Safeguard Properties

Sen. Blumenthal and Rep. Ellison Introduce the Permanently Protecting Tenants at Foreclosure Act

Posted on by Safeguard

Legislation Update
February 13, 2017

WASHINGTON, D.C. – WASHINGTON—Sen. Richard Blumenthal (D-CT) and Rep. Keith Ellison (D-MN) introduced the Permanently Protecting Tenants at Foreclosure Act (H.R. 915/S. 325) last week. The bill ensures expired federal protections for renters living in foreclosed properties are renewed. 

“It’s a matter of basic fairness and commonsense: families should not be kicked to the curb because their landlord didn’t pay his mortgage,” Senator Blumenthal said. “But under current law, families who pay their rent and play by the rules can be evicted when their building owner faces foreclosure. This critical bill would protect tenants by ensuring they are spared life on the streets when landlords shirk their obligations.”

“When a building owner falls into foreclosure, people who live in the property may be forced out—even if they’ve paid their rent in full and on time,” Rep. Ellison said. “It’s wrong that families face homelessness because the owner of the property where they live failed to make payments on time. The Permanently Protecting Tenants in Foreclosure Act ensures families have the time they need to find new housing.”

“The PTFA provides critical protection to innocent renter families whose homes have been foreclosed.  PTFA is an important tool, especially now, given the significant national shortage of rental housing,” said NHLP Executive Director Shamus Roller.

“Without federal protections in place, many renters in foreclosed properties are vulnerable to summary eviction—and homelessness. In nearly half the states, these renters can be evicted with five days’ notice or less, through no fault of their own,” said Law Center Executive Director Maria Foscarinis. “The PTFA provides critical protection to responsible renters whose homes have been foreclosed upon.”

“We are grateful to Representative Ellison for introducing this critical legislation to protect renters when their landlords’ properties go into foreclosure. We urge Congress to act swiftly to enact these protections,” said Diane Yentel, President and CEO for NLIHC.

While much of the response to the foreclosure crisis has focused on homeowners, 27% of properties and 40% of the units in foreclosure are estimated to be renter-occupied. These renters often have no idea that their landlord has fallen behind on mortgage payments, and usually have continued to pay their rent even as their landlord has failed to pay the mortgage. Prior to the passage of the Protecting Tenants at Foreclosure Act (PTFA) in May 2009, tenants were often required to move with as little as a few days-notice. The law ensured that most tenants can stay in their home for the remainder of their lease or for at least 90 days post-foreclosure.

But Congress did not extend the PTFA and it expired on December 31, 2014. The Permanently Protecting Tenants at Foreclosure Act of 2017 restores the national standard and makes the law permanent.

The Permanently Protecting Tenants at Foreclosure Act of 2017 is co-sponsored by:  Reps. Maxine Waters, Carolyn B. Maloney, Stephen F. Lynch, Gwen Moore, G.K. Butterfield, Michael Capuano, Katherine Clark, Elijah Cummings, Raúl Grijalva, John Lewis, James P. McGovern, Eleanor Holmes Norton, Mark Pocan, David Cicilline, Adam Smith, Matt Cartwright, Mark Takano and Maxine Waters.

Source: Office of Keith Ellison

Additional Resources:

Bill Info (H.R. 915; S.325)

WTNH News 8 (Effort underway in Congress to protect renters from foreclosures)

Not all Materials are Created Equal

Posted on by Safeguard

Industry Update
February 14, 2017

According to a report released on Monday, vacant and abandoned properties have a far-reaching toll on the communities they reside in—not only seeing lower property values but decreasing the values of neighboring homes as well.

Titled “Curing Community Blight: A Cost-Benefit of Clearboarding versus Plywood to Secure Vacant and Abandoned Properties,” the study found that vacant or abandoned homes worth approximately $200,000 lose $70,000 of their value while adjacent vacant properties drop in value by $100,000. According to a Harvard University Joint Center for Housing Studies report referenced, 1.3 million vacant residential properties still plague the economy.

The report, authored by former U.S. Treasury Department official Aaron Klein, found that clearboarding can provide a cost benefit ratio of 34:1 on the low side up to 140:1 over plywood. In addition to preserving values, the report found that clearboarding also reduces neighborhood crime rates.

“Using clearboarding increases the total property values of a median foreclosed home and all neighboring homes by $13,000 to $57,000, while the marginal cost for using an alternative technology such as clearboarding is under $1,000,” the report notes. Compared to plywood, clearboarding increases property value by 0.2 percent throughout surrounding neighborhoods within a ? mile radius.

Today’s report was commissioned by Community Blight Solutions and Founder and Chairman Robert Klein (no relation to Aaron Klein.)

“I think that this white paper makes it pretty obvious and pretty clear from a data perspective that the way we’ve been doing things up until now in the industry in terms of maintaining and boarding vacant properties is not the right way to go,” Klein said in an interview with DS News. “We did it because it was the only option available to us, but as new technology becomes available its time the industry take a new approach and find better ways to protect the value of homes and the value of communities. I think this is a step in the right direction.”

To view the full report, click here.

Source: DS News

Additional Resource:

DS News (The Cost of Fighting Community Blight)

Mass. SJC Holds Omission of Post-Foreclosure Notice Did Not Void Foreclosure

Posted on by Safeguard

Industry Update
February 6, 2017

The Massachusetts Supreme Judicial Court (“SJC”) recently affirmed a lower court’s ruling that a mortgagee’s failure to send a post-foreclosure notice required by Mass. Gen. Laws c. 244, § 15A does not render a foreclosure void.

A copy of the opinion in Turra v. Deutsche Bank Trust Company Americas is available at:  Link to Opinion.

A mortgagee notified a borrower that he was in default under the terms of his mortgage.  The mortgagee subsequently foreclosed on the property and commenced a summary process action.  The borrower then filed suit against the mortgagee, and the mortgagee moved to dismiss the borrower’s claims.

In opposition to the mortgagee’s motion to dismiss, the borrower argued among other things that the foreclosure was void because the mortgagee failed to strictly comply with the power of sale set forth in Mass. Gen. Laws c. 183, § 21, and further regulated by Mass. Gen. Laws c. 183, §§ 11-17C.

Specifically, the borrower argued that the mortgagee failed to comply with Mass. Gen. Laws c. 244, § 15A, which states:

a mortgagee conveying title to mortgaged premises pursuant to the provisions of this chapter shall, within thirty days of taking possession or conveying title, notify . . . the office of assessor or collector of taxes of the municipality in which the premises are located and any persons, companies, districts, commissions or other entities of any kind which provide water or sewer service to the premises, of said taking possession or conveying title.

The mortgagee did not dispute that it did not provide the required post-foreclosure notice, but maintained that this omission did not render the foreclosure void.  The trial judge agreed, noting that the duty of notification set forth in Section 15A arises after foreclosure and is not a duty that affects the right to foreclose.  The borrower appealed.

On appeal, the SJC noted that it previously held that one who sells under the power of sale “must follow strictly its terms” or the sale will be “wholly void.”  U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 646 (2011).

As the SJC also noted, the requirement of strict compliance and when it is, and is not, required was further considered in several subsequent cases.  In those cases, the SJC referred to Mass. Gen. Laws c. 244, §§ 11-17C, collectively as the provisions that further regulate the power of sale set forth in Mass. Gen. Laws c. 183, § 21.

However, the SJC noted that those earlier cases all related to the relationship between a mortgagee and mortgagor.  Here, the Court noted that the obligation set forth in Section 15A to provide a post-foreclosure notice to a taxing authority or water and sewer utility involves the foreclosing mortgagee and a third party.

Thus, the Court held that a failure to comply with the provisions of Section 15A does not create any potential harm to the mortgagor.  Accordingly, the SJC held, the mortgagee’s failure to provide notice as set forth in Section 15A had no consequential effect on the borrower.

In affirming the trial court’s decision, the SJC noted that, although the language in its earlier decisions suggested that failure to strictly comply with any provision contained in Mass. Gen. Laws. c. 244, §§ 11-17C will render a foreclosure void, that was not its intent.

Accordingly, the SJC held that because Mass. Gen. Laws c. 244, § 15A does not set forth any pre-foreclosure requirements that are part of the foreclosure process, a mortgagee’s failure to comply with Section 15A’s post-foreclosure provisions does not render a foreclosure void.

Source: The Consumer Financial Services Blog

Junior Lienholders and Banks Need to Take Care to Timely File Claims for Surplus Funds

Posted on by Safeguard

Industry Update
February 6, 2017

Because real estate values are rising again in Florida, it is becoming more common for there to be third party purchasers at foreclosure sales who pay more than the amount of the foreclosure judgment in order to obtain title to the property being sold. The balance of the purchase funds, after payment of the clerk’s fees and judgment amount, is known as the surplus. The surplus funds may be used to pay junior liens and mortgage claims, if a claim is submitted by the junior lienholder or mortgage holder within the time prescribed by statute.

Pursuant to Florida Statute Section 45.031(7)(b), any person claiming a right to surplus proceeds must file a claim with the Clerk of Court within sixty days of the foreclosure sale. A recent decision by the Florida Fifth District Court of Appeal clarifies that the date of the actual sale, not the date that the clerk issues the certificate of sale, is the starting point for calculating the sixty day period. In The Bank of New York Mellon v. Glenville, 42 Fla. Law Weekly D212 (January 20, 2017), a bank holding a junior lien filed a claim to surplus proceeds on September 2, 2015, sixty-two days after the date the property was sold. The trial court denied the bank’s claim as being untimely. On appeal, the bank argued that the sixty day time period should begin on the date the clerk issues the certificate of sale, not the sale date. The appellate court disagreed. The district court observed that the relevant statute specifically provides that after a sale of the property the clerk shall promptly file a certificate of sale. Consequently the statute describes the sale and the issuance of the certificate as separate events. Because the statute expressly requires the filing of a claim within sixty days of the date of the “sale”, it is that date, not the date that the certificate is issued that is controlling. Because the bank’s claim was filed outside the statutory window, the bank’s claim was found to have been properly denied.

The Bank of New York Mellon v. Glenville, 42 Fla. Law Weekly D212 (January 20, 2017)

About the Author:
Joel C. Zwemer is an attorney and Shareholder in Dean Mead’s Fort Pierce office. He concentrates his practice in the areas of commercial business and real estate litigation, creditors’ rights and bankruptcy. He has successfully litigated a wide range of cases in federal and state courts and regularly represents financial institutions in business and bankruptcy cases and litigation in Fort Pierce and Port Saint Lucie. He may be reached at (772)464-7700 or jzwemer@deanmead.com.

Source: Dean Mead Attorneys at Law

Home Values Severely Impacted by Environmental Hazards

Posted on by Safeguard

Industry Update
February 15, 2017

Recent studies have shown that homes located in areas with significant environmental hazards are more prone to foreclosure and decreased property values.

ATTOM Data Solutions released its third annual Environmental Hazards Housing Risk Index on February 16, which stated that one-fourth of 68.1 million single family homes and condos located in 8,642 ZIP codes are located in high or very high risk areas for at least one of four environmental hazards. These hazards include Superfund areas, brownfields, polluters, or poor air quality. Homes located in these ZIP codes have a combined estimated market value of $4.9 trillion, according to the index.

“Home values are higher and long-term home price appreciation is stronger in ZIP codes without a high risk for any of the four environmental hazards analyzed,” said Daren Blomquist, SVP at ATTOM Data Solutions. “Corresponding to that is a higher share of homes still seriously underwater in the ZIP codes with a high risk of at least one environmental hazard, indicating those areas have not regained as much of the home values lost during the downturn.”

A risk index for each of the four environmental hazards was calculated for each of the 8,642 ZIP codes, and the indexes were each divided into five categories of risk: Very Low, Low, Moderate, High, and Very High.

ZIP codes with the 10 highest Total Environmental Hazard Index values are located in Denver; San Bernardino, California; Curtis Bay, Maryland (in the Baltimore metro area); Santa Fe Springs, California (in the Los Angeles metro area); Fresno, California; Niagara Falls, New York; Saint Louis, Missouri; Mira Loma, California (in the Riverside-San Bernardino metro area); Hamburg, Pennsylvania (in the Reading metro area); and Tampa, Florida.

Over the last 10 years, median home prices have risen the most in Very Low risk ZIP codes, with the rise in prices lower in each subsequent category of higher risk. Median home prices in Very High risk ZIP codes are down 1.5 percent from 10 years ago.

Nevertheless, Blomquist said that investors still seem to buy properties in higher-risk areas.

“Environmental hazards likely impact owner-occupants more directly than investors, making the latter more willing to purchase in higher-risk areas,” he said.

Source: DS News

Foreclosures and the Year Ahead

Posted on by Safeguard

Industry Update
February 28, 2017

Daren Blomquist, SVP of ATTOM Data Solutions, recently wrote in Housing News Report, ATTOM’s monthly newsletter of industry news, on the distressed property crisis in areas of the country most affected by foreclosure. Citing the ATTOM Solutions 2016 Year-End Foreclosure Market Report, Blomquist noted that New York properties foreclosed in Q4 2016 have taken an average of 3.5 years to process, and that 31,838 loans actively in foreclosure originated between 2004 and 2008.

Six total New York counties were in the list of top 20 counties with the biggest backlogs of loans from this era. Blomquist spoke to Luana Malavolta, a real estate broker with Exit Reality Search in Bronx, New York, which ranks at number 18 on the list.

“There is less and less inventory coming on the market that is purchasable for mortgage products,” said Malavolta. “I feel it is because the financial institutions do not move fast enough on foreclosures and short sales, letting the properties stay in distress much longer. The longer the property is in distress, the less marketable it is for first time homebuyers utilizing mortgage products.”

Cash buyers are 41 percent of the distressed market, due to the mortgage product users being pushed out. Malavolta mentions these “predatory” cash buyers: “The cash buyer purchases [the property] and barely cleans it and puts it back on the market at a tremendous markup,” Malavolta continued. “Because inventory is so low you have fewer people buying, but at higher prices.”

Looking at ATTOM Data Solutions Year-End 2016 Home Sales Report, Blomquist mentions that in 2016, all-cash buyers made up 41 percent of residential property purchases in New York, well above the national average of 28 percent, and 15.9 percent of all residential property sales were bank-owned, foreclosure auction, or short sales.

Though New York continues to struggle, foreclosures nationally are at a 10-year low. With ATTOM data, Blomquist notes the decrease in foreclosure starts on a year-over-year basis in New Jersey, which had the highest state foreclosure rate in 2016. In addition, New Jersey has the highest property tax rate. According to Rob Lyszczarz, President of RE/MAX Properties Unlimited, high property taxes are making it difficult to liquidate distressed properties and will hinder New Jersey’s home price recovery. Additionally, New Jersey is experiencing some of the slowest appreciation rates in the country, with the media price of $270,000 for a single-family home remaining unchanged between 2015 and 2016.

In New Jersey and elsewhere, long stalled foreclosures are finally starting to be pushed through. Ed Kirn, a foreclosure attorney with Powers Kirn Law Firm, believes that “…it will be the beginning of a recovery period for our housing market. …Urban blight is going to decrease. Zombie properties are going to decrease … it’s better for everybody.”

Read the full article in Housing News Report by Daren Blomquist here. In addition, read Ten-X CMO Rick Sharga’s article on Ten-X’s online real estate marketplaces.

source: DS News

Fallout from Home Mortgage Crisis: Lender Claims Property Appraisers Are Liable for Lost Collateral Value

Posted on by Safeguard

Industry Update
February 9, 2017

A unit of Wilmington Savings Fund Society, FSB, acting as the trustee of a mortgage loan trust (“Trustee”), has rung in the New Year by filing nine lawsuits against appraisers whose appraisals were the basis for mortgage loans. See, e.g., Christina Trust, a Div. of Wilmington Savings Fund Soc. FSB v. Kasper, et al., Case No. 2:17-cv-00129 (D.N.J., filed Jan. 6, 2017). In each of those lawsuits, filed in the federal court for the District of New Jersey, the Trustee alleges that the 2007 and 2008 appraisals did not comply with the Uniform Standards of Professional Appraisal Practice (“USPAP”) and, as a result, provided a significantly inflated value of the property that misrepresented the collateral for the loan. The complaints assert that, but for the inflated appraisals, the lender would not have made the loans, and when the properties were foreclosed upon and later sold, the proceeds were not sufficient to cover the outstanding mortgage balances. The suits seek compensatory damages, plus punitive damages, attorney’s fees and interest and costs.

The negligent and grossly negligent acts alleged in the complaints include failing to use appropriate comparable properties, using unsupported adjustments to value or failing to incorporate appropriate adjustments, incomplete research and relying on inaccurate property descriptions. The appraisers are also alleged to have made negligent misrepresentations in the appraisal reports about the value of the property and the procedures used to derive value. Although the complaints do not assert fraud, they allege that the violations of professional standards are such that the “appraiser was most likely intentionally and knowingly trying to support an inflated value.”

Other cases have been brought against appraisers by the FDIC and other lenders or trustees who have suffered similar damages. Although many of them have survived motions to dismiss, the far more interesting issues pertain to damages, which likely could only be established or rebutted by expert evidence. Assuming a violation of professional standards could be established through an expert appraiser, the plaintiff would need to show that the breach of the appraisal standards was the proximate cause of the damage.

But the loss of collateral value could have been caused by other things, including macroeconomic conditions (the deep recession and the home mortgage crisis), which caused home values in many locations to decline during 2007 and 2008. If the entire neighborhood deteriorated over the next year or two because many other homeowners defaulted on their mortgages, then only a very sophisticated economic analysis could isolate the damage caused by the alleged inflated appraisal. The Trustee would also need to account for the passage of time between the appraisal and the eventual foreclosure, which may have included the time it took the trustee to trace the assignment of the collateral through a chain of successive owners.

The defendant appraisers will also likely dispute whether the actions of the Trustee to mitigate its damages were commercially reasonable. The complaints do not reveal whether the Trustee tried to recover the deficiency from the borrowers or, if it did not, why not. The defendants would also seek to blame the Trustee for some portion of the loss. The parties may need expert testimony to show that the Trustee’s conduct comported (or was inconsistent) with collateral protection practices. Still another issue would be the extent to which the condition of the property changed over time; a borrower whose home was “underwater” would have little incentive to maintain it. The complaints provide no details on the timing of the foreclosure or the condition of the properties at that time.

At this early point, it is not clear whether these lawsuits will ever progress to the point where the court rules on any of these causation and proof issues. However, it is clear that the effects of the great recession and the home mortgage crisis continue to be felt almost a decade later.

Source: The National Law Review

Breaking Down Blight

Posted on by Safeguard

Industry Update
February 6, 2017

Editors’ Note: This print feature appeared in the February issue of DS News.

Almost a decade has passed since the housing bubble burst, throwing the mortgage services industry and neighborhoods across the country into a pitched battle with blight. Recovery has been excruciatingly slow. Outdated rules and a public that has little understanding of the true costs associated with neighborhood blight contribute to a status-quo approach that has hindered the industry for decades.

Our residents and communities have borne the burdens that stem from a barely effective approach to combatting blight. But in 2016 and the early days of this year, the industry saw gradual movement that offers improved expectations for the days ahead.

Indeed, a confluence of change, innovation, and enhanced understanding of the widespread costs of blight have propelled the industry forward in efforts to decrease the number of zombie properties plaguing neighborhoods and to begin employing new technology in the form of polycarbonate clearboarding to secure vacant and abandoned properties.

Such progress offers reason for optimism that, finally, we will be able to attack community blight with the appropriate tools. Years from now, the industry will recognize 2017 as a pivotal year in the fight against blight.

Pre-approving Polycarbonate and the Plywood Problem

One of the most significant changes that built positive momentum in the fight against blight occurred in early November 2016, when Fannie Mae made the game-changing decision to pre-approve the use of polycarbonate clearboarding on pre-foreclosure properties. The decision marked the first time a GSE had expanded its reimbursement policies to include a 21st-century technology that is far superior to plywood.

Polycarbonate clearboarding resembles glass, yet it is virtually unbreakable. It can have a tremendous impact on conveying properties more quickly and in a more stable and marketable condition, especially when compared with plywood, an outdated and unattractive material used on vacant and abandoned property for decades.

Plywood announces that a building is vacant and abandoned, encouraging vandals and adverse occupants to break in. These people can become a threat to first responders, who cannot see through plywood to ascertain whether a property is actually vacant. Initially cheaper than polycarbonate clearboarding, plywood is easily broken into, deteriorates from weather conditions, and often has to be replaced three times or more.

Fannie Mae’s decision will likely be a catalyst that prompts the other GSEs and the industry in general to follow suit in 2017 and approve innovations that allow for the use of polycarbonate clearboarding.

The implications of this change will be staggering even if only Fannie Mae participates; if others follow suit, the impacts will be exponentially more significant. Consider that 1.3 million homes in America remain vacant. The national foreclosure rate is 1 in every 1,526 housing units, according to RealtyTrac.

As industry leaders embrace new technology, it will be possible to replace plywood with polycarbonate clearboarding, changing practically overnight the appearance of some of the most distressed neighborhoods across the country. Fannie Mae’s pre-approval policy expansion takes effect this month.

Gaining Legislative Support

Legislators from states and cities across the country are among those closest to witnessing the damage that unsecured and unsightly zombie properties exact on neighborhoods. Properties with plywood on them essentially scream that the neighborhood is in distress.

Ohio is leading all states in its proactive approach to attacking community blight. First, it passed the most progressive fast-track foreclosure law in the country, which in effect can shorten the length of time a property sits vacant during a foreclosure process from two years or more to just six months. This greatly reduces the opportunity for adverse occupants and the chances of non-surchargeable damage.

However, even more noteworthy is the measure Ohio Gov. John Kasich recently signed into law that bans plywood on vacant and abandoned properties. This bold law is the first of its kind in the United States and will have far-reaching implications. Most immediately, the law—which takes effect in March—will lead to far wider use of polycarbonate clearboarding in Ohio, which has the eighth-highest foreclosure rate in the nation, according to RealtyTrac.

This significant advancement in state government’s approach to eliminating plywood and fighting blight also should prove to be a model for states across the country.

Similarly, though not as wide-reaching, cities such as Phoenix and Coachella, California, are embracing the use of clearboarding to improve the appearance and security of their struggling neighborhoods. Phoenix was well ahead of the curve and, in 2015, passed an ordinance requiring all window and door openings visible from the street to be secured with polycarbonate clearboarding if the structure had been vacant and abandoned for more than 90 days.

In November, New York City lawmakers began review on a bill that would prohibit the use of plywood to secure vacant and abandoned buildings. Lawmakers clearly understood the simple yet direct connection between plywood and blight: “This bill would prohibit the use of plywood in sealing openings in vacant buildings,” they wrote when filing the bill. “This prohibition is intended to prevent blight.”

This bill would set a foundational example at the local level for eliminating plywood in communities of all sizes. New York City’s example would accelerate advocacy efforts for a progressive approach to blight remediation at all levels of government.

The True Cost of Foreclosure

Recently, Aaron Klein (no relation to the author) released a groundbreaking study quantifying for the first time the substantial and numerous impacts foreclosures and vacant and abandoned properties have on homeowners and their communities.

Even based on conservative estimates, the typical foreclosed home imposes costs of more than $170,000, he wrote in his paper, “Understanding the True Costs of Abandoned Properties: How Maintenance Can Make a Difference.”

The former U.S. Treasury Department Deputy Assistant Secretary for Economic Policy examines three main areas in which foreclosures and vacant and abandoned properties adversely impact homeowners and their communities: property values, crime, and increased burden on city resources. Among the findings Aaron Klein cites:

The foreclosure of a home will cause a loss of value of at least $130,000 for the home and its neighborhood.

Over half the total cost of a foreclosure’s impact on neighboring properties comes from the fact that the property is abandoned.

Vacant properties lead to increases in violent crime with substantial costs: $14,000 per vacant property per year in increased crime, translating into $795 million nationwide for all vacant properties.

The impact of vacancy on crime increases as the property stays vacant for longer periods, likely plateauing at between 12 and 18 months.

Vacant buildings are major fire hazards; vacant residential buildings account for one of every 14 residential building fires in America.

Community Blight Solutions of Cleveland commissioned this study to help decision makers across the country better understand blight’s true burdens.

Klein concludes that how well a vacant home is secured can have a substantial impact on the total costs associated with that status.

In a second study and paper to be released this month, Klein will examine the problems associated with plywood. His data will add to the growing evidence that plywood must be eliminated from vacant and abandoned properties and polycarbonate clearboarding should be used in its place.

The Year of Clearboarding

For the first time in decades, the housing industry—and mortgage field services in particular—are now armed with the tools they need to seriously and effectively attack community blight. For too long, plywood has served as the standard material for boarding vacant and abandoned properties. It has become the ugly and stigmatizing symbol of a community in despair.

Our laws and policies are now leaning toward a more proactive solution. We are beginning to replace outdated, unsightly, and inefficient plywood with modern-day technology in the form of polycarbonate clearboarding, but we have far to go. Advocacy efforts must continue at the national, state, and local levels. Progressive and effective policies must be adopted.

It is clear that 2017 will be the year of polycarbonate clearboarding. Forward-thinking leaders in government and industry are embracing a more effective solution.

Source: DS News

Additional Resources:

DS News (Not All Materials are Created Equal)

HousingWire/Community Blight Solutions (Servicing Game Changer)

DS News (The Cost of Fighting Community Blight)

Bankruptcy Case Update: A Flawless Foreclosure is Not Preference

Posted on by Safeguard

Industry Update
February 13, 2017

There is a division among bankruptcy courts across the country as to whether a properly conducted sheriff sale can be considered a “preference,” but Pennsylvania courts continue to send a clear message:

They can’t.

In the Western District of Pennsylvania, in a case the attorneys at Barley Snyder were monitoring, a judge recently held that a sheriff sale can’t be reversed or avoided by way of a preferential transfer action. That continues the streak where western Pennsylvania courts have continued to side with creditors when it comes to preference actions arising from sheriff sales rather than debtors, even though courts in other states have sided with debtors.

The facts of the case were undisputed. The individual debtor owned a home that she claimed was worth $200,000. It was subject to a first mortgage in favor of Capital One and a second mortgage held by Fifth Third Bank. Capital One commenced foreclosure for non-payment and obtained a default judgment. At a July sheriff sale, Fifth Third purchased the home for $90,000, with the bank’s deed issued in August. The home’s former owner did not participate in or object to the foreclosure action and sale, conceding she was behind on her mortgage payments and the foreclosure proceedings were completed in full compliance with the applicable law.

The debtor filed her Chapter 11 bankruptcy case October 2 and promptly filed suit seeking a determination that Fifth Third’s purchase was an avoidable preference in the amount of $80,000. Specifically, the debtor alleged the sheriff’s sale met the criteria for a preference since it was a transfer, the transfer occurred within 90 days of her petition, the debtor was insolvent at the time of sale, the transfer was made to satisfy an antecedent debt and that it allowed Fifth Third to secure more than it would have if the case was filed under Chapter 7. The court granted Fifth Third’s motion to dismiss the case even though the former homeowner appeared to meet the conditions for a preferential treatment.

Applying rationale from the U.S. Supreme Court decision in BFP v. Resolution Trust Co. alongside prior decisions from the Western District, Judge Carlotta Bohm found that Fifth Third could not and did not receive more under the qualifications of the law since it purchased the property at a regularly-conducted, non-collusive sheriff’s sale. The court’s determination essentially said properly conducted sheriff’s sales are not, and will not, be considered a preference.

Source: Barley Snyder Attorneys at Law

Arizona Court: Lender Who Bought Property at Foreclosure by Full Credit Bid Entitled to Title Insurance Coverage

Posted on by Safeguard

Industry Update
February 9, 2017

Can a lender who purchases the secured property via a full credit bid still obtain payment from the insurer who issued a title insurance policy for the deed of trust? Yes, the Arizona Supreme Court ruled this week, in a win for lenders and insureds. See Equity Income Partners, LP v. Chicago Title Ins. No., CV-16-0162-CQ.

When a lender issued two loans to borrowers, it bought two standard form title insurance policies that insured the lender against loss or damage sustained by reason of unmarketable title or lack of right of access to the land the borrowers were purchasing. The borrowers discovered that the land was surrounded by Maricopa County land and that they did not have legal access to the land. The borrowers defaulted and the lender foreclosed, and purchased the properties at a trustee’s sale for a full credit bid (i.e., the full amount of the debt). The lender then submitted a claim to its title insurer. But the insurer, Chicago Title Insurance Company (“Chicago Title”), refused to pay.
 
Chicago Title argued the policy was extinguished when the lender purchased the properties by credit bid for the full amount of the debt. The court disagreed, because the policy stated that coverage remained in force after the insured acquired the property. The provision stating that “payment” of the secured debt reduced the amount of insurance did not apply because the credit bid was not a “payment,” the court ruled. The lender received the title to the property and the borrowers’ outstanding debt was deemed fully satisfied, but the lender did not actually make or receive any payment. Therefore, the policy was not terminated nor its value reduced by the credit bid. So what is Chicago Title’s liability to the lender? The difference between the loss that the lender incurred and the fair market value of the properties that the lender acquired.

Source: Quarles & Brady LLC