Rhode Island Supreme Court Demands Strict Compliance with Fannie Mae/Freddie Mac "Paragraph 22" in Foreclosures

In a case of first impression, the Rhode Island Supreme Court concluded in Woel v. Christiana Trust that mortgage default notices sent to borrowers must strictly comply with the notice requirements included in a mortgage. The Court held that a lender's notice of default does not strictly comply with the terms of the standard Fannie Mae/Freddie Mac mortgage Paragraph 22, if the notice fails to inform the borrower of the right to reinstate after acceleration. More ›

Payment Deferral Now an Option for Borrowers in Fannie Mae and Freddie Mac COVID-19 Forbearance Plans

We previously reported on the impact of the CARES Act on federally backed mortgage loans, including the immediate availability of a 180 – 360 day forbearance plan for borrowers impacted by the pandemic. One key feature of this legislation and accompanying guidance publications is that servicers of GSE loans are required to evaluate borrowers for repayment options—including reinstatement, a repayment plan, modification, or some other workout—at the conclusion of the forbearance period. The forbearance plans do not offer loan forgiveness, and borrowers and their servicers are expected to resolve the forbearance amount at the end of the plan. More ›

Stepping Beyond the CARES Act: Massachusetts Expands Forbearance and Issues Sweeping Moratorium on Foreclosures and Evictions during COVID-19 Emergency

On April 20, 2020, Massachusetts Governor Charlie Baker signed H.4647 into law. The law establishes a moratorium on foreclosures and evictions for 120 days from the date of the enactment, or 45 days after the COVID-19 Emergency Order is lifted, whichever is sooner, and also extends forbearance to any borrower who requests it due to COVID-19. The law allows the Governor to expand the foreclosure moratorium for a further 90 days, so long as it does not exceed the 45 day limit after the COVID-19 Emergency Order is lifted. More ›

Congress is Nearing a $2 Trillion Stimulus Deal, Here's What it Means for Loan Servicers

The COVID-19 outbreak has resulted in unprecedented job loss for millions of Americans, creating economic uncertainty and challenges for loan servicers in 2020. Until the outbreak is controlled, missed payments on mortgages and student loans are likely to increase. Already, the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA) have issued 60 day moratoriums on foreclosures and evictions, which some states—and most banks and mortgage loan servicers—have adopted. Meanwhile, the Department of Education has announced that all borrowers with federal loans will have their interest rates automatically set at 0% for at least 60 days. Late Wednesday night, the Senate passed H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) after senate leadership reached an agreement with the White House earlier in the week. The legislation now moves to the House of Representatives for what many hope is unanimous consent. While we are still waiting on the House of Representative's approval, we've explored measures within the bill that will immediately impact student and mortgage loan servicers and outlined them below. More ›

NYDFS Issues Order and Instructions to Regulated Entities in Response to COVID-19

In response to challenges facing the financial services industry as a result of coronavirus (COVID-19), New York's Department of Financial Services (DFS) has issued a COVID-19 compliance order, along with a series of industry guidance letters related to the organizational preparedness of regulated institutions to manage risks associated with the outbreak.

Below is a summary of these recent actions and requests for information. Institutions are encouraged to visit the DFS website for additional updates and information. Hinshaw is well-positioned to assist impacted institutions in their review of the DFS instructions and the preparation of responses. More ›

Legal Guidance Watch: Second Circuit Nostra Sponte Certifies a Series of Mortgage Lender Compliance Questions to New York Court of Appeals

The Second Circuit recently certified two questions to the New York Court of Appeals regarding the requisite proof needed for borrowers to dispute the lender's compliance with New York Real Property Procedures and Acts ("RPAPL") § 1304 and the required filings under RPAPL § 1306 for a multi-borrower mortgage loan. The New York Court of Appeals has not yet ruled on these statutes and the requisite proof needed to comply with them. A decision on these issues could greatly impact the mortgage industry, given the impact of these statutes on mortgage foreclosure proceedings. More ›

First Circuit Reverses Course in Closely-Watched Pre-Foreclosure Notice Decision, Defers to Massachusetts Supreme Judicial Court

Earlier this year, Hinshaw reported on a decision by the First Circuit Court of Appeals which invalidated a Massachusetts foreclosure based on the Court's determination that the mortgage loan servicer's notice of default included additional language which did not strictly comply with Paragraph 22 of the mortgage. In the wake of that decision, the servicer filed a petition for rehearing on several grounds, but primarily because the Code of Massachusetts Regulations required use of what the Court had characterized as additional language. The banking community also filed several amicus briefs in support of Chase's petition. More ›

Florida Supreme Court Awards Appellate Attorney's Fees to Borrower After Mortgagee Voluntarily Drops Appeal

In a recent 4-3 decision, the Florida Supreme Court concluded that a borrower was entitled to her appellate attorneys' fees because she was the prevailing party in a judicial foreclosure action in which her mortgagee had voluntarily dropped the appeal. Marie Anne Glass' mortgage loan servicer filed a complaint for judicial foreclosure in December 2013. Glass moved to dismiss the case on grounds that did not challenge the default, but instead argued that her mortgagee failed to allege or demonstrate that it was the proper holder of the note. Ultimately, the trial court granted Glass' motion and dismissed the case with prejudice. More ›

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 ›