Mortgage Foreclosure Best Practices

Transcription

1 Mrtgage Freclsure Best Practices Senate Enrlled Act 492, cdified at I.C et seq., gave defendants in residential mrtgage freclsure actins the right t request a settlement cnference. Since this statute tk effect n July 1, 2009, the Indiana Supreme Curt, Divisin f State Curt Administratin has had pprtunity t bserve the functins and results f settlement cnferences bth under the statute and under the Mrtgage Freclsure Trial Curt Assistance Prject s (MFTCAP) pilt prgram, administered by the Divisin. While this legislatin was well-intentined, it did leave a few gaps. Wrking thrugh the settlement cnference prcess, bth in MFTCAP pilt and nn-pilt cunties, has taught us a few things. With these in mind, here are sme recmmended steps and best practices in dealing with mrtgage freclsure actins. Except fr where state statutes are referenced, these are nly guidelines and shuld nt be interpreted as having the frce r effect f law. T prduce these best practices, the Divisin f State Curt Administratin cnsulted with creditrs attrneys, defendants attrneys, academics, MFTCAP facilitatrs, and trial judges. These practices have nt been reviewed by the Indiana Supreme Curt. Hwever, they were develped in cnsultatin with Indiana trial judges, academics, and ther experts in creditr-debtr law, alng with the Office f the Indiana Attrney General and the Divisin f State Curt Administratin. These best practices have been amended effective July 1, 2011, t cmprt with changes in the settlement cnference law under Senate Enrlled Act 582, and amended effective Nvember 1, 2012, t incrprate changes in servicing standards under the natinal mrtgage settlement. These best practices are designed t be a guideline fr the prcessing f mrtgage freclsure prceedings and are nt set in stne. Changes, innvatins and suggestins are welcme and may be directed t Elizabeth Daultn at [email protected] r (317) PLEADING DISCLAIMER: The negtiable instrument best practices apply t pleadings nly, and nt t the standard f prf required by the Unifrm Cmmercial Cde (UCC). Either the Defendant r the Curt may require the Plaintiff t prve (A) pssessin f the riginal prmissry nte, and (B) that Plaintiff qualifies under I.C (1) r (2) r (3), and ther applicable law, such as trust law. Under I.C (1), t be a hlder (as defined in I.C ), the Plaintiff must be in pssessin f the riginal prmissry nte which is either endrsed in blank r is endrsed specifically t the Plaintiff. As lng as signatures are valid and (if applicable) there is a clear chain f endrsements t the Plaintiff r t an endrsement in blank, there is a presumptin the hlder, by prducing the instrument, is entitled t enfrce the nte, subject t valid defenses. Under I.C (2), t be a nn-hlder (as defined in I.C ), the Plaintiff must be in pssessin f the riginal prmissry nte, but unlike I.C. 301(1), the nte wuld nt be endrsed in blank r endrsed t the Plaintiff. The Plaintiff wuld have the burden t prve (withut benefit f a presumptin) a chain f title t establish the fact that it has the right t enfrce the nte (i.e., that Plaintiff is a nn-hlder under I.C ), subject t valid defenses (see I.C cmment 2). Under I.C (3), t be entitled t enfrce a lst nte, the persn seeking enfrcement must prve the terms f the instrument and the persn s right t enfrce the instrument. In additin, the persn required t pay the nte must be adequately prtected against lss that might ccur by reasn f a claim by anther persn attempting t enfrce the nte. Pleading Standards f Mrtgage Freclsure Cmplaints

2 If Plaintiff seeks t enfrce a negtiable instrument pursuant t I.C et seq., then the fllwing best practices shuld apply with respect t the cmplaint: Plaintiff shuld specify the subsectin f n which it bases its assertin that it is a persn entitled t enfrce the instrument; If Plaintiff alleges that it is a persn entitled t enfrce the instrument under (1) r (2) because it is either the hlder f the instrument (under (20)) r a transferee (under ), then cunsel shuld, prir t cmmencing the actin, cnfirm that Plaintiff pssesses the riginal instrument and can prduce the riginal nte in a timely manner if requested by the Curt; If Plaintiff alleges that it is a persn entitled t enfrce the instrument under (1) because it is the hlder f the instrument and is nt the riginal payee, then its cunsel shuld attach a cpy f the instrument, including the endrsements shwing the instrument is endrsed t bearer, in blank, r specially t Plaintiff; If Plaintiff alleges that it is a persn entitled t enfrce the instrument under (2) because it is the transferee f the instrument, then its cunsel shuld include in the cmplaint an assertin that the instrument has nt been endrsed t Plaintiff but has been transferred t Plaintiff fr the purpse f giving Plaintiff the right t enfrce the instrument. If Plaintiff maintains that it is a persn entitled t enfrce the instrument under (3) and because the riginal instrument has been lst, then cunsel shuld attach as an Exhibit t the Cmplaint an affidavit setting frth the assertins required by At the time the Cmplaint is filed, Plaintiff shuld prvide t the clerk a service list, including the name, address, and, if available, the telephne number and/r address fr each individual defendant debtr wh signed the mrtgage. Because many defendant debtrs have been and cntinue t be targeted by illegal freclsure rescue agencies, this service list shuld cmprt with the public access exclusins f Administrative Rule 9(H)(1). Affidavits In an affidavit f indebtedness filed with a mtin fr judgment, Plaintiff shall include the fllwing statements, where applicable: If Plaintiff is requesting t recver frce-placed prperty insurance premiums r expenses, the Plaintiff shall affirm that (1) there was a reasnable basis t frce place the insurance plicy r plicies; and (2) Plaintiff has cmplied with applicable laws cncerning frce-placed insurance. If Plaintiff is requesting default-related fees r csts t be assessed against Defendant, Plaintiff shall set frth an itemized list f all such fees and csts. Plaintiff shall als affirm that the fees and csts requested are bna fide and reasnable and that attrney fees charged t the Defendant are nly fr wrk perfrmed and are reasnable and custmary in amunt. If, prir t btaining a judgment, Plaintiff discvers that an affidavit filed in the freclsure prceeding was nt in accrdance with either state law r the Indiana Trial Rules, Plaintiff shall substitute such affidavit with a new affidavit and prvide apprpriate written ntice t the Defendant r Defendant s cunsel. Defendant shall nt bear the cst f the crrectin.

3 Settlement Cnferences: All curts shuld send a separate cmmunicatin t each mrtgage freclsure defendant infrming the defendant f his r her right t participate in a settlement cnference. The ntice sent by the lender as required by the statute des nt rutinely generate an appreciable respnse rate, whereas the single-sheet ntice sent by ur pilt curts has resulted in a settlement cnference request rate f apprximately 45 percent. The curt may nt delegate the duty t send the ntice under I.C (d) t the creditr r t any ther persn. If Plaintiff maintains that the Defendant des nt qualify fr a settlement cnference under (e)(1), lan secured by a dwelling nt the debtr s primary residence, then Plaintiff s cunsel shuld attach as an Exhibit t the Cmplaint any evidence in Plaintiff s pssessin establishing that the debtr des nt persnally reside at such address. If cunsel cannt prvide such evidence, the debtr shuld be sent a cpy f the Get Help Get Hpe frm prescribed by If Plaintiff maintains that the Defendant des nt qualify fr a settlement cnference under (e)(2), default f a prir freclsure preventin agreement under this chapter, then its cunsel shuld attach as an Exhibit t the Cmplaint a cpy f the freclsure preventin agreement and a recrd f payments substantiating default. If Defendant requests a settlement cnference under , n dispsitive mtins shuld be granted until ne f the fllwing ccurs: 1) The curt receives ntice that the debtr and creditr have agreed t enter int a freclsure preventin agreement; r 2) The curt receives ntice that the debtr and creditr are unable t agree n the terms f a freclsure preventin agreement. If Defendant requests a settlement cnference under , the curt shall treat this request as the entry f an appearance in accrdance with T.R. 3.1(B). Upn the defendant s request, r upn infrmatin received by the curt that the defendant des nt have access t the internet, the facilitatr r curt shall send t the defendant a sample Lss Mitigatin Package alng with the Order fr Settlement Cnference. Electrnic cpies f these dcuments are available at If the defendant des nt prvide t the Curt and the plaintiff at least ne (1) f the dcuments required as part f the lss mitigatin package at least thirty (30) days prir t the settlement cnference, the freclsure may prceed, s lng as the plaintiff has prvided the ntice required under I.C (c). Any prtin f a defendant s lss mitigatin package prvided t the curt-appinted facilitatr at least thirty (30) days prir t the scheduled settlement cnference shall be cnsidered t be prvided t the curt under I.C (a)(3). If, at the settlement cnference, the parties cmmence discussins regarding lss mitigatin alternatives and cnclude that additinal infrmatin r dcumentatin shuld be exchanged, then cause exists pursuant t (b) t recnvene the settlement cnference at a later date, and dispsitive mtins shuld nt be granted pursuant t (b) until the settlement cnference reprt has been submitted t the Curt by the Plaintiff(s), Defendant(s), r a curt-appinted facilitatr. Lss

4 mitigatin alternatives as referenced in this paragraph may include, but are nt limited t: frbearances, repayment plans, lan mdificatins, shrt sales, and deeds in lieu f freclsure. 1 Freclsure Lss Mitigatin fr Multistate Mrtgage Settlement Participants If Defendant s lan is serviced by Bank f America, Chase, Wells Farg, America s Servicing Cmpany, GMAC r CitiMrtgage and the real estate secured by the lan is wner-ccupied, then Plaintiff shall abide by the best practices in this sectin, regardless f whether the Plaintiff and lan servicer are the same entity r the lan servicer is servicing the lan n behalf f the Plaintiff: 2 In a pending pst-judgment, pre-sale freclsure prceeding in which an affidavit was filed which was required t be based n the affiant s review and persnal knwledge f its accuracy and was nt, r was nt prperly ntarized, Plaintiff shall prvide written ntice f the errr t Defendant r Defendant s cunsel prir t prceeding with the freclsure sale. If Defendant submits a cmplete lan mdificatin applicatin t mdify a first lien mrtgage lan t the lan servicer within 35 days f the lan being referred t freclsure, then Plaintiff shall nt mve fr judgment r prceed with a freclsure sale during the mdificatin review. If Plaintiff has already filed a mtin fr judgment, Plaintiff shall take reasnable steps t avid a ruling n such a mtin. If Plaintiff ffers Defendant a lan mdificatin as a result f the mdificatin review, Plaintiff must allw Defendant 14 days t accept r decline the mdificatin ffer befre prceeding with the freclsure sale. If Plaintiff denies Defendant s request fr a lan mdificatin, Plaintiff must allw Defendant 30 days t appeal the denial unless the Plaintiff denied Defendant s request due t ne f the fllwing reasns: ineligible mrtgage, ineligible prperty, ffer nt accepted by brrwer r request withdrawn, r lan was previusly mdified. If Defendant submits a cmplete lan mdificatin applicatin t the lan servicer mre than 35 days after the lan was referred t freclsure and mre than 15 days befre a sheriff sale, then Plaintiff shall nt prceed with the freclsure sale during the pendency f the mdificatin review. If Plaintiff ffers Defendant a lan mdificatin as a result f the mdificatin review, Plaintiff must allw Defendant 14 days t accept r decline the mdificatin ffer befre prceeding with the freclsure sale. Plaintiff shall nt mve fr judgment r prceed with a freclsure sale under any f the fllwing circumstances: Defendant is in cmpliance with a trial lan mdificatin, frbearance r repayment plan; r a shrt sale r deed-in-lieu f freclsure has been apprved by all parties (including, fr example, first lien investr, junir lien hlder and mrtgage insurer, as applicable), and prf f funds r financing has been prvided t the lan servicer. 1 The Making Hme Affrdable Prgram (MHA) is a federal lss mitigatin prgram available t sme brrwers. MHA includes lan mdificatins thrugh the Hme Affrdable Mdificatin Prgram (HAMP) and shrt sales and deeds in lieu f freclsure thrugh the Hme Affrdable Freclsure Alternative (HAFA) prgram. Many lan servicers participate in MHA. Guidelines fr lss mitigatin alternatives available thrugh MHA are available at: 2 The multistate mrtgage settlement required participating servicers t implement the practices referenced in this sectin n r befre Octber 2, Detailed infrmatin regarding the multistate mrtgage settlement is available at:

5 Plaintiff s gd-faith lss mitigatin activity, such as a lan mdificatin review, shall be a basis fr vacating a hearing under T.R. 41(E). Sanctins If either party fails t attend the settlement cnference r fails t abide by ther curt directives, apprpriate sanctins may be cnsidered. Judges in St. Jseph and Allen cunties have levied sanctins ranging frm $150 t $2,500 n plaintiffs wh repeatedly failed t attend a settlement cnference r wh refused t prvide dcuments as requested by the curt-appinted facilitatr. A hmewner defendant wh fails t attend the settlement cnference may be perceived as waiving his r her right t a settlement cnference, and the freclsure shuld prceed as therwise allwed by law. Defendant shuld nt be asked by Plaintiff t waive his r her right t a settlement cnference. Such actin n the Plaintiff s behalf may be cnsidered a sanctinable ffense. Mnetary sanctins cllected by the curt under this statute may be made payable by the circuit curt clerk n a semiannual basis t the Auditr f State, t be depsited int the Mrtgage Freclsure Fund. Pst-Judgment Any mtin t set aside a mrtgage freclsure judgment shuld state the reasn fr the request. The brrwers/hmewner shuld be sent ntice f the request. A petitin t set aside a judgment that attempts t reinstate the lan shuld be allwed because f reinstatement r mdificatin f the lan r ther freclsure preventin r lss mitigatin agreement. A party seeking t file a supplemental affidavit r substitute a previusly filed affidavit must file a mtin stating the grunds fr the substitutin. The mtin shuld be nticed t all parties, including previusly defaulted parties, and set fr hearing. Other Issues: I.C (d)(2) requires the plaintiff in a mrtgage freclsure actin t send t the defendant s insurance cmpany, by certified mail, return receipt requested, a cpy f the freclsure cmplaint. It is nt clear whether these mailing csts are deemed t be cllectible frm the defendant, whether the cmplaint shuld be filemarked, r whether the cmplaint shuld be sent by the plaintiff r plaintiff s cunsel. There is n enumerated penalty fr failure t cmply with this ntice prvisin. Current as f Nvember 2012.