY: 2014-15 SESSION Number:

NJ [R] S 175 - Updated (Hearing 03/03/2015)

Sponsor: Sen. Jim Whelan (DEM-NJ)

Title:

Permits liens in favor of planned real estate development associations for unpaid assessments in planned real estate developments.

Abstract:

Permits liens in favor of planned real estate development associations for unpaid assessments in planned real estate developments.

Status: Introduced in the Senate, Referred to Senate Community and Urban Affairs Committee - 01/14/2014



NNEVADA: ADJOURNED 2015, BIENNIAL SESSIONS NV [R] AB 240 - Updated (Text 07/20/2015)

Sponsor: Asm. John Moore (REP-NV)

Title: Revises provisions governing common-interest communities. (BDR 10-821)

Abstract:

Relating to common-interest communities; requiring the establishment of an impound account for the payment of certain assessments under certain circumstances; providing for the payment of assessments for common expenses from the impound account; revising provisions relating to the nonjudicial foreclosure of a unit-owners association s lien; authorizing a right of redemption after the foreclosure of an association s lien by sale under certain circumstances; authorizing the Commission for Common-Interest Communities and Condominium Hotels to adopt regulations to carry out the requirement for impound accounts; and providing other matters properly relating thereto.

Status: In Assembly. - 06/02/2015



NNEVADA- CONTINUED NV [R] SB 260 - Updated (Text 07/20/2015)

Sponsor: Sen. Becky Harris (REP-NV)

Title: Revises provisions governing common-interest communities. (BDR 10-726)

Abstract:

Relating to common-interest communities; requiring the establishment of an impound account for the payment of certain assessments under certain circumstances; providing for the payment of assessments for common expenses from the impound account; revising provisions governing liens of a unit-owners association; authorizing the Commission for Common-Interest Communities and Condominium Hotels to adopt regulations to carry out the requirement for impound accounts; and providing other matters properly relating thereto.

Status: Assembly Judiciary - Heard - 05/16/2015



NNEVADA- CONTINUED Number: NV [R] SB 306 - Updated (Text 07/20/2015)

Sponsor: Sen. Aaron Ford (DEM-NV)

Title: Revises provisions relating to liens on real property located within a common-interest community. (BDR 10-55)

Abstract:

Relating to common-interest communities; revising provisions governing a unit-owners association s lien on a unit for certain amounts due to the association; revising provisions governing the foreclosure of an association s lien; requiring the trustee under a deed of trust securing real property to provide a homeowners association certain notice concerning the Foreclosure Mediation Program under certain circumstances; requiring certain financial institutions to provide certain contact information to the Division of Financial Institutions of the Department of Business and Industry; and providing other matters properly relating thereto.

Status: Assembly Ways and Means - Mentioned - 06/01/2015



NNEVADA- CONTINUED Number: NV [R] SB 355 - Updated (Status 03/19/2015)

Sponsor: Sen. Scott Hammond (REP-NV)

Title: Revises provisions relating to real property. (BDR 10-680)

Abstract:

Relating to real property; revising provisions relating to amendments to the declaration of a common-interest community; revising provisions relating to the filling of vacancies on an executive board of a unit-owner s association; revising provisions governing the election of the members of an executive board; revising provisions governing meetings of an executive board; revising provisions governing the transfer of certain rights of the declarant of a common-interest community; revising provisions governing meetings of the units owners of a unit-owners association; revising provisions governing proxy voting by units owners; revising provisions governing the foreclosure of an association s lien on a unit; revising provisions relating to the program for foreclosure mediation; revising provisions relating to the reconveyance of certain property held in trust by a county treasurer; and providing other matters properly relating thereto.

Status: From printer. To committee. - 04/11/2015



OOHIO 2015-16- IN SESSION Number:

OH [R] HB 226 - Updated (Status 05/27/2015)

Sponsor: Rep. John Rogers (DEM-OH)

Title: Condominium association liens

Abstract:

To amend sections 5311.18 and 5312.12 of the Revised Code to provide that a portion of a condominium or planned community assessment is prior to other liens on condominium units and planned community lots and to provide that a condominium unit owners association lien is a continuing lien.

Status: Referred To Committee House Commerce And Labor - 05/26/2015



TTENNESSEE- PREFILING 2015-16 Number:

TN [R] HB 610 - Updated (Status 04/01/2015)

Sponsor: Rep. Mike Carter (REP-TN)

Title: Real Property

Abstract:

Real Property - As introduced, enacts the ""Tennessee Homeowners Association Act."" - Amends TCA Title 66.

Status: Action Def. in s/c Business and Utilities Subcommittee to 2016 - 03/31/2015



TTENNESSEE- CONTINUED Number:

TN [R] SB 405 - Updated (Status 04/01/2015)

Sponsor: Sen. Doug Overbey (REP-TN)

Title: Real Property

Abstract:

Real Property - As introduced, enacts the ""Tennessee Homeowners Association Act."" - Amends TCA Title 66.

Status:

Assigned to General Subcommittee of Senate Commerce and Labor Committee - 03/31/2015



WWASHINGTON- ADJOURNED 2015-16 Number:

WA [R] SB 5263 - Updated (Status 04/30/2015)

Sponsor: Sen. Jamie Pedersen (DEM-WA)

Title: Concerning the Washington uniform common interest ownership act.

Abstract: Establishes the Washington uniform common interest ownership act.

Status: By resolution, reintroduced and retained in present status. - 06/28/2015

Various States of Affairs • Some states require association liens to be paid from sales

proceeds first • Some states allow liens to relate back to recording of

declaration- Wyoming • Florida court held that relation back amendment to

declaration unenforceable under statute • Some states disallow relation back by statute- Indiana and

Nebraska

Various States of Affairs • CCommunity Associations Institute (CAI)-

founded 1974, over 30,000 members, international • Very comprehensive website, very active industry group-

caionline.org • States link page: http://www.caionline.org/govt/Pages/

StateLinksPage.aspx

• Amicus brief submissions throughout country, since 1995, including several in Colorado in 2014

http://www.caionline.org/govt/advocacy/amicus/Pages/default.aspx

Nevada problem • October, 2014- SFR Investments Pool v. U.S. Bank-

Nevada Supreme Court upheld lower court decision giving super-lien position to HOA without notice to banks and servicers and without filing suit

• Investors/Servicers disagree with interpretation of law

• Difficult to determine outstanding amounts • Similar HOA foreclosures pending in Nevada

Florida support

• United States of America v. Forest Hill Gardens East Condominium Association, Inc., No. 13-80513-CV (S.D. Fla. 2013)

• COA claimed that mortgagee liable not only for all unpaid assessments, but also for other fees and charges allegedly incurred, such as attorney’s fees, interest, late fees, and collection costs

• Mortgagee argued entitled to the “safe harbor” protection

• Court found that mortgagee not liable for other charges including attorney’s fees, interest, late fees, and collection costs additional to the unpaid assessments.

What’s Trending • State trend to increase number of months of

assessments entitled to protection • Community Associations Institute (CAI), industry

group for associations, recommends total priority over mortgages

• In 2012-13, GSEs warn lending may be impacted, require servicers to pay in order to avoid being wiped out, and to pay within 30 days of sale

• Escrow assessments- cumbersome

Best Practices • Request estoppel asap when title issued after sale • Refer to Declarations for information such as the

amount of interest, late payments, etc. • Request ledgers and invoices from the Association

to ensure that the Association is seeking legitimate payments.

• Pay any assessments that come due after obtaining Certificate of Title, even if there is a disagreement regarding safe harbor assessments, as good faith, avoid late fees and interest

ALFN TE@CH Regional Training Seminar September 9, 2015 ...

Documents

Transcript of ALFN TE@CH Regional Training Seminar September 9, 2015 ...