Oftentimes, a Debtor files a Bankruptcy petition that will stay a pending foreclosure. Should the Debtor seek relief under Chapter 7, all property of the Debtor becomes property of the Bankruptcy Estate and subject to disposition by the Chapter 7 Trustee, with court approval. Should the Chapter 7 Trustee determine that there is no equity in the mortgaged premises, he/she will “abandon” the property, and title will then revert back to the Debtor. The Debtor must then either pay the secured debt, or “surrender” the property to the Secured Creditor in satisfaction of, at least, the secured portion of the debt.
Years ago, banks were not permitted to make second mortgages, and the people who borrowed money secured by a second mortgage were perceived to be in financial difficulty.
On December 3, 2015, the United States Court of Appeals, 11th Circuit, decided the case of Kevin Prescott v. Seterus, Inc., 635 Fed. Appx. 640, 2015 U.S. App. LEXIS 20934 (11th Cir. Fla. 2015) and held that the inclusion of estimates or anticipated costs that have not yet been incurred, in a payoff or reinstatement letter, is a violation of the FDCPA.
As noted in my previous article, “Statute of Limitations,” New York’s six (6) year Statute of Limitations is tolled for the time the bankruptcy is pending, (CPLR section 204) and renewed for an additional six (6) year period if the debtor acknowledges the debt in writing. (GOL 17-101)
In our last article, we discussed the different types of short sales available and some of the details of the HAFA short sale program, in particular. In this article, we discuss some of the requirements and provisions of the Fannie Mae and Freddie Mac short sales.
In our last article, we discussed the Loss Mitigation procedures that occur in the state court, as part of the foreclosure process. In addition, Servicers are required to participate in Loss Mitigation within the Bankruptcy Court, once a Borrower files a Bankruptcy Petition. Since the Bankruptcy Court is a part of the federal court system, the process begins anew, regardless of what occurred at the state court mediation.
Prior to 2008, a New York foreclosure would be completed in a year or less. While Loss Mitigation existed, it was not a formal process as it is today, it's something that Servicers did throughout the foreclosure process. This process, known as “Dual Tracking”, was intended to avoid delays in the foreclosure process should the Loss Mitigation efforts fail, but is now prohibited by the Dodd–Frank Wall Street Reform and Consumer Protection Act. Read about it by clicking into our previous article.
The Due-on-Sale clause contained in most mortgages provides that if the property secured by the mortgage is sold to a third party without the lender's consent, the lender has the right to demand full payment of the loan. Lenders require this so that any prospective purchaser will feel compelled to submit a complete application to them, in order to avoid the risk of a foreclosure based upon the default of failing to obtain the lender’s consent. The application will contain the purchaser’s employment, income and all other information the lender would obtain if the purchaser was applying for a new loan. If the bank is satisfied with the creditworthiness of the purchaser, they will consent to the sale.
Failure to strictly comply with two of New York’s recently enacted consumer protection statutes affecting residential foreclosures, RPAPL 1304 and RPAPL 1306, which require a 90-day notice to be sent to the borrower, and specific information contained therein to be filed with the New York State Department of Finance within three days thereafter, have recently been reviewed and interpreted by the New York courts.