Real Estate Foreclosure & Loss Mitigation Presented by: Keri P. Ebeck, Esq. September 2015
Pre-Foreclosure Considerations Breach Letters Act 6 and Act 91 If not, Mortgage and Promissory note may require FDCPA Notice Assignments Foreclosure action must be filed in name of current owner of loan Assignment of Mortgage must be recorded before Complaint filing Allonge to Promissory Note
Pre-Foreclosure Considerations Documents or information needed to initiate foreclosure Copy of Mortgage and Promissory Note (and Assignments/Endorsements if applicable) Title Insurance policy Loan balance information Social Security Number of borrower for bankruptcy and military search Mailing address for borrower if not same as the collateral address Occupancy status of property Names of tenants (if applicable) Is borrower deceased? Name of heirs if known
Pre-Foreclosure Considerations Title Report Determine parties to the suit Title issues Lien priority dispute Incorrect legal description of collateral Invalid mortgage
Foreclosure Procedures Objectives Maximum recovery at minimum expense and time Clear title issued to purchaser Jurisdiction - courts authorized to handle foreclosure Venue - county in which property is located
Foreclosure Procedures Acceleration due to default notice may be required by loan documents; or by Statutory law Title exam - preliminary judicial report or title commitment Title issues Fractional interest Dower Lessees Legal description
Complaints Proper designation of plaintiff as holder of note and mortgage Proper designation of defendants Defendants named in foreclosure Mortgagors Owners of the property Heirs of decedent
Service of Complaint- 30 days to serve Personal or residence service by Sheriff Service by publication Service on USA (if IRS lien) If service cannot be obtained, Motion for Special Service Order allowing: certified/reg mail; posting of the property and in some cases, publication
Mediation/Settlement Conference Mediation/Settlement Conference required in some Judicial foreclosure states. Available via borrower s opting in in other Judicial foreclosure states. Lender must be prepared to negotiate in good faith and to review borrower s loss mitigation application thoroughly and quickly.
Obtaining Judgment Default judgment- No Answer upon service of complaint, 20 days to respond, 10 day default notice. If no response, can enter default judgment. Summary judgment- Answer filed Consent judgment- Maybe cash incentive or time before scheduling sale Trial
Obtaining Sale Date Writ of Execution- Costs of scheduling sale $2500 sale date depends on county- some 3 months, Monroe County- 2 years Sheriff s appraisal, advertisement and notice of sale Sale notice publication Service to all lienholders
Sheriff s Sale Bidding strategy Determine value of property How much are you owed? Factor in Judgment amount, unpaid taxes, REO carrying costs, etc. Set opening bid (no need for foreclosing lender to competitively bid unless there is tax advantage) How much are you willing to receive if the property is sold to a 3 rd party?
Sheriff s Sale Property will revert to lender or sell to 3rd party Sheriff s sale may be postponed; 2 postponements, not more than 130 days. After which a court order is needed. Defendant may file a motion to postpone sale at anytime. Sale can be stayed (cancelled) up until the fall of the hammer. Borrowers/Defendants have the legal right to reinstate (cure the mortgage) up until the fall of the hammer (until the property is auctioned off on the day of the sale)
Confirmation of Sale Sheriff s deed Typically, deeding packet goes to sheriff within 2 weeks after sale Depends on County- some 2 months, some counties, up to 6 months. Cannot market or rent property until sheriff s deed is recorded Cannot start any eviction proceedings until sheriff s deed is recorded Cannot gain access to the property until deed is recorded
Due Diligence Issues: Give Your Attorney a Clean Case Comply with state recording laws Generally necessary to put third parties on notice of mortgage priority Chapter 7 bankruptcy trustee may avoid defectively executed or unrecorded mortgage
Due Diligence Issues: Give Your Attorney a Clean Case Take action to cure mistakes or for reformation of mortgage Description of land Description of party Description of debt Terms of repayment Defective execution
Due Diligence Issues: Give Your Attorney a Clean Case Give attorney all relevant information up front Addresses for service of summons Balance due Copies of signed and recorded documents (originals in some states) Assignments of mortgage Copy of title insurance policy
The Decision Whether to Foreclose Consider alternative actions against borrower, co-signers, guarantors, or other collateral Weigh the condition and value of the property and your equity position against the cost of foreclosure- Want to do this upfront.
Pro-active Loss Mitigation Efforts: Before, During and After Foreclosure Communicate with debtor to induce an early reinstatement Collect fees and expenses upon reinstatement
Pro-active Loss Mitigation Efforts: Before, During and After Foreclosure Help the borrower refinance with you or a different lender In appropriate cases negotiate a loan work-out or modification agreement (with down payment, guarantees, and/or additional security, if possible)
Pro-active Loss Mitigation Efforts: Before, During and After Foreclosure Encourage a private sale in cases warranted by equity Agree to a friendly foreclosure, if deficiency would be uncollectable Negotiate for a deed-in-lieu of foreclosure, depending on condition and title issues
Pro-active Loss Mitigation Efforts: Before, During and After Foreclosure Consider a lump sum settlement Obtain and pursue collection of deficiency judgment Gather collection information in every telephone call with borrower
Acquiring Title Through Foreclosure or Deed-in-Lieu Be alert for title issues, especially in deed-in-lieu cases Inspect the property prior to taking title Consider cash for keys to obtain possession
Questions?
Thank You Keri Ebeck Partner Bankruptcy email kebeck@weltman.com phone 412.338.7102 www.weltman.com wwrbankruptcy.com (Blog)