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Congress Extends Foreclosure Postponements for Military Servicemembers

Posted on September 13, 2018September 13, 2018 by Safeguard

On January 12, JD Supra Business Advisor posted an article by CEB (Continuing Education of the Bar-California) discussing the recent decission by Congress to extend special provisions in the Servicemembers Civil Relief Act (SCRA) (50 USC App §§501–597a).

Congress Extends Foreclosure Postponements for Military Servicemembers

At the 11th hour (late December, 2014), Congress extended special provisions in the Servicemembers Civil Relief Act (SCRA) (50 USC App §§501–597a) that mandate postponement of a foreclosure on a military servicemember’s property. See Pub L 113–286.

What is the SCRA? The SCRA invalidates a foreclosure of a lien by virtue of a mortgage or deed of trust on real property for nonpayment of any amount due if the foreclosure is conducted while the debtor is in military service, or within 1 year after the debtor’s military service has ended, except on court order or if made valid under a written agreement. 50 USC App §533. This postponement applies only if the obligation was incurred before the debtor entered military service. 50 USC App §533(a)(1). California has enacted similar provisions. See Mil & V C §408.

On judicial foreclosure actions, the SCRA allows a servicemember to request a stay of the action “for a period of time as justice and equity require,” if the action was filed while the member was engaged in military service, or within 1 year after the service has ended, and the member’s ability to comply with the mortgage payments “is materially affected by military service.” See 50 USC App §533(b)(1). The court also has the power to modify the loan under 50 USC App §533(b)(2). Here, too, California has enacted similar provisions. See Mil & V C §408.

Who is Affected by the SCRA? The SCRA applies to all military servicemembers and their dependents, whether they entered military service before or after signing a loan or mortgage agreement. When the SCRA applies, it effectively precludes foreclosure by trustee sale without court intervention. Consequently, before conducting the foreclosure sale, trustees customarily require assurance that the trustor is not a member of the armed forces. The beneficiary usually provides this assurance by executing an affidavit on a form supplied by the trustee. If the beneficiary has no direct knowledge of the trustor’s military status, it may be necessary to obtain certificates from the personnel branches of each of the armed forces stating that the trustor is not in the military service.

What Does the 2014 Amendment Do? The 2008 amendment to the SCRA (50 USC App §533) had changed the time period during which foreclosure could not occur from 90 days to 9 months; the 2012 amendment had changed that time from 9 months to 1 year and was scheduled to expire on December 31, 2014. The 2014 amendment (1) extended that sunset date to December 31, 2015, and (2) effective January 1, 2016, the period under §533 will revert from 1 year to 9 months, rather than to the pre-2008 period of 90 days.

Further Research. There are great resources at CEB for foreclosure litigation attorneys. For discussion of both nonjudicial and judicial foreclosure, see California Mortgages, Deeds of Trust, and Foreclosure Litigation, chaps 2–3, 7 (4th ed Cal CEB). A new annual update of the book will be published in January 2015. Go to ceb.com to see the table of contents for each chapter of the book.

Please click here to view the article online.

About Safeguard
Safeguard Properties is the mortgage field services industry leader, preserving vacant and foreclosed properties across the U.S., Puerto Rico, Virgin Islands and Guam. Founded in 1990 by Robert Klein and headquartered in Cleveland, Ohio, Safeguard provides the highest quality service to our clients by leveraging innovative technologies and proactively developing industry best practices and quality control procedures. Consistent with Safeguard’s values and mission, we are an active supporter of hundreds of charitable efforts across the country. Annually, Safeguard gives back to communities in partnership with our employees, vendors and clients. We also are dedicated to working with community leaders and officials to eliminate blight and stabilize neighborhoods. Safeguard is dedicated to preserving today and protecting tomorrow. Website: www.safeguardproperties.com.

Baltimore Ordinance Concerning Vacant Structures Signed by Mayor

Posted on September 13, 2018September 13, 2018 by Safeguard

On January 25, The Baltimore Sun published an article titled City to take earlier, more aggressive approach to abandoned houses.

City to take earlier, more aggressive approach to abandoned houses

Past the manicured lawns and tidy red brick rowhomes along Stonewood Road in Baltimore’s New Northwood neighborhood sits one house that shows the ravages of years of neglect..

A faded and weathered garland from two, perhaps three, Christmases gone by coils around the front railing, and a strip of gutter ripped from the decorative cornice along the roof’s edge lies precariously atop the covered porch.

Councilman Bill Henry says neighbors call City Hall regularly to complain and to plead with officials to force the owner to fix the place up. But so far, the city’s efforts have been fruitless. Notices hang from the front doorknob; more sit unattended behind the screen door. (Attempts by The Baltimore Sun to reach the owner of the house also were unsuccessful.)

But Henry thinks the city has found a solution.

A law set to take effect next month will allow Baltimore officials to take over an abandoned home earlier than currently allowed, when an empty property begins to show signs of neglect but before it has a chance to fall into the level of disrepair that risks dragging down the entire neighborhood.

The law, sponsored by Henry, approved by the City Council and signed last week by Mayor Stephanie Rawlings-Blake, is the city’s latest tool against the 16,000 vacant properties that blight the landscape — leftovers from an era when the population was nearly twice as large, and magnets for the crime that for many defines Baltimore. Many believe that the city cannot move ahead until it solves the problem; Rawlings-Blake has made it a policy priority.

Advocates for property rights warn that such laws could be abused by officials eager to gentrify neighborhoods.

To Henry, the law gives communities a fighting chance.

“It is a war against blight,” he said. “You really have to fight blight like it is an enemy force. You have to put up defenses. You have to make sure you can flank it. You have to make sure you don’t get outflanked by it.”

Under current law, the city won’t force the sale of an abandoned house unless the windows and doors are broken or left open, allowing people and pests to come and go freely, or unless other damage is so severe that the property is unsafe.

The new law expands the circumstances in which the city may begin that process. For most of the houses in question, the clock will start when the city’s 311 hotline fields the first complaint of neglect — a dilapidated front porch, for example, or trash piling up among tall weeds.

Housing inspectors have generally responded to such complaints by writing up notices and issuing fines. But officials say that often didn’t solve the problem.

Under the new law, when the owner of a problem property ignores repeated notices to keep up a home, the city can petition a district court to force a sale.

Officials expect only a couple of hundred unoccupied houses to fall into this new category. In most cases, they say, the home will have been abandoned because the owner died. But they say the impact will be felt widely, because the effect abandoned properties can have on communities is far-reaching.

On a recent day, crews from the Department of Public Works, armed with a list of vacant properties, made stops in East and West Baltimore to board up houses. All of them met current city definitions.

City employees David Johnson Jr. and Clyde Crawford tugged on the front door of a house in the 1200 block of James St. in Pigtown to check if it was locked. Then they went around back and were able to walk inside. They found glass shattered all over the kitchen floor and trash, clothing and a For Sale sign strewn about.

Upstairs, a woman slept on a thin mattress on the floor with a gray-and-white kitten snuggling beside her. In the next room, a man awoke, scurried down the steps and out the back door. Scattered on the floor were syringes and needles, pills and empty packs of cigarettes.

Johnson asked the woman to grab her belongings and leave the property.

“We greatly appreciate your cooperation,” he said.

The woman rolled up a brown sleeping bag, grabbed a Betty Boop purse and stuffed some clothes in a Price Rite shopping bag.

The woman swore and asked, “Do you know what time it is?”

Later she said, “The dude said this was his brother’s house.”

The woman listed on property records as the owner told The Sun that the bank had taken the house. She said she didn’t know the name of the bank and declined to comment further.

At the next stop, Johnson and Crawford cut pieces of plywood to fit over the windows and doors of a vacant house in the 300 block of Fulton Ave. in the Franklin Square neighborhood.

The owners couldn’t be reached for comment. A neighbor said a fire forced a family to abandon the house more than a year ago. Now, neighbor Roger Simpkins said, he worries about squatters “getting high and burning it up.”

Rawlings-Blake said the new law will help the city respond more effectively to community complaints and will keep neighborhoods stronger.

“It is a real-life problem for communities across our city to deal with having a blighted and unoccupied property, and because of a technicality we were not able to do anything about it,” she said. “If it doesn’t make sense, you have to figure out a better way to do it.”

Rawlings-Blake said the approach is one of several the city uses to address vacant houses. The city plans to spend about $13 million to stabilize or knock down such properties.

The city spends about $1 million annually to board up vacant houses. Officials plan to tear down about 600 between now and early next year.

Officials say they don’t know how much enforcement of the new law will cost. The houses in the new category won’t have to be boarded up, at least initially, the way typical vacants are, because they don’t have unsecured access; otherwise, they’d already be considered vacant.

Rawlings-Blake’s Vacants to Value program identifies entire blocks slated for demolition and facilitates large-scale redevelopment in distressed communities. The administration says the initiative, unveiled in November 2010, has spurred the demolition or rehabilitation of 3,000 vacant houses and brought more than $107 million in private investment.

For some, images of entire city blocks lined with boarded-up houses have come to define Baltimore. Rawlings-Blake said she’s not concerned that the new law will add to the number of vacant houses on the books. She said it will help the city respond when a resident comes to officials and says, “The house next door is vacant, no one lives there, the paint is coming off the shutters, no one is collecting the mail.”

“There was very little for us to do,” she said.

Local landlords are studying the law.

“We certainly feel that it’s going to have an impact on our members, and investors in general, but we will have to review it in more detail to see exactly what the impact will be,” said Alan Chantker, president of the Mid-Atlantic Real Estate Investors Association.

Tommy Tompsett, director of government affairs for the Maryland Multi-Housing Association, said after a cursory review of the new law that it appeared unlikely to have much effect on landlords. He said the violations that would trigger the city to force a sale would also likely make a home uninhabitable, and unlikely to be rentable in the first place.

But Jeff Rowes, a senior attorney with the Institute for Justice in Arlington, Va., warned that the law could allow officials to make an “end run around eminent domain laws.” Such laws set limits on the government’s ability to acquire private property.

He advised officials to tread carefully.

“There is a huge potential for abuse, especially when there are developers who want to get their hands on the property and the city can resort to this instead of using eminent domain,” Rowes said.

The Constitution is clear in allowing governments to take properties that pose health and safety risks, Rowes said, but characterizing houses as nuisance properties is a gray area.

Jonathan Wood, a staff attorney with the Pacific Legal Foundation in Sacramento, Calif., said potential issues with Baltimore’s nuisance property law will come down to the way the City Council wrote the legislation and how officials enforce it.

“The City Council has an obligation to the community but also to the property owners, who have constitutional rights that need to be protected,” Wood said.

Henry, who introduced the legislation, said the city won’t use the law against property owners who keep their houses in good shape.

“This law is about protecting neighborhoods from irresponsible, absentee owners,” Henry said. “If you’re a responsible property owner, you will have absolutely no problem with this law. You just need one really bad house in the middle of a block, and you’ve just impacted the property values of 30 or 40 houses around it.”

Henry said the effect of abandoned properties on homes values citywide likely reaches millions of dollars.

Henry spoke of a neighbor who died a few years ago. He said he watched her home in the Radnor-Winston neighborhood of North Baltimore fall into disrepair. The property was put up for auction at an estate sale, but the high bid fell a few thousand dollars short of the $55,000 reverse mortgage she had on the property.

While the house sat empty, Henry said, a shutter smashed a third-story window during a storm, letting in the elements and animals, which caused further damage, Henry said. By the time the bank finally sold the house, he said, its value had fallen to $25,000.

The house never met the city’s definition of vacant, Henry said, despite being abandoned for years.

“That’s what got me, where I said, ‘Maybe we have to change the way we address this,'” Henry said. “It’s become more of a problem for more people.”

Once an unoccupied house is declared to be vacant or a nuisance property, Assistant Housing Commissioner Jason Hessler said, the city can petition the court to intervene through a process called receivership. That allows a third party to auction the property to a buyer who will redevelop it.

The average sale price for an auctioned house is about $20,000, although some sell for as little as $5,000. The money goes first to cover outstanding taxes and fees. Any remaining cash is given to mortgage companies and the original owner.

If the property doesn’t sell, the city can consider alternatives, including demolition.

Hessler said the city might issue violations for unoccupied houses based on exterior problems, such as a porch falling apart, gutters or downspouts missing, or shutters falling off. But until now, it hasn’t had the option of taking the owners to court under the receivership process.

“When owners walk away from the house, and it’s starting to rot, you can see it from these more minor violations from the outside,” Hessler said. “That is an indicator to us that there are additional problems.”

He said the new law “allows us to get to these properties before they rot all the way through.”

City officials think Ashburton in Northwest Baltimore is one neighborhood that stands to benefit from the new law: It’s a stable community with few vacants, but it occasionally sees a house abandoned by an owner who suffers financial challenges or health issues or dies.

Beatrice Scott, president of the Ashburton Area Association, called the new law “a very important move.”

“We wholeheartedly appreciate that,” she said. “Ashburton doesn’t sit still for a lot of neglect.”

Officials said Lake Evesham, Original Northwood and Belair-Edison are other examples of neighborhoods that could benefit from the new law.

Council President Bernard C. “Jack” Young said he’s eager to see the city shed the vacant houses.

“We should go further and put some restrictions on how long a house can be vacant before we start just giving them away to developers and nonprofits,” Young said. “It’s sickening that they have been sitting for 10, some 15 years, and there should be some kind of cutoff.

“We have blocks of them. Let’s give them to developers — just give them to them.”

Please click here to view the article online.

Please click here to view Baltimore’s Ordinance Concerning Vacant Structures (Bill 13-0293).

Wisconsin Court of Appeals Rejects Publication Deadline For Residential Foreclosures

Posted on September 13, 2018September 13, 2018 by Safeguard

On December 15, Bradley, Arant, Boult, Cummings LLP published an Appellate Alert discussing the Wisconsin Court of Appeals’ decision in Bank of America, N.A. v. Prissel,-N.W.2d-Nos. 2014AP642 & 2014AP647.

Wisconsin Court of Appeals Rejects Publication Deadline For Residential Foreclosures

Appellate Alert

On Tuesday, December 9, 2014, the Wisconsin Court of Appeals issued its decision in Bank of America, N.A. v. Prissel, — N.W.2d —, Nos. 2014AP642 & 2014AP647, a consolidated appeal involving the timing of a lender’s obligation to publish notice of residential foreclosure sales. At issue was the proper interpretation of Wisconsin Statute § 846.101(2), which provides that notice of a foreclosure sale of one- to four-family residences “shall be given” within the six-month redemption period following entry of a foreclosure judgment.

The borrowers challenged Bank of America’s failure to publish notice of two foreclosure sales within the six-month redemption period, arguing that Section 846.101(2)’s use of the word “shall” required publication within that time period. Bank of America, on the other hand, argued that the provision should be interpreted within the context of the entire foreclosure framework and, viewed in that light, should be interpreted to allow, but not require, publication within the six-month period.

In a unanimous opinion designated for publication, the Wisconsin Court of Appeals resolved the issue of first impression in Bank of America’s favor. Reiterating that “interpretations of mortgage foreclosure statutes must be based on the context of [the statutory framework] as a whole,” the court held that the legislature’s use of the word “shall” was “directory, rather than mandatory.”

The court agreed with Bank of America that a permissive construction was appropriate for several reasons. First, even though four other Wisconsin statutes governing different types of foreclosures provided that notice “may be given” within six months, the court concluded that it made no sense to interpret Section 846.101(2) any differently despite the statute’s use of the word “shall.” The court found no “reason why the legislature would have decided to require notice” within six months for one- to four-family residences, but not any other type of property.

Second, Section 846.101(2) “does not express a penalty for failing to publish” within the six-month period, which “lends support for construing the statute as directory.”

Third, requiring notices of sale to be published within the six-month period “could force lenders to market properties for sale when doing so is in neither the lender’s nor the borrower’s interest,” such as when “the borrower is appealing the foreclosure judgment” or the “parties have reached, or are trying to reach, a post-judgment workout or loan modification.”

Fourth, interpreting the word “shall” to be mandatory would contradict the purpose of the six-month redemption period, which “is to delay foreclosure sales for a period of time so that a defaulting borrower has an opportunity to redeem a foreclosed property.”

For these reasons, the court held that “Bank of America was permitted, but not required, to publish notices of foreclosure sale during the Borrowers’ redemption periods.”

Bradley Arant Boult Cummings LLP represented Bank of America in the Wisconsin Court of Appeals. If you have any questions, please contact Edmund Sauer.

Please click here to view the alert online.

Spending Bill Bans FHA from Financing Eminent Domain Loans

Posted on September 13, 2018September 13, 2018 by Safeguard

On December 12, National Mortgage News released an article discussing a provision in the $1.05 trillion cromnibus appropriations bill that would ban the Federal Housing Administration from refinancing loans that have been seized through eminent domain.

Spending Bill Bans FHA from Financing Eminent Domain Loans

The so-called cromnibus appropriations bill passed by the House late Thursday included a little-noticed provision that would make it more difficult for municipalities to use eminent domain to condemn and seize underwater mortgages.

The massive $1.05 trillion spending bill would ban the Federal Housing Administration from refinancing loans that have been seized via eminent domain. The bill is expected to be signed by the Senate soon.

Proponents of eminent domain such as San Francisco-based Mortgage Resolution Partners were planning to use FHA-insured loans to refinance loans that have been seized by municipalities and written down to their current appraised value.

But so far, the use of eminent domain has been thwarted by industry groups like the Mortgage Bankers Association and Securities Industry Financial Markets Association, which have strongly opposed Mortgage Resolution Partners’ efforts in cities like Richmond, Calif., Las Vegas and Newark, N.J.

Fannie Mae and Freddie Mac are not allowed to finance loans involved in an eminent domain takeover.

But Department of Housing and Urban Development officials have declined to take a position on the issue, contending they would have to consider the circumstances when actually presented with an application to refinance a mortgage seized via local governments exercising eminent domain.

Language in the spending bill says it “prohibits funds for HUD financing of mortgages for properties that have been subject to eminent domain.”

The inclusion of this language was welcomed by SIFMA.

“We are very supportive of Congress taking that position. By congress preventing FHA involvement, it restores certainty and confidence to the mortgage market and securitization,” said Dave Oxner, managing director of the group.

The MBA has supported a prohibition for a number of years, according to chief lobbyist Bill Killmer.

The use of eminent domain to achieve principal reduction would have created capital market implications, Killmer said.

Municipalities that resorted to eminent domain would have turned into “no-fly zones,” he said, where lenders would not finance new mortgages.

Other FHA-related provisions in the $1.05 trillion spending bill would block the agency from implementing its housing counseling program known as Homeowners Armed with Knowledge (HAWK) and from imposing a 4-basis-point fee on each newly insured mortgage to pay for upgrading its computer systems.

Please click here to view the article online.

About Safeguard
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders, and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally.
Website: www.safeguardproperties.com.

San Francisco Debates Eminent Domain for Mortgages: Muni Credit

Posted on September 13, 2018September 13, 2018 by Safeguard

On December 7, Bloomberg published an article discussing a proposal for the city of San Francisco to use eminent domain to take over loans on property with a market value below the mortgage amount.

San Francisco Debates Eminent Domain for Mortgages: Muni Credit

San Francisco may become the biggest U.S. city to use its development powers to help homeowners avoid foreclosure, partnering with another California community whose own plan has come under fire from investors.

The proposal from a member of San Francisco’s Board of Supervisors would use eminent domain to take over loans on property with a market value below the mortgage amount. A lawmaker says it would help minorities in the city of about 837,000, while some officials see the move increasing borrowing costs and discouraging investors.

The city may find out as soon as next month. Officials are seeking approval to sell about $400 million of general-obligation bonds in January to refinance debt, said Nadia Sesay, San Francisco’s public-finance director. The controller also plans to release a study on the eminent-domain plan next month.

“We’ve seen a large exodus of working-class and middle-class households from the city and I wanted to look at a tool to support these homeowners,” San Francisco Supervisor John Avalos, who offered the plan, said in a phone interview.

Affordability Squeeze

The issue is part of a broader debate over housing affordability in San Francisco as technology-industry wealth drives up housing prices and squeezes the middle class. If the proposal succeeds, the city would join nearby Richmond, which is seeking municipal partners in the effort. Lawmakers in California’s San Bernardino County, as well as in Chicago and North Las Vegas, Nevada, considered and abandoned the idea.

San Francisco supervisors in October asked the controller to look into partnering with Richmond. The refinery town of about 108,000 voted in 2013 to adopt a plan to use eminent domain — the right of governments to take private property for the public good — to seize loans and modify them to help homeowners avoid foreclosure. San Francisco lawmakers also asked the controller to offer alternatives to help borrowers.

Wells Fargo & Co. (WFC), Deutsche Bank AG (DBK) and Bank of New York Mellon Corp. sued Richmond on behalf of investors that hold securities backed by mortgages in the community.

‘Negatively Perceived’

Such a program in San Francisco would “likely be negatively perceived by financial markets, insurers, other financial intermediaries and potential investors in the city’s bonds,” Sesay and Ben Rosenfield, the controller, said Oct. 6 in a memo to Mayor Ed Lee and the 11-seat Board of Supervisors.

If the city adopts that approach, it may have to sell debt using a negotiated sale, instead of a competitive offering, in which it auctions bonds to the highest bidder, they wrote.

“In these circumstances, such a sale may draw from fewer potential investors and transaction participants, resulting in higher sale costs and less competitive interest rates,” they said.

Rosenfield hasn’t heard from investors or banks about the proposal, he said in a telephone interview.

Hundreds of homeowners may benefit from such a program now, and it may reach thousands in the future, Avalos said in an Oct. 21 memo to fellow supervisors.

“I’d like to stress the importance of not abandoning a substantial number of low-income, minority San Francisco homeowners because we are afraid that Wall Street will retaliate against us,” he said.

Risk-Reward

The city is the nation’s most expensive housing market. The $975,000 median home price for San Francisco as of October is tops among major U.S. cities, according to data provider RealtyTrac.

In the city’s estimation, the program wouldn’t be worth the risk, as it would apply to a limited group of borrowers.

About 90,000 San Francisco homeowners hold mortgages, of which about 10,000 involve loans bundled for sale to investors, which is the target group, the report said, citing data provider CoreLogic. (CLGX) About 80 of those loans are underwater, less than 0.1 percent of owner-occupied mortgages, according to the memo from the controller and the public-finance director.

Starved Market

Michael Johnson, managing partner at Gurtin Fixed Income Management, says the pool of loans is so small that it wouldn’t materially increase the city’s bond costs, especially given the roaring demand for California debt.

“It would be watched, but in terms of actual borrowing costs and the way the market would view the city’s bonds, I don’t see that that would have a real effect,” Johnson, whose company oversees $9.5 billion in Solana Beach, California, said in an interview. “The market is starved for good-quality California bonds.”

Investor appetite for tax-free California bonds increased after voters in 2012 approved increases to levies on sales and income.

Richmond, east of San Francisco, has been looking to partner with other cities to establish an authority that would buy underwater mortgages at market value and reduce the loan principal.

Wells Fargo sued Richmond last year, saying the approach violates constitutional protections against impairing private contracts. The bank dropped its case in May because the city hadn’t carried out its plan.

Jen Hibbard, a spokeswoman for the San Francisco-based bank, whose mortgage business is the largest in the U.S., declined to comment on San Francisco’s plan.

The move “could undermine and have a chilling effect on the extension of credit to prospective homeowners,” the Mortgage Bankers Association, a Washington-based trade group, said in an October brief. Federal programs aimed at mortgage modifications would be a better alternative to help struggling homeowners, the brief said.

Please click here to view the article online.

Protecting Tenants at Foreclosure Act (PTFA) Scheduled to Expire at End of 2014

Posted on September 13, 2018September 13, 2018 by Safeguard

Updated 4/1: On March 31, the New Haven Register released an article titled Programs, laws protect Greater New Haven homeowners, tenants from foreclosure.

Link to article

Updated 3/20: On March 13, Rep. Keith Ellison (D-MN) published a press release announcing the introduction of the Permanently Protecting Tenants at Foreclosure Act of 2015 (H.R. 1354).

Link to article

Link to H.R. 1354 text

On December 29, Benjamin Hoen, attorney with the Real Estate Default Group of Weltman, Weinberg & Reis Co., LPA authored a Client Advisory titled Federal Tenant Protection Act Scheduled to Expire.

Client Advisories Federal Tenant Protection Act Scheduled to Expire

In 2009, President Obama signed into law the federal Protecting Tenants at Foreclosure Act (PTFA), granting tenants, under certain circumstances, the right to live out their lease or at least 90 days’ notice before having to vacate a property sold at foreclosure sale. PTFA came at the height of the foreclosure crises, in response to a pervasive trend impacting renters living in mortgaged properties. Even though they paid rent each month, tenants were being evicted when the place they called home went through foreclosure, because their landlords failed to pay the mortgage.

However, these protections will no longer exist when PTFA expires on December 31, 2014.

In 2013, Legislation was introduced in the House and Senate by a number of democratic Senators and Representatives, seeking to make these protections permanent. The Bills received very little bi-partisan support, and as a result neither the House nor the Senate took a vote on the bill prior to the December congressional recess. With the new Republican controlled Congress set to take office in 2015, it is not expected that a Bill to make these protections permanent will gain much traction in the next Congress.

In a related matter, Congress passed a one year extension to the Foreclosure Relief and Extension for Servicemembers Act prior to the December recess. The Act ensures that troops on active duty are protected against losing their home for one year following the completion of their service. Previously, under the Servicemembers Civil Relief Act (SCRA), troops were only protected for 90 days. In 2012 those protections were extended to nine months, before being extended to one year in 2014. The Act was also set to expire on December 31, 2014, and if Congress had not acted, the protections would have reverted to the original 90 days. The temporary extension of these protections will remain in effect until December 31, 2015 and the Bill now awaits the President’s signature.

WWR will continue to monitor these situations, and take all necessary steps to ensure that our clients remain in full compliance with existing Federal law. Future updates to PTFA and SCRA will also be provided as they become known.

Please click here to view the advisory online.

Plans to Use Eminent Domain on Mortgages Stall, But Concerns Remain

Posted on September 13, 2018September 13, 2018 by Safeguard

On December 8, National Mortgage News published an article discussing the issue of muncipalities using eminent domain to seize underwater mortgages.

Plans to Use Eminent Domain on Mortgages Stall, But Concerns Remain

While municipal efforts to use eminent domain to seize homeowners’ underwater mortgages have subsided, the issue is still a concern for many mortgage bond market participants, according to Securities Industry and Financial Markets Association executives.

With some proposals still outstanding and the prospects of other efforts renewing, the concern is that mortgage eminent domain attempts could spread more widely if any one municipality is able to make inroads with a proposal, said Chris Killian, managing director and head of SIFMA’s Securitization Group.

“If one city moved forward and was successful, others would probably look to do it, too,” he said in an interview.

Through eminent domain, governments can seize private assets if they can justify that the assets serve a public purpose. Since the housing crisis, some municipalities have explored using the power to take control of underwater mortgages in their communities.

Some securities groups and investors have been not only been very vocal but filed legal challenges to the concept because it threatens to interrupt bondholders’ cash flows from collateral backing mortgage securities, and these debt instruments currently constitute a large, government-dominated market.

“If it proceeds, it’s still a serious issue,” Randy Snook, executive vice president for business policies and practices at SIFMA told NMN. “There are still municipalities considering it.”

But the number of municipalities interested has shrunk considerably, from two or three dozen to merely a “handful,” he said.

“I think a lot of people look at it and say, ‘Nice idea, but I don’t think I want my city to get mixed up in it [given the legal questions],'” said Killian.

Eminent domain seizure of loans could affect both private investors and taxpayers given government guarantees on the majority of current mortgage-backed securities market.

Laws governing eminent domain seizures call for “just compensation” to the previous owners of seized assets. But Snook said the loans seized would be bought for a “substantial discount” under existing proposals.

An eminent domain proposal being considered by the city of Richmond, Calif. is the one most likely to move forward, even though an investor group has already sued the municipality over the matter.

The Richmond city council has voted 4-3 in favor of moving forward with its plan, but needs one more vote in its favor for the program to get under way. Recent Richmond election results make that more likely to occur if politicians that take office in January maintain past positions.

Other municipalities still considering mortgage eminent domain proposals include Newark, N.J. and San Francisco. In addition, some New York City council members considered the move early this year as a means of providing underwater mortgage relief.

However far any of these cities take their proposals is currently in question. San Francisco is only studying the possibility for now, while Newark has budget problems that have led to state control of some functions. This could complicate Newark’s efforts to pursue mortgage eminent domain.

please click here to view the article online.

Ohio Senate Amends Proposed Foreclosure Expedition Bill

Posted on September 13, 2018September 13, 2018 by Safeguard

Updated 1/29/16: The Port Clinton News Herald published an article titled Improving neighborhoods with new foreclosure process.

Link to article

Updated 12/30/15: The Daily Reporter released an article titled House moves bill targeting blight.

Link to article

Updated 11/18/15: DS News published an article titled Delgado Applauds Passage of Ohio Foreclosure Fast Track Bill, Urges Senate to Act.

Link to article

Updated 6/22/15: On May 28, 2015, DS News published an article titled Re-Introduced Ohio Foreclosure Expedition Bill Passes House, Heads for Senate Vote.

Link to article

OH HB 134 Summary [pdf]

Link to OH HB 134 Full Text

Updated 1/9/15: On January 9, 2015, DS News released an article titled Ohio Lawmakers Plan to Re-Introduce Foreclosure Expedition Bill.

Link to article

Updated 12/11/14: On December 10, 2014, DS News published an article titled Amended Ohio Foreclosure Expedition Bill Dies in Senate Finance Committee.

Link to article

Industry Update
December 9, 2014

An Ohio House bill that would have expedited the residential foreclosure and transfer process and taken steps toward eliminating blight and vandalism in foreclosed, vacated properties has been amended and was introduced in the Ohio State Senate Tuesday, a source close to one of the bill’s sponsors told DS News.

Ohio HB 223 originally called for the launch of a pilot program in three counties in Ohio that would skip the sheriff’s appraisal process for foreclosed homes and allow foreclosed, abandoned homes to be sold with no minimum bid. In its original form, the bill would have significantly cut the time that a home sat vacant and abandoned while the foreclosure process is being completed. Other states were already looking at adopting similar legislation using Ohio HB 223 as a model, according to one of the original bill’s sponsors, Ohio State Representative Cheryl Grossman.

The amended bill, as proposed by Ohio’s Senate Financial Committee, eliminates the pilot program – what the source referred to as the “meat and potatoes” of the bill – and calls for a study commission, ensuring that the lengthy foreclosure process will not be shortened anytime soon and vacant and abandoned homes will remain in that state, contributing to the spread of blight in Ohio neighborhoods.

“Earlier today, the Ohio State Senate rendered a bill impotent, a bill which would have taken steps to ensure that these magnets for crime would be more quickly rehabilitated and promote the safety of neighborhoods across the state,” said Ed Delgado, President and CEO of the Five Star Institute. “A bill that could have become the template for a national policy on the treatment of vacant or abandoned properties. To say that today’s events are both short-sighted and disappointing would be a horrible understatement.”

Grossman said the idea for the bill was first proposed by Columbus City Attorney Rick Pfeiffer, and it was introduced to the Ohio Senate in June 2013 by Grossman, a Republican, and Ohio State Representative Michael Curtin, a Democrat. It passed unanimously in the Ohio House in April 2014.

One of the main purposes of the bill was to work to eliminate blight, which Grossman called a “cancer in neighborhoods” and a “horrible problem. Nothing good can come from these homes.” She said the longer they sit vacant, the greater the chance for more serious damage to the home will occur. Also, blighted properties often lead to vandalism and violent crime – and sometimes even tragic loss of life.

“Michaela Diemer, Mary Ellen Gutierrez, Jasmine Trotter, Anith Jones, Ahlyja Pinson … the list of names goes on,” Delgado said. “These are just a few of the hundreds of women have been raped or murdered in or near a vacant and abandoned property. They’re ordinary people. People that were mothers, wives, sisters, and daughters. The issue of vacant properties has become more than the expedient treatment of a distressed residential property. These shells have become a bastion for weapons, drugs, gangs, molestations and violent assaults. How many more must be harmed or tragically lose their life before a policy of common sense comes into play?”

The amended bill, introduced to the senate Tuesday, will likely be sent to the senate floor for a vote on Wednesday, then to the house floor for a vote the following day. If it does not pass in both the house and the senate, it will go to a conference committee – but it is expected to pass in both, the source close to the bill’s sponsors said.

The source close to sponsors of the original bill was disappointed that the bill was “gutted,” but said of the amended bill that “something is better than nothing.”

Source: DS News

Additional Resource:
Safeguard Properties Fast-Track Legislation Resource Center

North Carolina Appellate Court Discusses Service of Process by “Posting” and Due Dilligence Enabling “Posting”

Posted on September 13, 2018September 13, 2018 by Safeguard

On December 2, Michael C. Thelen, attorney with Womble Carlyle Sandridge & Rice, LLP posted an article to The National Law Review discussing In re Powell, No. COA14-498 (December 2, 2014).

North Carolina Appellate Court Discusses Service of Process By “Posting” and Due Diligence Enabling “Posting”

The North Carolina Court of Appeals issued a fractured ruling today on the manner of service and the interpretation of North Carolina Rule of Procedure 4(j1). The case is In re Powell, No. COA14-498 (December 2, 2014).

The heart of the matter is the manner of service. Specifically, whether the holder of the debt properly served the notice of foreclosure, a legal prerequisite.

Service of Foreclosure Notice

The law governing the service of notice of foreclosure provides: “The notice shall be served and proof of service shall be made in any manner provided by the Rules of Civil Procedure for service of summons, including service by registered mail or certified mail, return receipt requested.” NCGS 45-21.16(a).

The law continues, in the event “service upon a party cannot be effected after a reasonable and diligent effort” for “service of a summons, including service by registered mail or certified mail, return receipt requested” service by “publication” is authorized, which is made “by posting a notice in a conspicuous place and manner upon the property not less than 20 days prior to the date of the hearing”. NCGS 45-21.16(a). Notably, “[s]ervice by posting may run concurrently with any other effort to effect service.” NCGS 45-21.16(a).

Service Pursuant to Rule 4

Rule 4(j1) of the North Carolina Rules of Civil Procedure provides that “when a party cannot with due diligence be served by personal delivery, registered or certified mail, or by a designated delivery service,” the party may be served by publication. NCGS 1A-1, Rule 4(j1).

Analysis

The foreclosed-upon appellant made two arguments, neither of which the majority accepted: (1) the use of the word “or” in Rule 4(j1) is conjunctive rather than disjunctive, and therefore a party must attempt service by personal delivery, registered/certified mail, and designated delivery service before it may rely on posting notice to the subject property; or, in the alternative, (2) if the word “or” is disjunctive, [appellee debtholder] did not exercise due diligence before relying on posting.”

On the first issue, the majority determined, “In the considerable amount of caselaw interpreting Rule 4(j1), neither this Court nor our Supreme Court has ever adopted the interpretation espoused by appellant in this case – that a party must attempt personal service, service through registered or certified mail, and service through a designated delivery service before resorting to publication.”

To the majority, Rule 4(j1) is disjunctive and appellee debtholder’s attempts at mail service and personal service, concurrently with posting, were sufficient to trigger the viability of service by posting.

To the concurring judge, however, Rule 4(j1) is conjunctive and appellee debt holder must show that the foreclosed-upon appellant “cannot with due diligence be served” by mail service, personal service, or designated delivery service. Importantly, the concurring judge notes that, though conjunctive, “a party must [not] actually attempt to serve the opposing party in all three ways before utilizing service by publication” to satisfy Rule 4(j1).

Is this a distinction without a difference? Does the combination of efforts matter? For example, if I try to serve by mail and designated delivery service, but not by personal service, have I shown that the target “cannot with due diligence be served” such that posting is viable? What if I only try by mail, but I try three different times? Have I shown then that the target “cannot with due diligence be served” such that posting is viable?

To the majority, one proper mailing satisfies Rule 4(j1) and NCGS 45-21.16(a) as a matter of law: “[T]his Court has held that where a petitioner attempted to serve the respondent at their known mailing address via certified mail, but the mail was not claimed by the party to be served, the petitioner exercised due diligence sufficient to allow service by publication.”

By the concurrence, however, the inquiry becomes factual as to whether “due diligence” can be shown in the case of one mailing.

We’ll see if the Supreme Court puts this issue to rest.

Please click here to view the article online.

Please click here to view the article [pdf].

Massachusetts Supreme Judicial Court Invalidates Two Springfield Anti-Foreclosure Ordinances

Posted on September 13, 2018October 29, 2018 by Safeguard

On December 19, MassLive.com released an article titled SJC rules against Springfield in foreclosure ordinance case.

SJC rules against Springfield in foreclosure ordinance case

BOSTON – The Supreme Judicial Court on Friday ruled that Springfield’s foreclosure laws are illegal because they are preempted by existing state laws.

“Mortgage foreclosure regulation traditionally has been a matter of State, and not local, concern,” Associate Justice Francis Spina wrote in the unanimous decision.

The city of Springfield passed two anti-foreclosure ordinances in 2011 as the city was being hit hard by the mortgage foreclosure crisis. The ordinances have never been enforced because of court challenges by a group of Western Massachusetts banks.

One ordinance requires a bank that forecloses on a home to maintain the home to certain standards and pay a $10,000 bond, which can be used by the city to maintain foreclosed properties, if the bank fails to do so.

The other ordinance requires the establishment of a mandatory mediation program to help homeowners facing foreclosure. The bank would be responsible for paying most of the cost of the mediation.

Six Western Massachusetts banks, with Easthampton Savings Bank as the lead plaintiff, challenged the ordinances. A U.S. District Court judge upheld the ordinances. However, on appeal, the U.S. Court of Appeals issued a stay preventing Springfield from enforcing them. The federal court asked the Supreme Judicial Court, the state’s highest court, to answer two questions related to state law.

The SJC was asked to decide whether the local foreclosure ordinances are preempted by existing state laws and whether the $10,000 bond is a legal fee or an illegal tax. Cities and towns cannot create taxes without legislative approval.

The SJC ruled in favor of the banks, finding that the local foreclosure laws are preempted by state law.

Regarding the mandatory mediation policy, the justices wrote that the state already established a different way for banks and homeowners to negotiate before a foreclosure. “The (Springfield) mediation ordinance alters what the Legislature determined, as a matter of policy, to be the just medium between the parties involved in the contemplation of a mortgage foreclosure,” Spina wrote.

The court found that Springfield’s foreclosure law is similarly preempted by a state laws that set out specific requirements a property owner must abide by regarding the disposal of hazardous material and adherence to sanitary codes. State laws have a narrower definition of who owns a property and establish a different mechanism for paying for repairs.

The SJC did rule in favor of Springfield in determining that the bond is a legal fee, rather than an illegal tax. The court accepted the city’s argument that foreclosed properties can cause urban blight, and the fees would help the city cover its costs of cleaning up blighted properties.

The justices said the city could seek new laws through the legislature. “We recognize that the city of Springfield has attempted to address the serious problem of urban blight within its borders through these ordinances,” Spina, who is from Pittsfield, wrote. “Although we conclude that the city may not achieve its goal by ordinance as it has here attempted, a solution may be provided through the Legislature.”

The U.S. Court of Appeals must still issue its ruling, but the SJC ruling appears to make it nearly impossible for the federal court to uphold the ordinances.

A similar case is pending in federal court in Worcester, relating to foreclosure ordinances in Worcester and Lynn that are similar to those in Springfield. The SJC ruling could affect those cases as well.

Thomas Moore, Springfield’s associate city solicitor, said city officials are still reviewing the decision to determine the city’s next steps.

Kevin Kiley, executive vice president and chief operating officer of the Massachusetts Bankers Association, said he is “extremely pleased” with the ruling. “We think it’s a very well reasoned and well thought-out decision,” Kiley said.

Kiley said the ruling addresses the concern that bankers had about “a potential patchwork of municipal ordinances in numerous communities.”

Lawmakers have previously filed bills in the state legislature to require mandatory mediation in cases of foreclosure, so that that no home could be foreclosed on without giving the homeowner the option of mediation. Banks have opposed these bills, which have never passed. The SJC ruling makes it increasingly likely that a similar bill will be considered again during the next legislative session.

The SJC case was Easthampton Savings Bank v. City of Springfield.

Please click here to view the article online.

Please click here to view the SJC decision.