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Connecticut Expands Foreclosure Mediation Program
On June 18, Connecticut enacted HB 6355, which expands the state’s existing foreclosure mediation program and adds new mortgagee requirements. Specifically, the bill extends the foreclosure mediation program to (i) cover the disposition of property through means other than foreclosure, including short sales and deeds-in-lieu of foreclosure, and (ii) foreclosure actions with return dates of July 1, 2008 through June 30, 2009. The bill also, among other things, (i) establishes a pre-mediation process, (ii) requires mortgagees to provide to a borrower a complete financial package in connection with a request for a foreclosure alternative and provide to a mediator and the borrower an account history and related information after receiving notification that the case has been assigned to mediation, and (iii) establishes expedited foreclosure procedures for vacant and abandoned properties. The bill becomes effective on July 15, 2013.
Massachusetts Finalizes Foreclosure Regulations
Last week, the Massachusetts Division of Banks adopted revised foreclosure and mortgage modification regulations. The amendments implement a 2012 law that makes it harder to foreclose in that state, including by creating a pre-foreclosure modification notice requirement for creditors. The amended regulations (i) establish the processes for a borrower and creditor with regard to the borrower’s right to request a loan modification, (ii) establish the actions that constitute a borrower’s good faith response to a creditor’s notice of the right to request a loan modification, (iii) define good faith efforts by creditors to avoid foreclosure, and (iv) establish safe harbors for creditors that comply with the loan modification process. The new regulations take effect on June 21, 2013 and must be implemented by September 18, 2013.
Nevada Enacts Homeowner's Bill of Rights
On June 3, Nevada enacted a Homeowner’s Bill of Rights, SB 321, to establish protections from foreclosure for owner-occupied property securing residential mortgage loans. The Nevada bill, among other things, (i) requires that at least 30 calendar days before recording pre-foreclosure documents or commencing a judicial foreclosure action and at least 30 calendar days after a borrower’s default, the mortgage servicer, mortgagee or beneficiary of the deed of trust must provide to the borrower certain information concerning the borrower’s account, the available foreclosure prevention alternatives, and a statement of the facts supporting the right of the mortgagee or beneficiary to foreclose, (ii) requires that an institution contact, or attempt to contact, the borrower before filing pre-foreclosure documents or commencing a foreclosure, (iii) prohibits dual tracking, (iv) establishes “single point of contact” rules, and (v) allows borrowers in a judicial foreclosure action to elect to participate in a state foreclosure mediation program. These new requirements apply to notices of default and elections to sell that are recorded on or after October 1, 2013. The bill exempts institutions that foreclosed on 100 or fewer owner-occupied homes in the preceding annual reporting period, as established by their primary regulator.
Florida Enacts Fast-Track Foreclosure Bill
On June 7, Florida enacted HB 87 to immediately expedite the state’s judicial foreclosure process, including with regard to pending cases. The bill amends the state’s alternative foreclosure procedure to, among other things, (i) allow any lienholder, not only the mortgagee, to initiate the procedure, and (ii) establish new fast-track court procedures. The bill also (i) reduces the statute of limitations for deficiency judgments on a foreclosure action from five years to one year, (ii) requires the foreclosing party to provide information upon case filing regarding a lost, destroyed, or stolen promissory note, (iii) defines “adequate protections” in cases where there is a lost, destroyed, or stolen note, and (iv) adds protections for purchasers of property at a foreclosure sale. The bill took effect immediately.
Oregon Supreme Court Rulings Allow Nonjudicial Foreclosures to Proceed
On June 6, the Oregon Supreme Court issued a pair of rulings resolving issues around the role of MERS in the non-judicial foreclosure process and allowing such foreclosures to move forward. In Brandrup v. ReconTrust Company, N. A. S060281, slip op. (Oregon Jun. 6, 2013) and Niday v. GMAC Mortgage LLC, SC S060655, 2013 WL 2446524 (Oregon Jun. 6, 2013), the court answered a series of certified questions related to the role of an electronic mortgage registry as the beneficiary listed on trust deeds and applied those answers to the appeal of a state foreclosure action. The court held that, under the Oregon Trust Deed Act: (i) a mortgage registry that is neither a lender nor successor to a lender may not be a beneficiary of a trust deed; (ii) a mortgage registry is not eligible to serve as beneficiary where the trust deed provides that the registry holds only the legal title to the interests granted by the borrower, but, if necessary to comply with law or custom, the registry has the right to exercise any or all of those interests; (iii) assignments of a trust deed that result from the transfer of the secured obligation are not required to be recorded; and (iv) a mortgage registry cannot hold and transfer legal title to a trust deed as nominee for the lender, after the note secured by the trust deed is transferred from the lender to a successor or series of successors. The court also explained that, “even if MERS lacks authority to act as the trust deed's beneficiary, it may have authority to act on behalf of the beneficiary if it can demonstrate that it has an agency relationship with the beneficiary and that the agency agreement is sufficiently expansive.” The court added that this would apply equally to the issue of the registry’s authority to foreclose the trust deed. Effectively allowing nonjudicial foreclosures involving MERS as the beneficiary on trust deeds to proceed, the Court stated that “[i]n either case, MERS' authority to act as the beneficiary's agent depends on who succeeded to the lender's rights, whether those persons manifested consent that MERS act on their behalf and subject to their control, and whether MERS has agreed to so act.”
New York AG Signals Crackdown on Bank Foreclosure Practices
On June 4, New York Attorney General Eric Schneiderman (AG) announced a lawsuit against a major financial institution for allegedly violating state law by failing to timely file in foreclosure cases “requests for judicial intervention” (RJI), which would trigger court-supervised settlement conferences. The suit seeks to compel the financial institution to file the RJI immediately in all cases in which it has filed a proof of service, and to file an RJI simultaneously with proof of service in all future cases. The suit also seeks (i) to compel the firm to prepare an accounting of interest charges, penalties and fees that accrued beginning 60 days after the filing of proof of service on the homeowner; (ii) to toll and waive all accrued interest charges, fees and penalties that accrued, or will accrue, beginning 60 days after the filing of proof of service on the homeowner; (iii) restitution for interest charges, fees and penalties paid by the homeowner that accrued beginning 60 days after the filing of proof of service on the homeowner; and (iv) damages for homeowners injured by the alleged practices. The suit results from an AG investigation that sampled foreclosure filings in four New York counties, and the AG stated that he is committed to bringing similar actions against other lenders.
Oregon Expands Foreclosure Mediation Program
On June 4, Oregon enacted SB 558, which creates a foreclosure mediation program for judicial foreclosures. In 2012, Oregon enacted a law that required for nonjudicial foreclosures that a beneficiary (i) enter into mediation with a grantor for the purpose of negotiating a foreclosure avoidance measure, and (ii) notify a grantor if they are not eligible for any foreclosure avoidance measure or if the grantor has not complied with the terms of a foreclosure avoidance measure. The new law expands that program to cover judicial foreclosures and makes changes to the structure of the overall mediation program.
Minnesota Adds Loss Mitigation Requirements, Prohibits Dual Tracking
On May 24, Minnesota enacted SF 1276, which adds pre-foreclosure requirements for most mortgage servicers. Effective August 1, 2013, servicers must notify a borrower in writing of available loss mitigation options before referring the loan for foreclosure. Servicers also must, after receiving a modification or loss mitigation request, exercise reasonable diligence in obtaining documents and information from the mortgagor to complete a loss mitigation application, facilitate the submission and review of loss mitigation applications, and give the mortgagor a reasonable amount of time to provide the required documents. The law further requires servicers to timely review and offer a modification to eligible mortgagors, or timely offer other loss mitigation options for which the mortgagor is eligible. Effective October 31, 2013, except under certain circumstances, servicers generally are prohibited from (i) referring a loan to foreclosure while a loss mitigation or modification request is pending, and (ii) moving for a foreclosure order on loans that already have been referred if the servicer subsequently receives a loss mitigation application. The law also requires servicers to halt foreclosure sales in some instances and prohibits a servicer from moving for a foreclosure order if a mortgagor is in compliance with the terms of a modification or if a short sale has been approved.
Florida Amends Judicial Foreclosure Procedures
On May 9, the Supreme Court of Florida adopted amendments to the state’s civil procedure rules governing judicial foreclosures. The amendments authorize referral of residential mortgage foreclosure cases to general magistrates based on implied consent of the parties, while providing an opportunity for objection by the parties. The amendments also allow the chief judge of each judicial circuit to appoint the number of general magistrates needed to expeditiously preside over residential foreclosure actions. The appointed magistrates must be members of the Florida Bar, but are not required to give bond or surety, as otherwise required by the rule.
Indiana Eliminates Provisions Binding Interested Parties Not Named in Foreclosure Actions
On May 7, Indiana enacted SB 279 to (i) eliminate a provision in current law that binds certain omitted parties (i.e., parties who have an interest in the property subject to a mortgage foreclosure action, but are not named in the foreclosure action) by the court's judgment in a foreclosure action as if they had been parties to the foreclosure action, and (ii) limit the post-sale redemption rights of certain omitted parties. The changes become effective July 1, 2013.