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Showing 18 posts in Mortgage.

Another Court Refuses Lost Note Status to a Successor Lender

Last year, we reported on a Massachusetts Land Court decision, which interpreted Uniform Commercial Code section 3-309 to conclude that a mortgagee cannot foreclose in reliance upon a lost note affidavit, because the 1990 version of UCC 3-309 requires the party seeking to enforce the note demonstrate possession prior to its loss. 32 states remain under the 1990 version, and recently the Rhode Island Supreme Court joined decisions that prohibit enforcement of a lost note under this outdated version of the UCC. In SMS Fin. v. Corsetti, SMS Financial sued to enforce default on a note that was lost by a prior transferee. Sovereign Bank had loaned the defendants $1 million in exchange for a promissory note and a mortgage on property located at 385 South Main Street in Providence, Rhode Island. Following default and foreclosure, the defendants issued to Sovereign a new promissory note to repay the $200,000 deficiency on the original loan. Sovereign subsequently assigned its interest in the loan to SMS Financial; but, Sovereign had lost the original note so it delivered to SMS a lost note affidavit and an allonge. SMS filed suit against the defendants to collect on breach of the note, but the Superior Court entered summary judgment in favor of the defendants because SMS could not enforce the lost note. More ›

New York is Split on Whether Notice of Default Letters Trigger the Statute of Limitations

In Milone v. US Bank, N.A., a New York intermediate appellate court held that a letter to a borrower stating that the failure to cure a mortgage loan default "will result in acceleration" does not start the clock on the statute of limitations to foreclose and recover the entire debt. This ruling differs from that of another New York intermediate appellate court, which had ruled otherwise, setting up the possibility of the New York Court of Appeals weighing in on a key issue in New York foreclosure actions. More ›

Mortgage Holder Allowed to Proceed with Second Foreclosure Action after the First was dismissed with Prejudice

In Federal National Mortgage Association v. Thompson, the Wisconsin Supreme Court permitted a lender to pursue a second judicial foreclosure action after the first case was dismissed with prejudice. In the first foreclosure action, the lower court agreed with borrower Cory Thompson that his lender had failed to present evidence that a notice of intent to accelerate was mailed and that the servicer was in possession of the original note. After an unsuccessful appeal of the dismissal, the lender sent Thompson a new notice of intent to accelerate payment of the note and filed a second foreclosure action when no payments were received in response to the letter. Following trial of the second foreclosure action, the lower court granted judgment in favor of the lender. Thompson appealed, asserting that claim preclusion barred the second action. More ›

Mortgage Creditors Confront Five Year Extension of Mandatory Pre-Foreclosure Mediation Process in Rhode Island

The Rhode Island Senate recently approved a five-year extension of R.I. Gen. Laws § 34-27-3.2, which had established a mandatory mediation program any out-of-state mortgagee must follow before initiating foreclosure on owner-occupied, residential property. The current law is set to expire on July 1, 2018. If approved by the House, Senate Bill 2270 will extend the expiration date to July 1, 2023. Companion legislation, House Bill 7385, which sought to repeal the sunset clause thereby removing rather than extending the expiration date, has stalled. Rhode Island Banking Regulation 5, which clarifies mortgagees' duties under § 34-27-3.2 and the consequences of a mortgagee's failure to comply with the law and regulation, would likewise cease if the law expires. More ›

Despite Acceleration of Debt Through Prior Dismissed Foreclosure Action, Bankruptcy Petition Tolls Statute of Limitations on Subsequent Action

In Lubonty v. U.S. Bank National Association, a mortgagor sought to void a mortgage loan claiming that the six-year statute of limitations to foreclose had expired. The mortgagor had commenced multiple bankruptcy proceedings that trigged automatic stays and prevented foreclosure from proceeding for approximately four and a half years. New York law, CPLR § 204, extends the statute of limitations "[w]here the commencement of an action has been stayed by a court or by statutory prohibition," and the trial court held that the six-year statute of limitations was extended by the time period during which the foreclosure was stalled through successive bankruptcy petitions. More ›

HUD Regulation Requiring Face-to-Face Meeting Presents Compliance Challenge for Lenders Seeking Mortgage Foreclosure

In Dan-Harry v. PNC Bank, the Rhode Island federal court concluded that a mortgagor may bring a claim for damages and other remedies against a mortgagee on allegations of failure to conduct a pre-foreclosure face-to-face meeting required for breach of an FHA-insured mortgage. Dawari Dan-Harry obtained an FHA-insured mortgage loan to purchase property in Providence, Rhode Island, which included in Paragraph 9(d) the following provisions: "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." PNC Bank foreclosed on the mortgage and sold the property at auction to a third-party in January 2017. While continuing to occupy the property, Dan-Harry sued PNC for damages and to void the foreclosure sale on allegations that PNC failed to comply with HUD regulation 24 C.F.R. § 203.604(b), which requires a mortgagee to have a face-to-face meeting with the mortgagor or make a reasonable effort to arrange such a meeting before the mortgage becomes three months delinquent in payments. More ›

Recent Illinois Court Decision Illustrates Pitfalls of Multiple Filings of a Mortgage Foreclosure Action

While Illinois mortgagees have the option of recouping delinquent mortgage loan debt through different types of lawsuits, the pursuit of this option can violate Illinois' prohibition on refiling the same cause of action. A recent decision illustrates the pitfalls of a mortgagee's numerous lawsuits filed on the same default and debt in reliance upon Illinois' savings statute. More ›

Business Records Exception Used to Attack Foreclosure Action in Maine Supreme Court

The Maine Supreme Court, using a recent interpretation of the business records exception to the hearsay rule under Maine law, has raised questions regarding mortgage loan servicers' ability to foreclose on defaulted borrowers. An essential element of proof in any Maine judicial foreclosure action includes evidence of default, and in Key Bank Nat'l Ass'n v. Estate of Quint, the Court affirmed exclusion of a prior servicer's screenshots submitted to demonstrate the amount a borrower owed, costs incurred and the outstanding principal balance in pursuit of a judicial foreclosure action. The current servicer's witness testified to establish default on review of the prior servicer's business records and under exception to hearsay, but the trial judge concluded that the witness had not established the hearsay exception with regard to records of the prior servicer. More ›

Consumer Financial Services: What to Expect in 2018

2017 was a highly volatile year for the consumer financial services industry, featuring significant court rulings, regulatory changes and other developments.

With a new year upon us, Consumer Crossroads blog wanted to ask some of our Hinshaw financial services attorneys about what we might expect in 2018. Here they are, specifically prognosticating trends in FCRA litigation, reverse mortgages, student loan regulatory and litigation, CFPB developments, cryptocurrencies, TCPA litigation, lost promissory notes, federal regulatory conduct and local government responses to the foreclosure crisis. More ›

A New HUD Rule for Reverse Mortgages, with Additional Rule Changes Proposed in Congress

This past month, Washington was busy with rule changes and proposed legislation that underscores the ongoing debate over the origination and foreclosure of reverse mortgages. First, the U.S. Department of Housing and Urban Development reduced the maximum amount a reverse mortgage applicant can borrow. Previously, the maximum amount was exclusively tied to the property's value (at either 60% or 70%). Under the new rule, HUD has tied that maximum amount to three criteria: applicant's age, loan rates and the value of the property. While it is unclear how these new criteria will impact the maximum amount, the Wall Street Journal reports that Lending Tree's chief sales officer anticipates that a typical applicant will now be able to borrow 58% on the property's value, down from an average of 64%. Second, HUD increased the upfront insurance premium charged on any reverse mortgage from between .5%-2.5% percent and depending on the amount borrowed to a flat 2%. Given the reduction in amount that an applicant can borrow and an increase in upfront insurance payments, HUD's new rules appear aimed at benefiting lenders. The new rules went into effect on October 2, 2017. More ›

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