Safeguard Properties

Two Bills that Affect Foreclosure Notices

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Legislation Update
May 29, 2017

The Maryland legislature has passed House Bill 26 (“HB26”) that amends the foreclosure notice provisions contained in Maryland Real Property Article 7-105.2. HB26, slated to take effect on October 1, 2017, provides that notice of a foreclosure sale must be sent to a condominium association (COA) or homeowner’s association (HOA) that has recorded a lien against the property at least 30 days before the date of the proposed sale. This change now explicitly requires notice of sale be sent to any COA or HOA that has a lien recorded against the property at least 30 days prior to the scheduled sale. Since the current law requires notice to all subordinate lien- or judgment-holders (whose liens are recorded and indexed at least thirty days prior to the sale), this change is not particularly significant.

Further, and more impactful, the bill provides that in the event of a cancellation of a foreclosure sale, the trustee must send notice of the cancellation to the record owner and to any COA or HOA to whom notice of the sale was sent, within 14 days of the cancellation. The statute does not mandate a particular form for the notice.

The legislature in Annapolis also passed House Bill 1048 (HB1048), which adds a new registration component to the Maryland foreclosure process. Once it becomes effective, the law will require the property to be registered with the states’ Department of Labor and Licensing Regulation within seven days of docketing the case. While none of the information to be collected for this registration is unusual, the eventual registration process (either through a form drafted by the Commissioner of Financial Regulation, or directly through electronic registration) includes the requirement to provide the contact information for the “person authorized to manage and maintain the Property before the foreclosure sale.” Thus, in order to comply, servicers will need to provide property preservation contact info to their law firms early in the process (if relying on firms to handle the registration). This Bill also further extends State preemption of current foreclosure registry requirements to include this new registration. Interestingly though, the statute defines this new notice as not a public record, but says the registration notice can be made available to the jurisdictions, a person who owns property on the same block, or the HOA or COA. Fortunately, the legislature explicitly moved back the effective date of this bill from the first draft until October 1, 2018.

In summary, while neither of these Bills make any fundamental changes to Maryland’s foreclosure rules, they are additional administrative and procedural steps that will need to be monitored to ensure compliance

Source: DS News

Additional Resources:

HB 1048 (full info)

HB 26 (full info)

The New Age of Servicing

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Industry Update
May 10, 2017

Servicers counting the ripples in the wake of a new administration, rising interest rates, regulatory changes, technological advancements, and a new generation of borrowers can certainly find themselves in a sink-or-swim situation. The industry is evolving before our eyes, and the cumulative effect of undergoing such a tide turn is that we’ve entered a new age of servicing.

To not only survive but also succeed as a next-generation servicer, the status quo must fall by the wayside. Servicers need to stay a step ahead in their practices to build their businesses and their relationships now and into the near—if still unfolding—future.

Navigating the Here and Now

The Federal Reserve recently raised the target for the federal funds rate to a range of 0.75–1 percent, effectively pushing up mortgage rates—they’ve increased roughly 25–30 basis points since late last year—and putting the industry on notice that the Fed is encouraged by the economy’s performance and plans more increases this year.

Although many mortgage originators are now grumbling about the impact rising rates will have on the market, it is important to keep some historical perspective in mind. Mortgage rates are still incredibly low, and those in the business with gray hair can remember the days when mortgage rates hovered in the 7-9 percent range after more than a decade of rates that were typically above 10 percent.

However, that’s not to say that rising rates won’t impact mortgage bankers—in ways both positive and negative. Originators that have focused much of their business in the refinance space will find it challenging to switch gears and build their purchase business, while smart lenders have already begun that process and will find it easier to navigate the market shift.

On a macro level, rising rates should be taken as a welcome sign that our economy is healthy and ready for some strong growth. Within the mortgage space, the market should begin to find a more stable “normal” purchase-oriented balance. Private money will also begin to return to the market, which will help spur some desperately needed innovation in non-QM lending.

Mortgage bankers and servicers also face a new administration in Washington, D.C., that is promising radical change. While it’s early in his term, it appears that President Trump intends to make good on his promise to ease the regulatory burdens that have made it difficult for businesses to thrive and the economy to grow. The industry should be particularly encouraged that he has appointed to office men and women who have run successful businesses themselves.

When it comes to the top regulator, the Consumer Financial Protection Bureau (CFPB), significant change may be on the horizon there as well. Pending litigation (PHH Corporation vs. CFPB) could alter the very structure of the agency and could give the president more direct control over the director, who currently can only be removed “for cause.”

Policy and politics aside, servicers must be ready to embrace change in the market. Rising rates mean consumers will be more likely to hold on to their loans and build equity. Instead of reading about “strategic defaults,” homeowners will watch their homes increase in value while paying down their loans. In fact, this scenario is already happening. ATTOM Data Solutions recently reported that foreclosure activity is at a 10-year low.

Rising rates also mean servicers have a great opportunity to build lasting relationships with their customers. In particular, servicers can begin to really leverage technology and social media not only to service a loan but to truly connect with their customers as well. In addition to having borrowers who are loyal, today’s technology can help streamline operations and mitigate the high cost of servicing in the era of the Dodd-Frank Act and the CFPB.

The Millennial Impact

By now, every mortgage industry professional has read or heard about the millennial generation. Virtually every mortgage conference and seminar for at least the past five years has emphasized the impact millennials would soon have on the housing market. Here are a few key statistics about the generation that will carry the housing market for several decades:

By 2020, Brookings estimates that one in three Americans will be a millennial, and by 2025, millennials will constitute a whopping 75 percent of the workforce.

According to Zillow, more millennials (65 percent) consider homeownership an essential part of the American dream than any other generation.

While they are still “on their way,” millennials are, in significant ways, already “here.” LendingTree recently reported that more than one-third (36.1 percent) of all mortgage requests through its site are from borrowers age 35 and younger. Zillow estimates that up to 42 percent of all homebuyers last year were millennials.

All millennials aren’t stereotypical internet-start-up urbanites. Almost half of all millennial homebuyers live in suburban neighborhoods, and another 20 percent live in rural locations.

Further, researchers at NerdWallet estimate that two-thirds of millennials haven’t even reached the average homebuying age of 31, and 22 percent are still under 25 years old.

Millennials have just begun to arrive, and connecting with them isn’t just the job of the mortgage originator; servicers, too, must act now to create a culture within their companies that values building long-term relationships with their borrowers.

Geared for Interactive Technology

Beyond millennials’ raw numbers and purchasing power (Forbes estimates it’s at least $200 billion), understanding how to connect with them—as well as Generation X—is crucial. First, company websites and social touch points that aren’t mobile friendly may as well be selling Atari systems or vinyl records. Research indicates that 90 percent of millennials use smartphones, 93 percent access the internet on mobile devices, and more than half (53 percent) own a tablet. In between charges, millennials are spending an enormous amount of time on social media—more than six hours per week on average.

This is a huge opportunity to speak to potential customers no matter where they are and actively engage with them in a meaningful way. Today’s consumer won’t buy a product just because they see a TV ad. No longer passive consumers, they want to actually interact with brands.

In many ways, millennials and other internet-savvy generations are becoming more and more immune to traditional forms of advertising. Children who can’t yet talk or walk already understand how to skip an ad to get to the content or game they want. A consumer with that mindset will only respond to content that provides them value. That’s why interactions with them cannot be superficial. Companies must work harder to truly connect with them.

Active Engagement Earns Allegiance

Examine how pop culture icons like Kanye West, politicians like President Trump, and companies like Seamless have maximized their social media platforms by doing more than just posting occasional messages. They engage with their audiences and do so frequently, generating intense brand loyalty.

While mortgage servicers may not have a new album, policy, or menu item to promote, this is where they can turn what is frequently a weakness into a strength. Consider this: What is the most common complaint consumers have about their mortgage servicers? Too often, it is customer service, as the industry hasn’t done enough to effectively communicate with borrowers.

Legacy processes and procedures are geared to satisfy statutory and regulatory rules, and that often means mail, phone, and email communication. However, social networks provide a great opportunity for improving customer service, and successful servicers will soon have dedicated staff scanning social media sites and resolving issues by communicating through Twitter, Facebook, LinkedIn, Snapchat, and more.

Many servicers already have such social media staff in place and are encouraged to see customers proactively reach out to them on social media channels. Online crowdsourced review sites like Yelp provide businesses a chance to monitor consumer sentiment and potential issues in real time. Clearly, with a more responsive, customer-focused approach, servicers can address issues before they see complaints publicly displayed in a government database.

This approach will also provide new business opportunities. Forbes research reveals that 62 percent of millennials say that a brand that actively engages with them on social networks is more likely to earn their loyalty. This 35-and-younger crowd has mostly grown up in a connected world, and just like marketers in the past used catalogs, radio, and television, social media is where today’s consumer can be found.

Additionally, utilizing the mountain of available data and targeted content can increase the effectiveness of messaging. The right message at the right time to the right customer is only possible when marketers know who they are and what they need.

Technology’s Many Roles

New technology isn’t limited to just social media, however. The ability to increasingly automate and streamline servicing operations is crucial to reducing overhead and compliance costs, which have skyrocketed over the past decade.

In addition to fueling growth strategies, new technology will help the industry defend and protect both customers and companies. Considering the threats out there, cyber security is a critical component of any business plan. Intrusions into systems threaten customer personal information and data, and it is incumbent on servicers to take that seriously and invest resources in defensive measures. These efforts should also include hosting high-level executive discussions about what do to in the event of an attack as well as creating and maintaining updated disaster recovery plans.

Although it promises much, technology should not be seen as a silver bullet. While gaining efficiencies and mitigating rising costs are important, losing touch with consumers would be a fatal mistake. The key is to find balance between the need to utilize technology and the necessity of maintaining a human touch with borrowers. This is where social media can be a powerful tool; it’s an effective way to reach borrowers with a personal touch that goes beyond simple auto-generated letters and oft-ignored robocalls.

Today’s mortgage servicer should already begin to think of itself as “tomorrow’smortgage servicer.” New technologies need to be adopted and adapted to existing systems and personnel, not only to streamline operations but to take advantage of rising rates to build relationships with customers, as well.

If rates do continue to climb, many of them will be customers for a long period of time, and servicers need to think not in terms of loans, but loyalty. If companies’ leaders build that kind of culture, they will find that rate fluctuations won’t matter as much. Customers will trust their servicer and, in turn, provide a host of new business opportunities. That’s the future of servicing. 

Source: MReport

Should Servicers Still be Outsourcing REO Disposition?

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Industry Update
May 5, 2017

The true state of the foreclosure market

As the foreclosure crisis continues to shrink in the rearview mirror, many in the mortgage industry are starting to breathe easier. Default rates have been dropping steadily and most forecasters expect that trend to continue. By all accounts, our industry is moving well into the recovery.

For some players, including the nation’s banks and capital markets investors who have invested heavily in distressed loan portfolios, this is misleading.

While it is true that zombie foreclosures, which have posed such serious problems in some jurisdictions that state legislatures have been moved to pass new laws, are on the decrease, recent reports in the trade media put the number of zombie foreclosures down 9% from the third quarter of 2015.

Unfortunately, this drop in vacant properties that have yet to be foreclosed is balanced by a rise in bank owned real estate. RealtyTrac’s parent company ATTOM Data Solutions reported in September that the percentage of vacant bank-owned properties is larger now versus a year ago as banks are completing more foreclosures. To some degree, this is an “out of the frying pan and into the fire” sort of situation.

According to a HousingWire story, Attom found 7% more vacant bank-owned at the end of the third quarter. That’s up 67% from 2015, with an estimated 46,000 zombie foreclosures still lying dormant. Without residents living in the bank-owned homes, these properties pose much more serious risks to the bank because property preservation is more difficult and costly.

While REO sales have been decreasing since the crash, Servicing Management reports that at 7% of all distressed sale activity, it’s still double the pre-crisis amount of 3%. This is still a big problem for servicers.

Capital markets players that invested heavily in distressed pools have also been working through their portfolios, which has increased the REO inventory they’re holding. These investments are made in the knowledge that many of these assets will be returned to the market, hopefully at a profit. Every day that REO remains unsold costs these firms money. Choosing the wrong asset management and REO disposition partner can quickly erase the profitability in these portfolios.

Bank and capital markets executives understand the challenges inherent in properly managing this process, which led to a standing room only crowd for the REO Lab at this fall’s Five Star Conference and Expo. Speakers from all over the industry offered their best advice for dealing with what will likely be an increasing load of REO inventory in the short term.

“I think that people are realizing the market may shift again, and if you’re ahead of your game and paying attention now, if it shifts, and your knowledge is there, you’ll be able to handle that industry, I think REOs will come back—not the way they were when the market shifted in 2008, 2009, and 2010,” said Joyce Essex-Harvey, an agent with Coldwell Banker Residential Brokerage and one of the speakers in the lab, according to an article in the MReport.

Getting outsourced REO disposition right

The days of financial services companies believing they are large enough to handle every function on their own are long past. Today’s most successful companies find partners they can trust to outsource those functions that are not core to their business. As you would expect, that means that both banks and capital markets firms are seeking out third party experts to handle their asset management and REO disposition functions. We’ve already witnessed an uptick in our business in this area and we expect it to continue throughout 2017.

Failure to choose the right third-party business partners is risky. Even if the CFPB wasn’t holding the company accountable for every action taken by the third party (which it is), the risk that inexperience could lead a partner to make a costly mistake is very real.

Buyers of outsourced asset management and REO disposition services must have partners that can help them (1) cut costs, and (2) vastly improve performance. Adding efficiency to these processes actually creates value for the buyer, which explains why firms shopping for these services take such care in the selection of their partners.

While suggesting that time and money are the key metrics on which to base a new partnership may seem simplistic, choosing a partner that cannot deliver savings in both is a bad decision. But what does it take to deliver efficiency affordably? How can the buyer know that a partner is truly capable of delivering them both?

The right partner must help institutional sellers both minimize costs and maximize returns. It requires significant and specialized human and technological resources to move a firm’s foreclosure assets from sale to closing and liquidation at a high rate of speed — and at a higher return.

Choosing such a partner can be difficult if you don’t consider all of the elements that go into delivering on the promise of better execution with lower costs. Servicers are advised to perform due diligence on any partner and find out how any prospective partner plans to offer both.

Source: HousingWire

Realtors Push for Renewal of Tax Relief on Forgiven Housing Debt

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Legislation Update
May 11, 2017

The passage of a bill that would temporarily re-establish mortgage-forgiveness tax-relief is one of the National Association of Realtors’ “highest priorities” for the year, the group said Tuesday.

NAR in a letter to the Senate pushed for the passage of S. 122, the Mortgage Debt Tax Relief Act, a bill introduced by Senate Finance Committee Members Dean Heller, R-Nev.; Debbie Stabenow, D-Mich.; Johnny Isakson, R-Ga.; and Bob Menendez, D-N.J. The bill would extend the relief for two years.

“A decade after the housing crash that led to the Great Recession, there are still far too many homeowners who find themselves in foreclosure, completing a loan sale or attempting to have an existing loan restructured,” said NAR President William Brown in the letter.

Over 6% or more than 3.2 million homeowners still have mortgages that outweigh the value of their homes and almost 600,000 homes are in the foreclosure process in the U.S., the letter notes, citing CoreLogic and Mortgage Bankers Association estimates, respectively.

The original Mortgage Forgiveness Tax Relief Act of 2007 that expired this year dates back to the outset of the housing crash and had been extended multiple times.

Without the conditional relief, the homeowner debt that lenders forgive is considered taxable income.

NAR late last year had opposed other proposals that would have marginalized tax incentives for homeownership.

Source: National Mortgage News

Additional Resource:

Congress.Gov (S.122 full info)

North Carolina Supreme Court Adopts “Substantial Competent Evidence” Requirement for Borrowers Asserting “True Value” Defense in Foreclosure Deficiency Actions

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Industry Update
May 9, 2017

On Friday, May 5, 2017, in a major victory for lenders, the North Carolina Supreme Court reversed the North Carolina Court of Appeals’ decision in United Community Bank v. Wolfe.  In July 2015, the Court of Appeals decided in favor of United Community Bank and effectively eliminated the ability of lenders to obtain post-foreclosure deficiency judgments without committing to a full-blown jury trial.  The Court of Appeals held that a borrower’s opinion of the value of foreclosed property, standing alone, was evidence of the property’s value sufficient to create a fact issue and avoid summary judgment.  The Supreme Court rejected this standard, replacing it with a requirement that a borrower present “substantial competent evidence” of the property’s value.  A borrower’s own unsupported opinion, standing alone, cannot defeat summary judgment.

United Community Bank involved the application of Section 45-21.36 of the North Carolina General Statutes—the so-called “offset defense”—which allows certain loan obligors a defense in post-foreclosure deficiency actions.  Section 45-21.36 provides that when the lender acquires the property at foreclosure for less than the total of the outstanding loan amount plus expenses and then sues to collect the deficiency, certain obligors may defeat the action by showing that the property was worth the debt plus expenses during the foreclosure sale or that the lender bid substantially less than the property’s true value.

In United Community Bank, the bank loaned the defendants $350,000 to purchase real property and secured the loan with a deed of trust.  When the defendants defaulted, the bank foreclosed.  The bank was the high bidder at the foreclosure sale with a credit bid of $275,000.  The bank applied the net proceeds of the sale to the debt ($275,000 minus expenses), leaving a deficiency of over $50,000.

The bank sued the defendants for the deficiency.  The bank then moved for summary judgment, which is a procedure allowing a trial court to dispose of a case before trial if “there is no genuine issue of material fact” and a party is entitled to judgment “as a matter of law.”  To avoid summary judgment, the party against whom summary judgment is sought must forecast evidence of a genuine dispute about a material fact.

In United Community Bank, the defendants, relying upon the “offset defense,” attempted to show the trial court there was a genuine dispute about the true value of the property at the foreclosure sale.  The defendants filed a joint affidavit stating that they believed the property was “fairly worth the amount of the debt it secured” at the foreclosure sale.  The affidavit did not state the basis for this opinion, indicated no appraisal or other expertise held by the defendants to support their value claim, and did not opine on a specific dollar amount or minimum dollar amount for the property’s value.  The trial court disregarded the affidavit and granted the bank’s motion for summary judgment, which was supported by an opinion from the bank’s licensed appraiser.

The North Carolina Court of Appeals reversed the trial court and held that the defendants’ opinion of value, standing alone, was evidence of the property’s value.  The Court also held that the defendants’ sworn statement that the property was “worth the amount of the debt” should be interpreted as stating a specific value, and the affidavit created a genuine issue of material fact—that is, the value of the property at the time of the foreclosure sale—that a jury had to decide.

The ramifications of the decision were immediately clear.  To prevent a lender from obtaining a deficiency judgment on summary judgment, a borrower had only to file an affidavit opposing summary judgment that, in the borrower’s opinion, the property was worth the debt at the foreclosure sale.  With summary judgment off the table, lenders had to consider the cost of a possible jury trial before pursuing a deficiency action.  In our experience, the decision led to fewer deficiency actions and more claims being resolved by discounted settlement.

In reversing the Court of Appeals, the Supreme Court created a heightened standard for borrowers.  A borrower opposing summary judgment must forecast “substantial competent evidence” by way of specific facts to show the property’s “true value” is genuinely at issue.  A conclusory statement by the borrower that the property is worth the debt is insufficient.  The borrower must support its opinion by specific facts and objective criteria, not speculation.

The Supreme Court did not define “substantial competent evidence,” but the holding likely will require a borrower to retain a licensed appraiser to opine on the property’s true value.  If a borrower is unable or unwilling to incur this expense, then the lender once again will have a clear path to summary judgment.

Source: The National Law Review

Morning Spin: Owners Who Leave Chicago Properties Vacant Might Have to Pay More

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Legislation Update
May 25, 2017

Owners of vacant Chicago properties would pay more to the city each year their parcels go unused, under a proposal made Wednesday by a Southwest Side alderman.

Currently, the city requires that owners register vacant properties at a cost of $250 a year. But the plan from Ald. George Cardenas would double that fee to $500 for the second year, $1,000 for the third and $2,000 for the fourth and fifth. Then it would jump to $3,500 for years six through 10. In year 11, the fees would jump to $5,000, plus $500 for each additional year.

Cardenas, 12th, said the changes would create a disincentive for allowing properties to stay empty for long periods of time.

Fees for mortgage lenders that hold title to properties that are abandoned also would escalate in a similar fashion. The fees they would end up paying after 10 years would hit $6,000, plus $500 for each additional year.

“There’s too much leeway given to building owners,” Cardenas said. “We need to get these buildings rehabbed and back in working condition so people can live in them.

“We have attempted to decrease the number of abandoned buildings, and the only way to do that is by pushing these owners,” added Cardenas, who said he’s also worried about vacant commercial properties. “Those people that just want to buy property and hang onto it, we’re against that.”

Source: Chicago Tribune

Additional Resource:

Amendment of Municipal Code Sections 13-12-125 and 13-12-126 concerning renewal fees for registered vacant buildings (full text)

Montgomery Co. Bill May Help Foreclosed Homes Get on the Market

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Legislation Update
April 24, 2017

WASHINGTON — Montgomery County is hardly immune to the glut of vacant, foreclosed homes that exist in the state of Maryland, but the county council is hoping a bill that passed unanimously last week will help put more of those homes on the market.

The bill still needs County Executive Ike Leggett’s signature, though a veto seems unlikely.

The bill’s aim is to get foreclosed properties on the state’s registry. Councilman Tom Hucker, who was a state delegate when the legislature passed a law giving the county this authority, said banks that own these homes are often slow to get homes on the registry in order to avoid paying transfer and property taxes.

“There (are) over 500 empty homes that are just left there to rot in our neighborhoods,” Hucker said. “They’re owned by national banks. We can’t make the national banks sell the property.”

But Hucker argues when the banks hold on to these homes, it exacts a toll on the neighborhoods that surround them and the first responders who serve them.

“They attract crime,” said Hucker. “They attract homeless people and squatters. They sometimes attract people who go in there to have a drug party. They’re twice as likely to be a case of arson.

“One reason we need these people to register with the state foreclosed property registry is so first responders know who to contact if anything goes wrong with the property. But some of these national banks have been deliberately skipping out on the foreclosure registry because it allows them to skip out on the county’s transfer tax.”

But now banks that don’t meet the 30-day deadline to get those properties registered could be fined as much as $1,000 per day by the county.

“We can’t do everything,” said Hucker. “But that’s one thing we ought to be doing, giving them an incentive to get it back on the market and issuing the fines.”

Source: Washington Top News

Additional Resource:

Montgomery County, Maryland (Bill 38-16 info)

Missouri Bill Calls for Property Manager Listing

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Updated 7/12/17: The Kansas City Star published an article titled Greitens signs bill aimed at tracking owners of abandoned property in KC.

Link to article

Link to bill text

Legislation Update
May 1, 2017

HB 493 — LIMITED LIABILITY COMPANIES (Bondon)

COMMITTEE OF ORIGIN: Standing Committee on Local Government

Currently, limited liability companies in Kansas City that own or rent real property or own unoccupied property within the city are required to file an affidavit with the city clerk specifying the name and address of a person with management control or responsibility for the real property. This bill clarifies that it must be a street address and must be a natural person.

The limited liability company must file a successor affidavit within 30 days of a change in the natural person with management control or responsibility for the real property.

The city cannot charge a fee for the filing of the affidavit or successor affidavit.

If a limited liability company fails or refuses to file the affidavit, any person adversely affected by the failure or refusal, or the city, may petition the circuit court in the county where the property is located to direct the completion and filing of the affidavit.

This bill is the same as HB 1708 (2016).

Source: Missouri House of Representatives

Additional Resource:

Missouri House of Representatives (HB 493 full info)

Fast-Track Foreclosure Legislation: A Proactive Solution to Address the Problem of Community Blight

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Editorial
May 23, 2017

While the economic recovery has brought a slowdown to residential mortgage foreclosures, there remains a plethora of vacant and unoccupied properties dotting urban landscapes. Unfortunately, outdated foreclosure laws can leave these homes vacant and vulnerable for years, fostering the spread of community blight.

Unlike a good bottle of wine, a vacant property does not get better with age. For the past several years, many in the industry (including this author) have been advocating for state legislators across the country to consider legislation that will reduce the time it takes to foreclose on vacant and abandoned properties. As long as these properties remain vacant, they contribute to a self-perpetuating cycle of blight and instability in the community. Houses that stand empty suffer structural damage from weather and climate. Further, vacant properties are hubs for crime, drug activity, and fires, as well as becoming havens for squatters.

Fast-track legislation can reduce the number of “zombie properties” and reverse the problems that destroy neighborhoods. Several states have put themselves ahead of the national curve in the fight against blight by enacting fast-track legislation. Recently, Ohio and Maryland have passed fast-track legislation, with other states considering similar legislation as an important step in addressing neighborhood blight.

These new fast-track laws accelerate the foreclosure process to as little as six months in certain situations, enabling the mortgage servicer in many cases to get possession of the property before it deteriorates — increasing the likelihood that it can be rehabilitated and sold. Specifically, fast-track legislation permits the holder of a note of a defaulted residential mortgage loan (secured by a residential property that appears to be vacant and abandoned) to bring a summary action in court to foreclose the loan in an expedited manner.

It is important to mention that compliance with consumer protection laws and a proper balance of property rights for both the mortgage servicer and the property owner are at the core of any fast-track legislation. The language in the Ohio and Maryland legislation provides a summary of actions by residential mortgage servicers and revises procedures and timelines for foreclosure action, while still providing property owners with necessary protections. These protections help to ensure that a property is, indeed, vacant and abandoned before the expedited foreclosure process is instituted. To be clear, no one will be forced out of their home.

Both the Ohio and Maryland laws provide for this balance of protection for all parties. For example, the new Maryland law requires secured parties to serve a petition for expedited foreclosure on the mortgagor and to post a notice on the property, allowing the record owner of the property to challenge any finding that the property is vacant and abandoned. The two states’ legislation also authorizes a secured party to expedite the foreclosure process, provided that the party can demonstrate to a court that the property is vacant and abandoned by satisfying at least three of eleven specific criteria listed in the legislation (e.g., utilities disconnected, windows and entrances boarded up).

Other states need to take action to change their laws and target zombie properties. Several states (including New York, Pennsylvania, and New Jersey) have introduced fast-track legislation and, hopefully, these proposals will be enacted by their respective general assemblies. On the other hand, some states have passed recent laws that seem to miss the point, imposing a pre-foreclosure duty on mortgagees to maintain vacant and abandoned properties or prohibiting lenders from taking possession of a property prior to foreclosure.

As these new fast-track laws go into effect, one of the biggest challenges will be enforcement. Mortgagees, code enforcement, and the courts will need to work together to ensure that fast-track legislation accomplishes its purpose to eradicate the blight that is plaguing our communities.

Source: USFN

Additional Resource:

Safeguard Properties Fast-Track Legislation Resource Center

Enforcement of Vacant and Abandoned Property Ordinances on Rise

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Legislation Update
April 21, 2017

Banks and other mortgage servicers are receiving notices from companies like ProChamps, which have been retained to assist municipalities with enforcement of vacant property ordinances. These enforcement actions could significantly impact the foreclosure process.

Over the past several years, Pennsylvania cities, boroughs and municipalities have enacted wide-ranging vacant and abandoned property registration ordinances. The stated intent of these ordinances is to establish processes to address the deterioration and blight on neighborhoods caused by the increasing amount of properties subject to mortgage foreclosure and to identify and regulate foreclosed properties located within a community.

In central Pennsylvania, registration ordinances have been established in cities and boroughs such as Reading, Lancaster, Harrisburg, Steelton and York.

Generally, the ordinances require lenders or servicers to complete inspections within days of filing a foreclosure action or confessing judgment to determine the occupancy status, and then register the property regardless of the occupancy status. Ordinances require registration fees, which may be due annually or biannually, and range from as little as $50 to as much as $500. Typically, ordinances include penalties for failure to register properties timely. Registering properties requires the lender/servicer to provide detailed contact information to the municipality, and imposes significant property maintenance requirements. The expectation is that the lender/servicer will help maintain the property during the foreclosure process, and failure to do so can result in penalties against the lender. The ordinances intend to serve two purposes – generate revenue through fees and penalties and ensure that an interested party reasonably maintains the property until a new owner is secured.

Until recently, enforcement of these ordinances has been irregular. However, a number of communities across Pennsylvania have engaged Community Champions and their affiliate ProChamps to actively help the enforcement of vacant and abandoned property ordinances. ProChamps works in conjunction with community officials to research, identify and track properties in foreclosure, then enforce the municipal ordinances. Lenders and servicers should be aware of their involvement in Pennsylvania and understand the role they play in assisting communities with the enforcement of ordinances.

Vacant and abandoned property ordinances can be tricky to navigate and lenders may have rights not apparent on the face of the ordinance. If you have questions regarding a specific ordinance, are subject to penalties for failure to register a property or want to discuss your rights with respect to an ordinance, contact any of the attorneys in our Finance & Creditors’ Rights Practice Group for assistance.

Source: Barley Snyder Attorneys at Law