Foreclosure

Move It Or Lose It! Freddie Mac and Fannie Mae Tell Banks To Speed Up Short Sale Decisions

by Rich Vetstein on April 18, 2012 · 0 comments

in Condominium Law,Foreclosure,Massachusetts Real Estate Law,Short Sales

Lenders Given 30 Days For Short Sale Decisions

Well, someone in government has been listening to the chorus of complaints about lenders taking too long to make short sale decisions. In a *rare* move of federal government housing competence, the Federal Housing Finance Agency has instructed Fannie Mae and Freddie Mac to impose new guidelines which should accelerate short sale decisions. The new rules require that short sale lenders make a decision on a short sale within 30 days of a complete application, and if more time is needed, they must give weekly status updates. This will make short sale agents, sellers and buyers much happier. The new requirements go into effect June 15.

However, how much of an impact this will have on national short sales remains to be seen. Freddie Mac has jurisdiction over a small percentage of short sales, mostly HAFA short sales as well as a limited number of traditional short sales, totaling about 45,000 last year. (Bank of America did over 150,000 short sales last year, by comparison). This is certainly a step in the right direction, and hopefully will lead to more regulatory pressure on the big banks to speed up short sales.

I asked expert short sale negotiator, Andrew Coppo of Greater Boston Short Sales, for some commentary on this news, and he has a more tempered reaction:

It is no secret that both lenders and loan servicers have made continued efforts during recent months to vastly improve their short sale approval time-frames. As someone who exclusively negotiates short sales, I think it is important to note that the new Freddie Mac regulations don’t include any penalties or sanctions for loan servicers or lenders who fail to comply. What’s more, the new rules appear to only require short sale lenders to “make a decision on a short sale within 30 days of a complete application, otherwise they need to send weekly updates.” Most lenders will simply comply with the new requirements by sending out a weekly letter stating that the file is incomplete and request more short sale documents from the homeowner (most lenders already do this). Lenders could also comply with the new rules by simply making an unreasonably high counter-offer. What most people fail to realize is that most lenders, such as Bank of America, Chase, Wells Fargo, and GMAC all utilize an automated short sale processing software, known as Equator, that enables them to approve a short sale in as little as 30 days. The majority of short sales that take more than 60 days to get approved do so because the person submitting the paperwork fails to submit a complete package or the lender “loses” a portion of the submitted paperwork. While the new guidelines are a step in the right direction, without any sanctions or penalties I don’t see them having much of an effect on the time in which the lenders and loan servicers process short sale requests.

The text of the press release (which can be read in full here) is below:

In an effort to make the short sale process more transparent, Freddie Mac (OTC: FMCC) is updating its timelines and also requiring servicers to provide weekly updates when decisions take more than 30 days after the receipt of a complete application for a short sale under the Obama Administration’s Home Affordable Foreclosure Alternative (HAFA) initiative or Freddie Mac’s traditional requirements. All decisions must be made within 60-days. Today’s announcement marks the newest part of the Servicing Alignment Initiative (SAI) Freddie Mac and Fannie Mae launched in 2011 at the direction of their regulator, the Federal Housing Finance Agency, to set consistent servicing and delinquency management requirements. Last year Freddie Mac completed 45,623 short sales, a 140 percent increase since the housing crisis began.

News Facts

Freddie Mac’s new short sale timelines require servicers to make a decision within 30 days of receiving either 1) an offer on a property under Freddie Mac’s traditional short sale program or 2) a completed Borrower Response Package (BRP) requesting consideration for a short sale under HAFA or Freddie Mac’s traditional short sale program. (BRPs are standardized assistance applications developed as part of the Servicing Alignment Initiative.)

If more than 30 days are needed, borrowers must receive weekly status updates and a decision no later than 60 days from the date the complete BRP is received. This will help servicers who may need more time to obtain a broker price opinion or a private mortgage insurer’s approval on a BRP or property offer.

In the event a servicer makes a counteroffer, the borrower is expected to respond within five business days. The servicer must then respond within 10 business days of receiving the borrower’s response.

Freddie Mac will use the new timelines to evaluate servicer compliance with the SAI and its own servicing requirements.

Freddie Mac completed 45,623 short sales in 2011, a 140 percent increase since 2009. Overall, Freddie Mac has also helped more than 615,000 distressed borrowers avoid foreclosure since the housing crisis began.

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Richard Vetstein, Esq. is an experienced Massachusetts short sale attorney. For more information, please contact him at info@vetsteinlawgroup or 508-620-5352.

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Massachusetts Appeals Court Drops The Eviction Hammer On Post-Foreclosure Squatters

by Rich Vetstein on April 10, 2012 · 0 comments

in Foreclosure,Landlord Tenant Law,Massachusetts Property Values,Massachusetts Real Estate Law,Mortgage Crisis

Common Eviction Defenses Ruled Unavailable To Squatters Who Lived Rent/Mortgage Free For 3 Years

In a April 10, 2012 ruling, the Massachusetts Appeals Court just made it easier for foreclosing banks to evict squatters of foreclosed properties. This is one of the few pro-bank Massachusetts decisions coming out of the foreclosure crisis, and should help speed up the disposition and sale of foreclosure and REO properties which, in turn, should help the housing market.

The case is Deutsche Bank v. Gabriel, and can be downloaded here. The defendants were all members of a single family living at 195-197 Callender Street in Dorchester for over 28 years. In 2009, the property went into foreclosure, and Deutsche Bank acquired title by foreclosure deed. As has become common in neighborhoods throughout Boston, the foreclosed upon family refused to leave, and Deutsche Bank brought eviction proceedings against them.

The family fought the eviction tooth-and-nail, and asserted the very common statutory defense based on poor property conditions. This defense, if successful, can prevent a landlord from recovering possession. Aside from irony that the family had been living at the premises for 28 years and was therefore the clear cause of any bad property conditions, the Appeals Court held that the family were squatters (and not tenants) with no legal entitlement to raise this defense. Barring another appeal, the court cleared the way for the eviction, some 6 years after the foreclosure and presumably with the tenants living rent and mortgage free the entire time.

With the housing market turning around, this decision is some long-awaited good news for those dealing with REO and foreclosed properties. Squatting tenants will be easier to evict and properties should be back on the market faster. Bad news for those fighting foreclosure, but good news for the real estate market.

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate and eviction attorney. For more information, please contact him at 508-620-5352 or info@vetsteinlawgroup.com.

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Massachusetts Appeals Court Rules That Lost Promissory Note Renders Mortgage Unenforceable

by Rich Vetstein on March 2, 2012 · 3 comments

in Foreclosure,Massachusetts Real Estate Law,Mortgages,Real Estate Litigation,Title Defects,Title Insurance

Case Underscores Importance of Safeguarding Loan Documents And Getting Subordinations

JPMorgan Chase & Co. v. Casarano, Mass. Appeals Court (Feb. 28, 2012) (click to read)

In a decision which could impact foreclosure cases involving missing or lost loan documents, the Appeals Court held that a mortgage is unenforceable and must be discharged where the underlying promissory note securing the mortgage could not be found.

Seller Second Mortgage Financing

This case involved an unconventional second mortgage for approximately $15,000 taken back from a private seller. The homeowner subsequently refinanced the first mortgage several times, but the refinancing lenders’ attorneys never obtained a subordination from the second lien-holder. That was a mistake. The first mortgage wound up in Wells Fargo’s hands which realized that due to the lack of recorded subordination, the second mortgage was senior to its first mortgage.

Alas, a title claim arose and the title insurance company had to step in and file an “equitable subrogation” action. In this type of legal action, a first mortgage holder asks the court to rearrange the priorities of mortgages due to mistake, inadvertence or to prevent injustice.

Where’s The Note?

The second mortgage holder had lost the promissory note which secured its mortgage, and notably, could not locate a copy of it. The mortgage itself referenced the amount of the loan and the interest rate but was silent on everything else, including the payment term, maturity date, and whether it was under seal. The second mortgage holder argued that enough of the terms of the missing note could be “imported” from the mortgage, but the Appeals Court disagreed, reasoning that there wasn’t enough specificity on key terms to enforce the mortgage.

Lesson One: Safeguard Original Loan Docs

This decision underscores the importance of safeguarding original promissory notes and other debt instruments, or at a minimum keeping photocopies so that if enforcement is required, the material terms of the original can be proved to the satisfaction of the court. With all the paperwork irregularities endemic with securitized mortgages these days, missing or lost promissory notes and loan documents have become more prevalent. This decision is potentially problematic for those foreclosures where the original promissory note is lost. The standard Fannie Mae form mortgage does not spell out the loan terms with specificity, instead, it references the promissory note. Indeed, the Fannie Mae mortgage does not even reference the interest rate. Based on this decision, a mortgage without sufficient evidence of a promissory note could be rendered unenforceable and un-forecloseable.

As an aside, a lender who lacks an original promissory note could rely upon Uniform Commercial Code Section 3-309, which provides:

(a) A person not in possession of an instrument is entitled to enforce the instrument if (i) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (ii) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (iii) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process. (b) A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, section 3-308 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

Lesson Two: Get Subordinations For Junior Liens

This decision also underscores the importance of getting a subordination agreement for second mortgages and other junior lien-holders when closing refinances. A subordination agreement is a contract whereby a junior lien-holder agrees to remain in junior position to a first mortgage or other senior lien-holder during a refinancing transaction. Otherwise, the first in time rule of recording would elevate a junior lien-holder to first, priority position after a refinance. If a subordination was obtained and recorded here, this case would not have occurred.

Disclaimer: I drafted the original complaint in this case while working at my previous law firm. I had long since left when the case was decided at the Appeals Court.

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Richard D. Vetstein, Esq. is a Massachusetts real estate and title defect attorney. He can be reached by email at info@vetsteinlawgroup.com or 508-620-5352.

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Lawmakers To The Rescue? Legislation Filed To Fix “Ibanez” Foreclosure Title Defects

by Rich Vetstein on February 28, 2012 · 8 comments

in Foreclosure,Massachusetts Real Estate Law,Mortgage Crisis,Mortgages,Title Defects,Title Insurance

Post image for Lawmakers To The Rescue? Legislation Filed To Fix “Ibanez” Foreclosure Title Defects

Massachusetts Senate Bill 830 Addresses Toxic Foreclosure Titles

Finally, Massachusetts lawmakers have taken action to help innocent purchasers of foreclosed properties in the aftermath of the U.S. Bank v. Ibanez and Bevilacqua v. Rodriguez decisions, which resulted in widespread title defects for previously foreclosed properties. The legislation, Senate Bill 830, An Act Clearing Titles To Foreclosed Properties, is sponsored by Shrewsbury State Senator Michael Moore and the Massachusetts Land Title Association. Full text is embedded below.

The bill, if approved, will amend the state foreclosure laws to validate a foreclosure, even if it’s technically deficient under the Ibanez ruling, so long as the previously foreclosed owner does not file a legal challenge to the validity of the foreclosure within 90 days of the foreclosure auction.

The bill has support from both the community/housing sector and the real estate industry. Indeed, the left-leaning Citizens’ Housing and Planning Association (CHAPA), non-profit umbrella organization for affordable housing and community development activities in Massachusetts, has filed written testimony in support of the bill.

Properties afflicted with Ibanez title defects, in worst cases, cannot be sold or refinanced. Homeowners without title insurance are compelled to spend thousands in legal fees to clear their titles. Allowing such foreclosed properties to sit and languish in title purgatory is a huge drain on individual, innocent home purchasers and the housing market itself.

A recent case in point: I was recently contacted by a nice couple who bought a Metrowest condominium in 2008 after it had been foreclosed. Little did they know that the foreclosure suffered from an “Ibanez” title defect. Unfortunately, the lawyer who handled the closing did not recommend they buy owner’s title insurance. They have been unable to track down the prior owner who went back to his home country of Brazil, and now they are stuck without many options, unable to refinance or sell their unit. This bill will help people like this who have helped the housing market by purchasing foreclosed properties, and improving them.

The bill is now before the Joint Committee on the Judiciary. Please email them to show your support of Senate Bill 830.
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Richard D. Vetstein, Esq. is a Massachusetts real estate and title defect attorney. He can be reached by email at info@vetsteinlawgroup.com or 508-620-5352.

Massachusetts Senate Bill 830

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SJC Requests Friend-Of-The-Court Briefs In Important Foreclosure Case of HSBC Bank v. Matt

by Rich Vetstein on February 18, 2012 · 0 comments

in Foreclosure,Massachusetts Real Estate Law,Mortgage Crisis,Mortgages,Title Defects

In yet another move evidencing the Supreme Judicial Court’s ongoing concern over the impact of the foreclosure crisis in Massachusetts, the SJC is soliciting friend-of-the-court briefs in the next important foreclosure case, HSBC Bank v. Jodi Matt.

As we wrote about in our prior post here, the SJC is considering whether a lender holding a securitized mortgage has standing to even begin a foreclosure action in the Land Court under the Servicemembers Civil Relief Act–one of the first steps in the Massachusetts foreclosure process. The SJC will ostensibly decide whether lenders holding mortgages held in a securitized pool, with questions whether they in fact were validly assigned those mortgages, can start foreclosures in Massachusetts. The lower court Land Court opinion can be read here.

The text of the Court’s announcement is as follows:

February 17, 2012 – ANNOUNCEMENT: The Justices are soliciting amicus briefs. Whether the Land Court judge correctly concluded that a bank had standing to commence an action to determine whether the defendant (alleged to be in breach of her mortgage obligations) was entitled to the benefits of the Servicemembers Civil Relief Act, on the ground that the bank had a contractual right to become the holder of the note and mortgage. The case is tentatively scheduled for argument in May.

For more information about how to submit a friend of the court brief, go to the SJC Website.

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate litigator and attorney. Please contact him if you are dealing with a Massachusetts foreclosure title dispute.

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Breaking News: Massachusetts Joins National Foreclosure Abuse Settlement

by Rich Vetstein on February 9, 2012 · 1 comment

in Foreclosure,Massachusetts Property Values,Mortgage Crisis,Mortgages

Post image for Breaking News: Massachusetts Joins National Foreclosure Abuse Settlement

Updated (2.9.12 6:30pm)

In the largest national settlement since the tobacco litigation, the Boston Globe is reporting that Massachusetts Attorney General Martha Coakley is expected today to sign on to a settlement brokered by attorneys general nationwide with five major US lenders over the banks’ role in the country’s foreclosure crisis. As we wrote about here, in December of last year AG Coakley pulled out of the settlement and brought a historical lawsuit against the big lenders over foreclosure abuses.

As reported in the Globe, Coakley has been been negotiating for days with lenders over the pact, which has been months in the making. Massachusetts is one of only a few states that have yet to agree to the settlement, which reportedly could total between $25 billion and $30 billion. The money is being promised by Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citibank, and Ally Financial Inc.

According to Coakley’s office, Massachusetts estimated total share of the settlement is nearly $318 Million:

Massachusetts borrowers will receive an estimated $224 Million in benefits from loan term modifications and other direct relief.
Massachusetts borrowers who lost their home to foreclosure from January 1, 2008 through December 31, 2011 and suffered servicing abuse would qualify for $14.6 Million in cash payments to borrowers.
The value of refinanced loans to Massachusetts underwater borrowers would be an estimated $32.7 Million.

Banker and Tradesman is reporting that homeowners still living in underwater properties may get up to $20,000 each for principal reductions. That may not be nearly enough for many victims of foreclosure abuses. It’s unclear how much money will be available for much needed mortgage principal reduction and loan modifications.

However, the state was told yesterday it could sign on to the pact without giving up its right to litigate other issues related to the five lenders and how they conducted foreclosures, according to the Globe. Under terms of the tentative agreement, Coakley apparently will still be able to pursue claims against MERS and lenders for foreclosures in Massachusetts without having the proper paperwork.

For more information, here is the Attorney General’s Press Release.

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Supplemental and Friend-Of-The-Court Briefs Filed In Eaton v. Federal National Mortgage Ass’n (Fannie Mae)

by Rich Vetstein 01.31.2012 Fannie Mae

For interested legal observers of the foreclosure crisis, it really doesn’t get any better than this. Supplemental and amicus curie legal briefs have been filed in much awaited case of Eaton v. Federal National Mortgage Ass’n, and they make for great reading. The briefs were filed in response to the SJC’s concern, mid-appeal, over whether [...]

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New Trends Emerging In Massachusetts Short Sale Legal Practice

by Rich Vetstein 01.24.2012 Foreclosure

The Offer to Purchase Has Become Much More Important With a glut of distressed property still on the market and lenders realizing foreclosures aren’t very cost-effective, analysts are predicting a healthy spike in short sales for 2012. Short sales are quite unique in terms of deal dynamics, and should be handled differently than the typical [...]

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Breaking News: SJC Concerned Over Potential Disastrous Impact On Foreclosure Titles In Eaton v. Fannie Mae

by Rich Vetstein 01.09.2012 Fannie Mae

The Supreme Judicial Court has just issued an unusual order in the very important Eaton v. Federal National Mortgage Association case, indicating its deep concern over whether an adverse ruling against foreclosing lenders will have a disastrous impact on foreclosure titles and, if so, whether its ruling should be applied prospectively rather than retroactively. The [...]

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2011 Massachusetts Real Estate Law Year In Review

by Rich Vetstein 12.30.2011 Foreclosure

It’s time again for our annual review of highlights in Massachusetts Real Estate Law for the past year. It’s been a very busy year. From the foreclosure fallout, to Occupy Boston, to the new homestead law, there’s been lots to report on. We’ll start in order of importance this year. SJC Decides Controversial U.S. Bank [...]

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Maximizing Massachusetts Short Sale Success: From Hardship Letter To Closing

by Rich Vetstein 12.25.2011 Fannie Mae

Tireless Determination The Key To Massachusetts Short Sale Success What Is A Short Sale? A short sale is special type of real estate transaction between a homeowner, his mortgage holder(s), and a third party buyer where the property owner’s mortgage balance exceeds the market value of the property — known as being “under water.” In [...]

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SJC Agrees To Hear Crucial Foreclosure Standing Case In HSBC Bank v. Matt

by Rich Vetstein 12.02.2011 Foreclosure

Court May Decide Lenders’ Standing In All Foreclosure Cases Involving Securitized Mortgages With all the hoopla yesterday surrounding Attorney General Martha Coakley’s monumental lawsuit against the big banks over foreclosure practices, the Supreme Judicial Court on November 29, 2011 quietly agreed to hear an appeal over whether a lender holding a securitized mortgage has standing [...]

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A Tale Of Two Opinions: Mass. AG Sues Major Banks and MERS Over Foreclosure Mess While Federal Judge Upholds MERS System

by Rich Vetstein 12.01.2011 Foreclosure

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…” — Charles Dickens, A Tale of Two Cities AG Martha Coakley Files Major Civil Action Against Big Banks First, the big news. Attorney General Martha Coakley has filed a huge consumer [...]

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Massachusetts Superior Court Again Endorses “Produce The Note” Foreclosure Defense

by Rich Vetstein 11.08.2011 Foreclosure

Final Say Will Come Soon At SJC In Eaton v. FNMA In Adamson v. MERS (embedded below), Superior Court Judge Raymond Brassard became the second Massachusetts trial judge to endorse the so-called “produce the note” defense in a foreclosure defense case. The question of whether a foreclosing lender must hold both the promissory note and [...]

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What Now? Bevilacqua v. Rodriguez Leaves Toxic Foreclosure Titles Unclear

by Rich Vetstein 10.18.2011 Deeds

No Easy Fix For Defective Foreclosure Titles After U.S. Bank v. Ibanez Ruling The Massachusetts Supreme Judicial Court issued its opinion today in the much anticipated Bevilacqua v. Rodriguez case considering property owners’ rights when they are saddled with defective titles stemming from improper foreclosures in the aftermath of the landmark U.S. Bank v. Ibanez [...]

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SJC Looks At Roles Of Mortgage Servicers and MERS In Eaton v. FNMA Arguments

by Rich Vetstein 10.03.2011 Fannie Mae

I just finished watching the oral arguments in the SJC case of Eaton v. Federal National Mortgage Ass’n, The webcast should be up soon on the SJC Website. You can read the briefs in the case here. As outlined in my prior post on the case, the Court is considering the very important question of [...]

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SJC To Hear Oral Arguments In Eaton v. FNMA On Monday

by Rich Vetstein 09.30.2011 Fannie Mae

Updated: Click Here For Our Oral Argument Recap Just a reminder to those following the important SJC case of Eaton v. Federal National Mortgage Ass’n — oral arguments will be held on Monday, October 3rd, starting at 9am. You can view the oral argument live via webcast through the SJC Website. You can read the [...]

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Stopping Foreclosure: Bankruptcy’s Automatic Stay Is A Valuable Last Resort (Guest Post by Matthew Trask, Esq.)

by Rich Vetstein 09.16.2011 Bankruptcy

During this Great Recession, we’ve been closely covering the foreclosure crisis from a real estate law perspective. I am not a bankruptcy attorney, and don’t claim to be. So I thought: why don’t we have an experienced bankruptcy attorney guest blog about the interplay between foreclosure and bankruptcy? Attorney Matthew P. Trask, a partner with [...]

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SJC Expands Scope Of Tenant Protections In Foreclosed Properties Act

by Rich Vetstein 09.12.2011 Fannie Mae

FNMA v. Nunez: Tenant Foreclosure Act Applied Retroactively On September 6, 2011, in Federal National Mortgage Association v. Nunez (embedded below), the Supreme Judicial Court considered for the first time the 13-month-old “Tenant Protections In Foreclosed Properties” Act which protects tenants living in foreclosed properties from eviction in certain circumstances. The issue was whether the [...]

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SJC To Consider “Produce The Note” Foreclosure Defense In MERS Mortgage Case

by Rich Vetstein 09.08.2011 Fannie Mae

Update: SJC Orders Additional Briefing On Potential Impact of Ruling (1/6/12) Oral Argument Analysis (10/3/11) Do Lenders Need To Hold Both Promissory Note & Mortgage At Foreclosure? In a rare “sua sponte” (on their own) direct appellate review, the Massachusetts Supreme Judicial Court has agreed to hear an appeal considering the controversial “produce the note” [...]

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