We’ve recently seen a fair amount of well-read commentary on foreclosures in residential real estate, beginning with an update on Federal Reserve efforts to begin compensating victims of improper mortgage servicer practices:
• Uncle Sam Wants You (to tell the Fed about illegal foreclosures):
“On May 23, the Board of Governors of the Federal Reserve System issued a video that gave instructions to borrowers who may have been injured by improper foreclosures on how to seek relief… The brief announcement reminds borrowers that, as part of the enforcement actions taken in April 2011 by federal banking regulatory agencies, they may be eligible to receive compensation if an independent review finds evidence of direct financial injury due to servicer error.” (Federal Reserve Tells Borrowers How to Apply For Foreclosure Review by Katten Muchin Rosenman LLP)
• Oral agreement to postpone a foreclosure is not binding in Minnesota:
“… the U.S. Court of Appeals for the Eighth Circuit held that an oral promise to postpone a foreclosure sale is not enforceable under the Minnesota Credit Agreement Statute (MCAS). At issue was a provision of the MCAS that prohibits a debtor from ‘maintain[ing] an action on a credit agreement unless the agreement is in writing, expresses consideration, sets forth the relevant terms and conditions, and is signed by the creditor and the debtor.’” (Eighth Circuit Holds Oral Promise to Postpone Foreclosure Sale Is Not Enforceable under Minnesota Law by BuckleySandler LLP)
“The decision … should deter attempts by borrowers to unwind foreclosure sales based on alleged oral promises by lenders or servicers. The [Minnesota Credit Agreement Statute] prohibits a debtor from suing on a ‘credit agreement’ unless it is in writing and defines a ‘credit agreement’ to mean ‘an agreement to lend or forbear repayment of money … to otherwise extend credit, or to make any other financial accommodation.’ Asserting the MCA did not bar her claim for promissory estoppel, the borrower argued that the lender’s promise to postpone the sale while it reviewed her request for a loan modification was not a forbearance agreement under the MCA because the lender retained its contractual right to foreclose after completing the review process.” (Lender’s Oral Promise to Postpone Foreclosure Unenforceable, Eighth Circuit Holds by Ballard Spahr LLP)
• “Show me the note” won’t stop a foreclosure in Arizona:
“Arizona’s non-judicial foreclosure statutes do not require the beneficiary to prove its authority or ‘show the note’ before a trustee may commence a non-judicial foreclosure, the Arizona Supreme Court has ruled. The May 18, 2012, decision in Hogan v. Washington Mutual Bank, N.A. et. al should have a significant impact on pending and future mortgage foreclosure-related litigation in Arizona, as it flatly rejects a legal theory frequently advanced by borrowers in an attempt to avoid foreclosure.” (Arizona High Court Rejects ‘Show Me the Note’ Claim in Foreclosure Litigation by Ballard Spahr LLP)
“The court concluded by noting that the ‘[Arizona] legislature balanced the concerns of trustors, trustees, and beneficiaries in arriving at the current statutory process,’ and to hold otherwise would upset the legislature’s purpose.” (Arizona Supreme Court Holds Beneficiary Does Not Have to Prove Right to Foreclose by BuckleySandler LLP)
• California appeals court rejects a “Show me the note” claim in that state, too:
“In Debrunner v. Deutsche Bank Nat. Trust Co., the California Court of Appeal affirmed the dismissal of a complaint for wrongful foreclosure with prejudice, holding that a beneficiary under a deed of trust need not possess the original promissory note to commence foreclosure and that a borrower cannot avoid foreclosure based on a technical deficiency without showing actual prejudice… The Court … held that ‘nothing in the applicable statutes … precludes foreclosure when the foreclosing party does not possess the original promissory note.’” (Borrower’s “Show Me The Note” Argument Fails To Halt Foreclosure by Sheppard Mullin Richter & Hampton LLP)
• Proposed Massachusetts foreclosure law passes its first vote with flying colors:
“The Massachusetts House of Representatives yesterday unanimously passed House Bill 4087, ‘An Act to Prevent Unlawful and Unnecessary Foreclosures.’ The bill is designed to get ‘borrowers and lenders to the table,’ according to State Representative Michael Costello, the Co-Chair of the Committee on Financial Services. The bill would mandate that banks and other lenders account for numerous factors before they can enter foreclosure proceedings on residential homeowners.” (Massachusetts House of Representatives Advances Foreclosure Legislation by Mintz Levin)
• Virginia Supreme Court voids foreclosure sale because bank failed to meet face-to-face with borrower:
“Banks and other mortgage lenders should be aware of a recent Virginia Supreme Court decision requiring that a lender hold a face-to-face meeting with the borrower before foreclosure in FHA/HUD cases. In Mathews v. PHH Mortgage Corp., the Court held that a foreclosure sale was void because the bank had not held the face-to-face meeting required by the HUD regulations.” (Virginia Ruling Holds that Mortgage Lenders Must Hold Face-to-Face Meetings Before Foreclosure in FHA/HUD Loans by Womble Carlyle Sandridge & Rice, PLLC)
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Related reading: Foreclosures Drop in Some States, Others Still Digging Out (Lawyers.com)
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