vii

Summary Contents

Using the Digital Library iii

The Leading Resource for All Consumer Law iv

Contents ix

Chapter 1 Introduction 1

Chapter 2 Authority to Foreclose 19

Chapter 3 Challenging the Authority to Foreclose 61

Chapter 4 Authority to Foreclose Special Issues: Servicers, GSE Loans, and MERS 99

Chapter 5 Procedural and Equitable Defenses to Home Foreclosures 127

Chapter 6 Government Insured Loans and Moratoriums 177

Chapter 7 Defending Foreclosures by Challenging Unfair Lending Practices 221

Chapter 8 Litigating Foreclosure Cases 243

Chapter 9 Using Bankruptcy to Prevent Foreclosure 319

Chapter 10 Issues Arising After a Foreclosure Sale 373

Chapter 11 Manufactured Home Foreclosures and Repossessions 433

Chapter 12 Forfeiture of Land Installment Sales Contracts 463

Chapter 13 Condominium and Homeowner Association Liens and Foreclosures 479

Chapter 14 Preventing Foreclosure of Reverse Mortgages 531

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Chapter 15 Tax Liens and Tax Foreclosures 549

Chapter 16 Foreclosure Rescue Scams 579

Appendix A Selected Provisions of the Servicemembers Civil Relief Act 645

Appendix B Selected Statutes and Regulations Pertaining to Mortgages Held or Insured by the Federal Government 653

Appendix C Reverse Mortgages 685

Appendix D Summary of State Reverse Mortgage Laws 699

Appendix E Summary of State Foreclosure Laws 725

Appendix F Summary of State Real Estate Tax Abatement Laws 751

Appendix G Summary of State Tax Lien Foreclosure Laws 759

Appendix H Summary of State Condominium Laws 793

Appendix I Foreclosure Prevention Practice Aids and Sample Mortgage Documents 809

Appendix J Helpful Websites 821

Appendix K Glossaries 823

Index 833

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Contents

Using the Digital Library iii

The Leading Resource for All Consumer Law iv

Chapter 1 Introduction 1 1 About This Treatise 1 1 1 1 Topics Covered 1 1 1 2 All Subscribers Have Access to the Digital Version 1 1 1 3 The Appendices 2 1 1 4 Additional Digital Pleadings, Practice Tools, and

Primary Source Materials 2 1 1 5 Unreported Cases and Clearinghouse Citations 2 1 1 6 Relation of Home Foreclosures to Other NCLC Treatises 3 1 2 Analyzing a Foreclosure Case 3 1 2 1 Introduction 3 1 2 2 First Steps 3 1 2 2 1 Identify the Type of Foreclosure 3 1 2 2 2 Determine Time Constraints 3 1 2 2 3 Understanding the Homeowner’s Objectives 4 1 2 2 4 Gather and Review Loan Documents 4 1 2 2 5 Identify the Critical Parties 4 1 2 3 Follow the Money 5 1 2 4 Analyze for Servicing Claims 5 1 2 5 Analyze the Loan for Origination Claims 6 1 2 6 Analyze the Foreclosure for Procedural Defenses 7 1.2.7 NegotiatingaWorkoutorModification 7 1 2 8 Should the Homeowner File for Bankruptcy to

Protect the Home? 8 1 2 9 Manufactured Home Foreclosures 8 1 2 10 Real Estate Installment Sales 9 1 2 11 Reverse Mortgage Foreclosures 9 1 2 12 Is the Foreclosure Pursuant to a Property Tax Lien? 9 1 2 13 Is It Possible to Set Aside the Foreclosure Sale? 10 1.2.14 IstheConsumerLiableforaDeficiencyAftertheSale? 10 1 3 Understanding the Mortgage Market 11 1 3 1 Introduction 11 1 3 2 The Players in the Mortgage Origination Process 11 1 3 2 1 Mortgage Originator 11 1 3 2 2 Mortgage Broker 11 1.3.2.3 LoanOfficer 11 1 3 2 4 Mortgage Electronic Registration System (MERS) 12 1 3 2 5 Real Estate Agent 12 1 3 2 6 Appraiser 12 1 3 2 7 Closing Agent or Attorney 12 1 3 2 8 Escrow Agent 12

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1 3 2 9 Private Mortgage Insurance Companies 13 1 3 2 10 Government Mortgage Guarantors 13 1 3 3 Post- Closing Players 13 1 3 3 1 Introduction 13 1 3 3 2 Secondary Mortgage Market 13 1 3 3 3 Loan Owner 13 1 3 3 3 1 In general 13 1 3 3 3 2 Finding out who owns the mortgage 14 1 3 3 4 Securitization 14 1 3 3 4 1 In general 14 1 3 3 4 2 Players 15 1 3 3 4 3 Documentation 16 1 3 3 5 Mortgage Servicers 17 1 3 3 6 Default Services Providers 17 1 3 3 7 Lender’s Foreclosure Attorney 17 1 3 3 8 Foreclosing Trustee 17 1 3 3 9 REO Management Companies 18

Chapter 2 Authority to Foreclose 2 1 Introduction 19 2 2 Who Has the Right to Foreclose? 19 2 2 1 Introduction 19 2 2 2 Relationship Between Notes and Mortgages 19 2 2 3 The Primacy of the Note 20 2 2 4 The Promissory Note As a Negotiable Instrument Under the UCC 21 2 2 4 1 Overview 21 2 2 4 2 Negotiable Notes Can Be Payable to the Order

ofaSpecificPersonorSimplytothe“Bearer” 22 2.2.4.3 TheBenefitsofBeingtheHolderofaNegotiableNote 22 2 2 5 Who Can Enforce a Negotiable Instrument? 23 2.2.5.1 The“PersonEntitledtoEnforce”aNegotiable

Instrument(“PETE”) 23 2.2.5.2 TheDistinctionBetweenaHolderandthe“Owner”oftheNote 25 2 2 5 3 The Holder’s Possession Through an Agent or Custodian 25 2 2 5 4 Enforcement of Order Paper: A Party in Possession of a

Properly Indorsed Note 25 2 2 5 5 The Role of Allonges 27 2 2 5 6 Enforcement of Bearer Paper: A Party Must Be in Possession 28 2 2 5 7 A Key Litigation Issue for Holder Status—

Timing of Indorsements 29 2 2 5 8 Others Who Can Enforce a Negotiable Instrument:

Non- Holders and Those Not in Possession of Note 30 2 2 5 8 1 Generally 30 2 2 5 8 2 A non- holder in possession who has the rights

of a holder 31 2 2 5 8 3 A party seeking to enforce a lost note 32 2 2 5 9 Possession of the Note at the Right Time— What Does

the Evidence Show? 33 2 2 5 10 Assignments of Security Instruments Do Not Automatically

Transfer the Right to Enforce the Related Negotiable Notes 35 2 3 Right to Foreclose and the UCC: The Uncommitted States 36 2 3 1 Introduction 36

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2 3 2 Harmonizing Foreclosure Statutes and the UCC: Statutory Construction Principles 38

2 3 3 Application of Statutory Construction Principles 39 2 4 Nonnegotiable Paper Notes 40 2 4 1 Who Can Enforce a Nonnegotiable Note? 40 2 4 2 When Is a Note Nonnegotiable? 40 2 4 2 1 Introduction 40 2 4 2 2 Home Equity Lines of Credit 41 2 4 2 3 Payment Option (PO) ARMs 41 2 4 2 4 FHA- Insured Mortgage Notes 44 2 4 3 The Role of Article 9 of the UCC in the Sale (Transfer) of

Nonnegotiable Notes 45 2 4 4 The Concepts of Ownership of and Right to Enforce Loan Notes 46 2 4 5 The Sale of Promissory Notes Through Securitization and

Practical Issues 47 2 4 6 Nonnegotiable Notes and Assignee Liability 48 2 5 Enforcement of Electronic Notes Secured by Real Property 49 2 5 1 Background 49 2 5 2 Legal Framework 50 2 5 2 1 Overview 50 2.5.2.2 TheElectronicNoteMustConstitutea“TransferableRecord” 51 2.5.2.3 ThePartySeekingtoForecloseMustHave“Control”

of the Transferable Record 52 2 5 2 4 The Transferable Record Must Be Created, Stored, and

Assigned in Compliance with Certain Control- Related Requirements 52

2 5 3 Proof Issues 52 2 5 4 Enforcement of Electronic Notes That Would be Nonnegotiable

If in Paper Form 53 2 5 5 Conversion of an Electronic Note to a Paper Note 55 2 6 Transfer of the Security Instrument— Was There a Proper Assignment

of the Mortgage or Deed of Trust? 56 2 6 1 General 56 2.6.2 The“MortgageFollowstheNote”Rule 56

Chapter 3 Challenging the Authority to Foreclose 3 1 Introduction 61 3 2 Identifying Mortgage Holders 61 3 2 1 Overview 61 3 2 2 Federal Statutes Requiring Disclosure of Ownership of

Mortgage Loans 61 3 2 3 State Laws Requiring Disclosure of Ownership of Mortgage Loans 63 3 3 Challenging Authority to Foreclose in Judicial Foreclosure States 65 3 3 1 Introduction 65 3 3 2 Requirement to Have Authority to Enforce the Note 65 3 3 3 Requirement to be Current Assignee of the Security Instrument 66 3 3 4 Constitutional Standing Requirements 67 3 3 5 Real Party in Interest 67 3 3 6 Procedures for Challenging Authority to Foreclose in

Judicial Foreclosures 68 3 3 7 Cure of Authority to Foreclose Defects After the Filing

of the Complaint 70

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3 3 8 Waiver and the Effect of Final Judgment on Challenges to Authority to Foreclose 72

3 4 Non- judicial Foreclosures— Who Has Authority to Foreclose? 73 3 4 1 Introduction 73 3 4 2 Authority to Conduct Non- judicial Foreclosure Based on

Right to Enforce Security Instrument 75 3 4 3 Authority to Conduct Non- judicial Foreclosure Based on

Right to Enforce Promissory Note 76 3 4 4 Enforcement of Both the Mortgage and the Note in Non- judicial

Foreclosure— The Massachusetts Ibanez and Eaton Decisions 78 3 4 5 Burden of Proof and Burden of Pleading in Challenging Authority

to Conduct a Non- judicial Sale 79 3.4.6 MeetingSpecificityofPleadingStandardstoChallenge

Non- judicial Foreclosures 81 3 4 7 Limits on Challenges to Authority to Foreclose After a

Non- judicial Sale 83 3 4 8 Bond Requirements and Challenges to the Authority to Foreclose 85 3 4 9 Challenging Authority to Foreclose in Post- Sale Eviction Proceedings 85 3 5 Bankruptcy Proceedings and the Authority to Foreclose Under State Law 87 3 6 Common Issues in Challenges to Foreclosure Based on Faulty Documentation 90 3 6 1 Do Borrowers Have Standing to Challenge Loan Document Transfers? 90 3 6 2 Power of Attorney from Authorized Agent to Assign Mortgage 93 3 6 3 Other Evidence of Transfer of Notes and Mortgages 93 3 6 3 1 Lenders’ Attempts to Prove Transfers of Notes and Mortgages

Through Securitization Documents 93 3 6 3 2 Acquisition of Notes and Mortgages Through

Merger and Purchase of Financial Institutions 94 3 6 3 3 Is the Loan Properly Included in the Trust? 95 3 6 4 Role of Document Custodian 98 3 6 5 Evidentiary Problems 98

Chapter 4 Authority to Foreclose Special Issues: Servicers, GSE Loans, and MERS 4 1 Introduction 99 4 2 Challenging a Servicer’s Authority to Foreclose 99 4 2 1 The Servicer Foreclosing As Agent for the Owner or

Holder of the Loan 99 4 2 2 The Servicer Foreclosing As the Holder of the Loan 100 4 3 Special Issues Related to GSE Servicers 101 4 3 1 Introduction 101 4 3 2 Foreclosure on Behalf of or in Fannie Mae’s Name 102 4 3 2 1 Generally 102 4 3 2 2 Does the Servicer Have the Authority to Foreclose in

Its Role of Document Custodian? 103 4 3 2 3 Does the Servicer Have the Authority to Foreclose When

Fannie Mae Directly Transfers or Negotiates the Mortgage Note to the Servicer, But Remains the Note Owner? 104

4 3 2 4 Does the Servicer Have the Authority to Foreclose When the Custodian Transfers the Note to the Servicer on Behalf of Fannie Mae Who Remains the Owner? 105

4 3 2 5 Does the Servicer Have the Authority to Foreclose When Neither Fannie Mae Nor the Custodian Transfers the Mortgage Note to the Servicer? 105

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4 3 3 Foreclosure on Behalf of or in Freddie Mac’s Name 109 4 3 3 1 Generally 109 4.3.3.2 FreddieMac’sVersionofFannieMae’s“PhantomTransfer”

Provisions 109 4 4 Challenges to the Role of the Mortgage Electronic Registration

System 112 4 4 1 The Mortgage Electronic Registration System (MERS) 112 4 4 2 The Unreliability of MERS Records 114 4 4 3 MERS Holds No Right to Payment 114 4 4 4 MERS Prohibits Conduct of Foreclosures in Its Name 116 4 5 Court Rulings on MERS’ Role in Foreclosures 116 4 5 1 Court Decisions Barring MERS from Foreclosing 116 4.5.2 MERSMayNotForecloseBecauseItIsNotaTrueBeneficiary

of the Note 116 4 5 3 Decisions Allowing MERS to Foreclose 118 4 5 4 Limits on MERS’ Agency Role in Foreclosures 119 4 5 4 1 MERS Cannot Act for Unknown and Undisclosed

“SuccessorsandAssigns” 119 4 5 4 2 Evidence From an Alleged Agent Alone Cannot Establish

the Facts of Agency 120 4 5 4 3 The MERS’ Security Instrument Standing Alone Does

Not Establish an Agency Relationship with Successors of the Original Lender 120

4 6 The Validity of Transfers of Documents in MERS’ Name 121 4 6 1 MERS’ Assignments of Mortgages and Deeds of Trust 121 4 6 2 Transfers of Notes by MERS 122 4 7 Challenging MERS’ Standing in Bankruptcy Proceedings 124 4 8 Other Challenges Involving MERS 125 4 9 Local Recorders’ Actions Against MERS 126

Chapter 5 Procedural and Equitable Defenses to Home Foreclosures 5 1 Introduction 127 5 2 Introduction to the Foreclosure Process 127 5 2 1 Overview 127 5 2 2 Judicial Foreclosure 128 5.2.3 Non-Judicial,“PowerofSale”Foreclosure 128 5 2 4 Other Methods of Foreclosure 129 5 2 5 Right to Cure a Default 130 5 2 6 Redemption 130 5 3 Statute of Limitations Defenses 131 5 3 1 Overview 131 5 3 2 When Does the Statute of Limitations Begin to Run? 132 5 3 3 Renewing the Statute of Limitations 133 5 3 4 What Is the Effect of Expiration of the Statute of Limitations

on the Underlying Debt? 134 5 4 Res Judicata Following a Ruling on the Merits Against the Lender 136 5 5 Procedural Defenses 137 5 5 1 Introduction 137 5 5 2 Failure to Meet Procedural Notice Prerequisites 138 5 5 2 1 Introduction 138 5 5 2 2 Right to Cure and Loss Mitigation Notices Required

by Statutes 139

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5 5 2 3 Notice of Right to Cure and Reinstate— Contractual Cure Notices (Paragraph 22 of the Standard GSE Security Instrument) 140

5 5 2 4 Notice of Sale 142 5 5 2 5 The Lender’s Evidence of Compliance with

Notice Requirements 143 5 5 2 6 The Consequences of Noncompliance 143 5 6 Default: Waiver and Estoppel 146 5 7 Other Procedural Defenses 147 5 8 Due Process Challenges to Foreclosure by Power of Sale 148 5 8 1 Introduction 148 5.8.2 ParticipationbyStateOfficial 149 5 9 Foreclosure of a Deed of Trust 150 5 10 Due on Sale Clauses 152 5 10 1 Overview 152 5 10 2 Federal Exemptions 153 5 10 3 Intra- Family Transfers 153 5.10.4 Exemptionfor“WindowPeriod”Loans 154 5 10 5 Foreclosure Based on a Payment Default Not Barred 154 5 11 Using Equitable Grounds to Prevent a Foreclosure 155 5 12 Mortgagee’s/Trustee’s Duty of Good Faith 156 5 12 1 Generally 156 5.12.2 EnjoiningaForeclosureSaleWhenThereIsSufficient

Equity in the Property to Satisfy the Mortgage Debt 158 5 13 State and Local Mediation Programs 159 5 13 1 State and Local Responses to the Foreclosure Crisis 159 5 13 2 State Statutes Requiring Foreclosure Conferences or Mediation 159 5 13 2 1 Overview 159 5 13 2 2 State and Local Judicial Directives for

Foreclosure Mediation 160 5 13 2 2 1 Generally 160 5 13 2 2 2 Foreclosure conference programs implemented

by bankruptcy courts 161 5 13 2 3 Judicial Enforcement of Conference and Mediation

Requirements 162 5 13 2 4 Finding an Obligation to Negotiate in Good Faith in the

Absence of a Foreclosure Conference or Mediation Program 166 5 13 2 4 1 Generally 166 5.13.2.4.2 Themeaningof“goodfaith” 167 5 14 Protections from Foreclosure Available Under the Servicemembers

Civil Relief Act 168 5 14 1 Overview 168 5 14 2 Who Is Protected by the Act? 168 5 14 3 Protections Against Foreclosure 169 5 14 4 Protections Against Forfeiture of Installment Contracts 173 5 14 5 Interest Rate Reduction Under the Act 173 5 14 6 Waiver of Rights Under the Act 173 5 14 7 Remedies for Violation of the Act 174 5 14 8 The SCRA in Bankruptcy 175

Chapter 6 Government Insured Loans and Moratoriums 6 1 Introduction 177

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6 2 Mortgages Insured by the Federal Housing Administration (FHA) 177 6 2 1 Overview 177 6 2 2 The HUD Loss Mitigation Program 177 6 2 3 Foreclosure of FHA- Insured Mortgages 178 6 2 3 1 Introduction 178 6 2 3 2 HUD’s FHA Loss Mitigation Regulations 179 6 2 3 2 1 In general 179 6 2 3 2 2 Introductory regulations— 24 C F R §§ 203 500,

203 501, and 203 600 180 6 2 3 2 3 Notice— 24 C F R § 203 602 180 6 2 3 2 4 Face- to- face meeting— 24 C F R § 203 604 181 6 2 3 2 5 Periodic review of loss mitigation— 24 C F R

§ 203 605 182 6 2 3 2 6 Compliance with regulations, default in payment,

acceleration notice— 24 C F R § 203 606 183 6 2 3 2 7 Reinstatement, special forbearance, loan

modification—24C.F.R.§§203.608,203.614, 203 616 183

6 2 4 The Consumer Financial Protection Bureau’s RESPA and TILA Rules Apply to FHA Loans 183

6 2 5 Defenses to Foreclosure in Judicial Foreclosure States 184 6 2 5 1 Introduction 184 6 2 5 2 Compliance with FHA Guidelines as a Condition

Precedent to Foreclosure 186 6 2 5 3 Non- Compliance with FHA Guidelines as an Equitable

Defense to Foreclosure 187 6 2 5 4 Burdens of Proof and Pleading 187 6.2.6 AffirmativeLawsuitsandNon-JudicialForeclosure 188 6 2 6 1 Introduction 188 6 2 6 2 Post- Foreclosure Sale Challenges 190 6 2 6 3 Responding to Common Lender Arguments Against

Borrowers’ Enforcement of Their Contract Rights 191 6 2 7 Other Common Legal Issues in Judicial and Non- Judicial

Foreclosures of FHA Loans 194 6.2.7.1 RespondingtoLenders’“SubstantialCompliance”

Arguments 194 6 2 7 2 Lenders’ Efforts to Re- Start Failed Foreclosures—

The Importance of Loss Mitigation Timing 195 6 2 7 3 Past Bankruptcy Not a Bar to Claims and Defenses Asserting

Non- Compliance with FHA Servicing Requirements 196 6 2 7 4 Money Judgment on the Note Not an Alternative to an

Improper Foreclosure 196 6 2 8 Practical Matters in FHA Litigation 197 6 2 9 Foreclosure of Mortgages Held by HUD 198 6 2 9 1 HUD Foreclosure Statute Applies When HUD

Holds the Mortgage 198 6 2 9 2 Challenges to the Law 199 6 2 10 HUD’s FHA Loan Sale Program 199 6 2 10 1 Introduction 199 6 2 10 2 HUD’s Attempts to Reform the DASP Program

Have Been Ineffective 201 6 2 10 3 Legal Claim Arising from the DASP Program 201

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6 3 Mortgages Guaranteed by the Department of Veterans Affairs 202 6 3 1 Overview 202 6 3 2 Preforeclosure Servicing Requirements for VA- Guaranteed Mortgages 202 6 3 3 Foreclosure of VA- Guaranteed Mortgages 204 6 3 3 1 Introduction 204 6 3 3 2 Foreclosure Prevention Claims and Defenses Based on

Lender’s Failure to Comply with VA Servicing Guidelines 204 6 3 4 Administrative Appeals of Adverse Decisions 206 6 3 4 1 Introduction 206 6 3 4 2 Postforeclosure Waiver of Indebtedness 207 6 4 Mortgages Held or Guaranteed by the Rural Housing Service 207 6 4 1 Rural Housing Mortgages 207 6 4 2 Section 502 Direct Single- Family Housing Loans 208 6 4 2 1 Acceleration and Foreclosure of Section 502 Direct Loans 208 6.4.2.2 DefaultBasedonFailuretoRefinance 209 6 4 2 3 Administrative Challenges to Acceleration of

Section 502 Direct Loans 209 6 4 2 4 Foreclosure Defense Based on RHS’s Failure to Comply

with Servicing Guidelines 211 6 4 3 Section 502 Guaranteed Loans 212 6 4 3 1 Introduction 212 6 4 3 2 Foreclosure of Section 502 Guaranteed Loans 212 6 5 Debts Owed to the Federal Government 214 6 6 Due Process Challenges to Foreclosure of Federally Held Mortgages 214 6 6 1 The Government As Foreclosing Mortgage Holder 214 6 6 2 Due Process Requirements 217 6 7 Moratoriums and Other Relief for Homeowners Facing Foreclosure

After a Natural or Man- Made Disaster 218 6 7 1 Overview 218 6 7 2 Foreclosure Relief for FHA Borrowers Affected by

Natural Disasters 218 6 7 3 Foreclosure Relief for VA Borrowers Affected by Natural Disasters 219 6 7 4 Foreclosure Relief for USDA/Rural Development Borrowers

Affected by Natural Disasters 219 6 7 4 1 Rural Development Direct Loans 219 6 7 4 2 Rural Development Guaranteed Loans 220

Chapter 7 Defending Foreclosures by Challenging Unfair Lending Practices 7 1 Introduction 221 7 2 Common Types of Misconduct 221 7 2 1 Creditor Overreaching 221 7 2 2 Steering and Targeting 222 7 2 3 Loan Churning 222 7 2 4 Loan Packing 223 7 2 4 1 Introduction 223 7 2 4 2 Credit Insurance Basics 223 7 2 4 3 Inappropriate Grounds for Denial of Coverage 224 7 2 4 4 Available Legal Claims to Challenge Nonpayment of

Credit Insurance 224 7 2 4 5 Ban Against Financing of Credit Insurance Premiums 225 7 2 5 Broker Originated Loans 225 7.2.6 PropertyFlippingandInflatedAppraisals 226

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7 2 7 Home Improvement Financing Schemes 227 7.2.8 ForeclosureRescueandLoanModificationScams 228 7 3 Raising Origination Misconduct to Stop a Foreclosure— Substantive

Claims and Defenses 228 7 4 Unfair and Deceptive Acts and Practices (UDAP) Statutes 229 7 5 The Truth in Lending Act 229 7 5 1 Introduction 229 7 5 2 Truth in Lending Act Rescission Rights 229 7 5 3 Truth in Lending Act Damages Claims 230 7 5 4 Substantive Protections for Residential Mortgage Loans 231 7 5 5 Higher- Priced Mortgage Loans 231 7 5 6 The Home Ownership and Equity Protection Act (HOEPA) 232 7 6 The Real Estate Settlement Procedures Act (RESPA) 232 7 6 1 Introduction 232 7 6 2 RESPA’s Disclosure Requirements and Combined TILA/RESPA

Disclosures 233 7 6 3 Substantive RESPA Prohibitions 233 7 7 Fair Lending Statutes 234 7 8 Civil RICO 235 7 9 SAFE Act Licensing 235 7 10 State High- Cost Mortgage Statutes 236 7 11 Fraud or Misrepresentation 236 7 12 Fiduciary Duty 237 7 13 Unconscionability 237 7 14 Usury 238 7 15 Other Defenses 238 7 15 1 Negligence 238 7 15 2 Estoppel 239 7 15 3 Unjust Enrichment 239 7 15 4 Incompetence 239 7 15 5 Invalid Security Instruments 240 7 16 Raising Origination- Related Claims and Defenses Against

Assignees 240 7 16 1 Assignees of HOEPA Loans 240 7 16 2 The Holder- in- Due Course Doctrine 241 7 16 3 The FDIC and Assignees 241

Chapter 8 Litigating Foreclosure Cases 8 1 Introduction 243 8 2 Gathering Information 243 8 2 1 Client Interview 243 8 2 2 Obtaining and Storing Documents 244 8 2 2 1 Overview 244 8 2 2 2 Document Sources 244 8 2 2 3 Storing Documents 244 8 2 3 Mortgage Loan Origination Documents 244 8 2 4 Appraisal 246 8 2 5 Servicing Records 246 8 2 5 1 Payoff Amount 246 8 2 5 2 Payment History 247 8 2 5 3 Contact History 247 8 2 5 4 Loss Mitigation Documents 247

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8 2 5 5 Pooling and Servicing Agreement 247 8 2 5 6 Transfer of Servicing Notice 247 8 2 6 Mortgage Transfer of Ownership Notices 248 8 2 7 Public Records 248 8 2 7 1 Land Records 248 8 2 7 2 Consumer Complaints 248 8 2 7 3 Newspaper Articles/Internet Searches 248 8 2 7 4 Corporate and Business Documents 249 8 2 7 5 Securities and Exchange Commission Documents 249 8 2 7 6 Rating Agencies 249 8 2 7 7 Other Lawsuits 249 8 2 7 8 State Administrative Agencies 249 8 2 8 Information Obtained Through Discovery 249 8 2 8 1 List of Items to Ask for in Discovery 249 8.2.8.2 Confidentiality/ProtectionOrders 250 8 3 Applying Evidence Rules to Foreclosure Litigation Documents 250 8 3 1 Introduction 250 8 3 2 Authentication of Paper Documents 252 8 3 2 1 Introduction 252 8 3 2 2 Authenticating Promissory Notes 253 8 3 2 3 Authenticating Security Instruments and Assignments 254 8 3 3 Authentication of Electronically Stored Information 255 8.3.4 TheRequirementsforPersonalKnowledge—AffidavitsandTrial 256 8 3 5 The Business Records Exception to the Hearsay Rule 260 8 3 6 Other Evidence Issues in Foreclosure Litigation: Judicial Notice

and Presumptions 263 8 3 7 Challenging the Lender’s Summary Judgment Record 264 8 3 8 Defeating Summary Judgment 265 8 4 Choosing Defendants 266 8 4 1 Introduction 266 8 4 2 Mortgage Owner Liability 266 8 4 2 1 Overview 266 8 4 2 2 Liability for Originator Conduct 266 8 4 2 3 Liability for Mortgage Servicing Abuses 267 8 4 2 3 1 In general 267 8 4 2 3 2 Liability for conduct of subagents 268 8 4 2 3 3 Liability limitations for government

agency owners 268 8 4 3 Liability of Servicers and Others Involved in Servicing Loans 269 8 5 Forum Selection 270 8 5 1 Federal Jurisdiction 270 8 5 1 1 Overview 270 8 5 1 2 Advantages and Disadvantages of Federal Court 270 8 5 1 3 Standing 270 8 5 1 4 Supplemental Jurisdiction 271 8 5 1 5 Removal of Actions 272 8 5 2 Staying in State Court 273 8 5 3 Personal Jurisdiction over Out- of- State Defendants 273 8 6 Bond Requirements 274 8 7 Issues Posed by Separate Court Proceedings 275 8 7 1 Introduction 275 8 7 2 Younger Abstention 276

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8 7 2 1 Elements Required for Younger Abstention 276 8 7 2 2 Whether State Court Foreclosure Proceedings Fall Within

AnyoftheThreeCaseCategoriesIdentifiedinSprint 277 8 7 2 3 Whether State Court Foreclosure Proceedings Meet the

MiddlesexCriteria;“ImportantStateInterests” 278 8 7 2 4 How Courts Have Applied Younger in Foreclosure Cases 279 8 7 3 The Anti- Injunction Act 280 8 7 4 Colorado River Abstention 281 8 7 5 The Rooker- Feldman Doctrine 282 8 7 5 1 Overview 282 8 7 5 2 Cases Removed from State Court 284 8 7 5 3 Where State Case Had Not Reached Final Judgment Before

Federal Case Filed 284 8 7 5 4 Where the Federal Parties Are Not the Same As the

State Parties 286 8 7 5 4 1 Where federal plaintiff was not a party to the

state court action 286 8 7 5 4 2 Where federal defendants were not parties to the

state court action 286 8 7 5 5 Claims the Homeowner Could Not Have Raised in the State

Court Case; Claims Arising After State Court Case 287 8 7 5 6 Where Homeowner Is Defendant in Federal Court Case 287 8 7 5 7 Where Federal Plaintiff Was Also the Plaintiff in State Court 288 8 7 5 8 Claims Asserted in Bankruptcy 288 8 7 5 9 Inapplicable to Independent Claims 289 8 7 5 9 1 When is a claim independent? 289 8 7 5 9 2 Are TILA rescission claims independent? 291 8 7 5 9 3 Constitutional challenges 292 8 7 5 9 4 Claims based on acts that preceded the state

court suit 292 8 7 5 9 5 Claims based on litigation misconduct by party in

state court suit 293 8 7 5 9 6 Other independent claims 294 8 7 6 Res Judicata and Collateral Estoppel 295 8 7 7 The Bankruptcy Automatic Stay As an Alternative 295 8 8 Mandatory Arbitration Clauses 295 8 8 1 Introduction 295 8 8 2 Federal Limits on Arbitration in Mortgage Loans 295 8 8 2 1 Coverage 295 8 8 2 2 Two Separate TILA Provisions Limit Arbitration 296 8 8 2 3 Effective Date and Retroactive Application 296 8 8 3 Arbitration Is Consistent with CROA and Even Usury Claims 297 8 8 4 How to Challenge the Enforceability of an Arbitration Requirement 298 8 8 4 1 Overview 298 8 8 4 2 Does the Court or Arbitrator Decide Whether a Clause Is

Enforceable? 298 8 8 5 Eleven Homeowner Responses to an Arbitration Requirement 299 8 9 Tax Issues 301 8 9 1 Introduction 301 8 9 2 Pain and Suffering Damages 301 8 9 3 Multiple, Statutory, and Punitive Damages 301 8 9 4 Prejudgment and Postjudgment Interest 302

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8 9 5 Damages Relating to Overpayment 302 8 9 6 When Loan Forgiveness Is Not Income 302 8 9 7 Taxability of Attorney Fees 302 8 10 Settlement Issues 303 8 10 1 Dealing with Multiple Defendants 303 8.10.2 Confidentiality 304 8 10 3 Protecting the Consumer’s Credit Report 305 8 10 4 Tax Consequences of Settlement 306 8 10 4 1 Overview 306 8 10 4 2 Settlement Should Specify Nature of All Damages 306 8.10.4.3 ReflectingTaxConsequencesinSettlementAmounts 307 8 10 5 Attorney Fees 307 8 10 6 Protecting Against the Defendant’s Bankruptcy 308 8 10 7 Make Sure the Agreement Is Enforceable 308 8.10.8 AddressthePublicBenefitConsequencesoftheSettlement 308 8 10 9 Other Considerations 309 8 11 Preemption of State Foreclosure or Servicing Laws 309 8 11 1 Introduction 309 8 11 2 Historical Context 309 8 11 3 Current Preemption Statutory Standard 310 8 11 4 The OCC’s Current Preemption Regulation 310 8 11 5 Applying the 2011 OCC Preemption Standard to Servicing and

Foreclosure Laws 311 8 11 6 Pre- 2011 HOLA Preemption of State Servicing and Foreclosure Laws 313 8 11 6 1 OTS Rule and Mortgage Servicing 313 8 11 6 2 Preemption of State Preforeclosure Requirements 315 8 11 7 Effect of Merger of Federal Savings Association with National Bank 317 8 12 Preemption Under the Federal Credit Union Act 317

Chapter 9 Using Bankruptcy to Prevent Foreclosure 9 1 Introduction 319 9 2 Bankruptcy Basics 320 9 2 1 Two Common Types of Bankruptcy for Consumers 320 9 2 1 1 General 320 9 2 1 2 Chapter 7 (Straight Bankruptcy) 320 9 2 1 3 Chapter 13 (Reorganization) 320 9 2 2 Gathering the Necessary Information 321 9 2 3 Credit Counseling and Debtor Education Requirements 321 9 2 4 Litigating in a Bankruptcy Case 321 9 3 Obtaining the Automatic Stay 321 9 3 1 Stays Obtained by Filing for Bankruptcy 321 9 3 1 1 The Automatic Stay 321 9 3 1 2 The Codebtor Stay 322 9 3 2 Purpose of the Automatic Stay 323 9 3 3 Duration of the Automatic Stay 323 9 3 3 1 General Rule 323 9 3 3 2 Limitations Based on Repeat Filings 324 9 3 3 3 In Rem Stay Relief 325 9 3 4 Scope of the Automatic Stay 326 9 3 4 1 Stay of Legal Proceedings 326 9 3 4 2 Stay of Acts Directed at Debtor’s Property

(Including Foreclosure) 327

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Contents

9 3 5 Notice of the Automatic Stay 328 9 3 6 Enforcing the Stay 329 9 3 6 1 Remedies for Violations of the Stay 329 9 3 6 2 Violations of the Stay by Government Entities 332 9 3 6 3 Procedure 333 9 3 7 Proceedings Seeking Relief from Stay 333 9 3 7 1 Overview 333 9 3 7 2 Form of Proceeding 333 9 3 7 3 Standing of Moving Party to Seek Stay Relief and

Indispensable Parties 334 9 3 7 4 Time Limits for Court Actions 335 9 3 7 5 Grounds for Relief from Stay 336 9 3 7 6 Debtor Must Conduct Speedy Discovery 338 9 3 7 7 Burden of Proof 338 9 3 7 8 Raising Consumer Defenses in Response to a Motion for

Relief from Stay 338 9 3 7 8 1 Generally 338 9 3 7 8 2 Responding to the motion 338 9 3 7 8 3 The applicable legal standard for evaluating

consumer defenses to a motion for relief 339 9 3 7 8 4 Practice tips 339 9 3 7 9 Stays Pending Appeal 341 9 4 Curing Defaults on Home Loans 341 9 4 1 Generally 341 9 4 2 Curing a Default in Bankruptcy After a Foreclosure Judgment or

Foreclosure Auction 343 9 4 2 1 Generally 343 9 4 2 2 Postforeclosure Sale Rights of Redemption 343 9 4 2 3 Cure Rights When the Sale Process Is Not Yet Completed

Under State Law 344 9 4 2 4 If the Sale Can Be Set Aside 345 9 4 3 Effect of a Cure 345 9 4 4 Creditors’ Attorney Fees and Costs 346 9 4 5 Payment of Interest on the Arrears 348 9 4 6 Use of Bankruptcy Rules 3001(c)(2)(C) and 3002 1 349 9 4 6 1 General 349 9 4 6 2 Mortgage Proof of Claim Attachment— Rule 3001(c)(2)(C) 349 9 4 6 3 Application of Rule 3002 1 350 9 4 6 4 Notice of Payment Change—

Rule 3002 1(b) 350 9 4 6 5 Notice of Postpetition Fees—

Rule 3002 1(c) 351 9 4 6 6 Fee Dispute Procedure— Rule 3002 1(e) 352 9 4 6 7 Notice of Final Cure Payment—

Rules 3002 1(f) Through 3002 1(h) 352 9 4 6 8 Sanctions for Noncompliance—

Rules 3001(c)(2)(D) and 3002 1(i) 354 9 4 6 9 Rule 3002 1 and Attorneys General Settlement with

Major Servicers 355 9 4 7 Proper Crediting of Plan Payments 356 9 5 Paying Secured Claims in Full 358 9 6 Stripping Down Residential Mortgages to the Value of the Collateral 359

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9 6 1 Home Secured Loans 359 9 6 2 Strip Off of Wholly Unsecured Junior Mortgages 360 9 6 3 Manufactured Home Loans 362 9 6 4 Mortgages with Additional Security 362 9 7 Avoiding Judicial Liens— Section 522(f)(1) 363 9 8 Debtor’s Statement of Intention Regarding Secured Property 365 9 8 1 Requirements of Section 521(a)(2) 365 9 8 2 Stay Relief Based on Noncompliance with Statement

of Intention 366 9 9 Sale of Property 367 9 10 Impact of Bankruptcy on Later Foreclosure Prevention Efforts 368 9 10 1 Overview 368 9 10 2 Impact of Bankruptcy on Negotiated Workout Plans and

LoanModifications 368 9 10 2 1 Effect of Prior Discharge 368 9 10 2 2 Bankruptcy Policies of Loss Mitigation Programs 369 9 10 3 Impact of Bankruptcy on Legal Defenses to Foreclosure 370 9 10 4 Impact of Prior Bankruptcy on Later Bankruptcy Filing 372

Chapter 10 Issues Arising After a Foreclosure Sale 10 1 Introduction 373 10 2 Re- Purchasing the Home During or After the Foreclosure Sale 373 10 2 1 Purchasing the Home at the Foreclosure Sale 373 10 2 2 Redeeming the Home After the Foreclosure Sale 373 10 2 2 1 State Statutes Described 373 10 2 2 2 Utility of the Right to Redeem 375 10 3 Setting Aside a Completed Foreclosure Sale 375 10 3 1 Overview 375 10 3 2 Procedural Issues 375 10 3 2 1 Generally 375 10 3 2 2 Rooker- Feldman Doctrine 377 10 3 3 Grounds on Which a Foreclosure May Be Set Aside 378 10 3 3 1 Generally 378 10 3 3 2 Irregularity in the Conduct of the Sale 378 10 3 3 3 Void and Voidable Sales 380 10.3.3.4 WhatTypeof“Harm”or“Prejudice”IsSufficientto

Set Aside a Completed Foreclosure Sale? 380 10 3 3 4 1 In general 380 10 3 3 4 2 Authority to foreclose (standing) 381 10 3 3 4 3 Notice 384 10 3 3 4 4 Loss mitigation 387 10 3 3 5 Inadequacy of Sale Price 389 10 3 3 5 1 In general 389 10 3 3 5 2 Inadequate price and irregularity in the

conduct of the sale 391 10 3 3 5 3 Inadequate price and unfairness 393 10 3 3 5 4 Practice tips 394 10 3 4 Setting Aside a Foreclosure Sale in Bankruptcy 395 10 3 4 1 Sales That Violate the Automatic Stay 395 10 3 4 1 1 In general 395 10 3 4 1 2 Where automatic stay does not apply 396 10 3 4 2 Fraudulent Transfers— 11 U S C § 548 397

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10 3 4 3 Using State Law Invalidity to Set Aside a Sale in Bankruptcy Court 398

10 3 4 4 Preferences— 11 U S C § 547 400 10 3 4 5 Sales That Are Not Complete Under State Law 402 10.4 DeficiencyJudgments 402 10.4.1 DeficiencyJudgmentsDefined 402 10.4.2 StateStatutoryRestrictionsonDeficiencyJudgments 402 10.4.3 JudicialLimitationsonDeficiencyJudgments 405 10.4.4 CreditorMustProvetheDeficiencyAmount 407 10.4.5 DeficiencyClaimsAreUnsecured 408 10 5 Claiming a Foreclosure Sale Surplus 409 10 5 1 Procedure 409 10 5 2 Timelines in Distribution of a Surplus 411 10 5 3 Steps Homeowners Should Take 411 10 5 4 Relative Rights of Judicial Lien and Homestead Exemption 412 10.5.5 “SurplusRetrieval”Consultants 412 10 6 Damage Claims for Wrongful Foreclosure 412 10 7 Tax Consequences of a Foreclosure or Settlement of Home:

An Introduction 415 10 7 1 Foreclosure Sales May Result in Taxable Income 415 10 7 2 Taxable Gain From the Foreclosure Sale of the Home or

Settlement 415 10 7 2 1 When Is a Gain Taxable? 415 10 7 2 2 Calculating the Amount of the Gain 416 10 7 2 3 Lenders Reporting of the Amount Realized 416 10 7 3 Cancellation of Debt (COD) Income 416 10 7 3 1 General Rule 416 10 7 3 2 Determining the Amount of Discharged Debt: Recourse vs

Non- Recourse Debt 417 10 7 3 3 Triggering Events: When COD Must Be Reported 417 10 7 3 4 When COD Need Not Be Reported 418 10 7 3 5 Form 1099- C 418 10 7 3 5 1 What is a 1099- C? 418 10.7.3.5.2 Thefilingofa1099-Cdoesnotmeanthattax

is owed 418 10.7.3.5.3 Improperfilingofa1099-C;useofa1099-C

to defeat collection actions 419 10 7 3 6 Taxpayer Reporting: Form 982 419 10 7 4 Exclusions from Cancellation of Debt Income 420 10 7 4 1 Overview 420 10 7 4 2 Insolvency Exclusion 420 10 7 4 3 Bankruptcy Exclusion 420 10 7 4 4 Disputed or Contingent Debts 421 10 7 4 5 Interest and Fees 422 10.7.4.6 PurchasePriceInfirmityDoctrine 422 10 7 4 7 Acquisition Indebtedness (For Tax Years Through 2017) 422 10 7 4 7 1 In general 422 10 7 4 7 2 Ordering rule for home equity debt 423 10 7 4 7 3 Government payments to reduce principal 423 10 7 5 What to Do If an Exclusion Applies 424 10 7 5 1 Overview 424 10 7 5 2 What to Do If Tax Has Mistakenly Been Paid 424

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10 7 5 3 Preventing Submission of a 1099- C Form 424 10 7 5 4 Taxation of National Mortgage Settlement and

Similar Payments 425 10 8 Rights of Tenants in Possession Following Foreclosure on

Their Landlord’s Property 425 10 8 1 Federal Protections 425 10 8 1 1 Overview 425 10 8 1 2 Fannie Mae and Freddie Mac Mortgages 426 10 8 1 3 FHA- Insured Mortgages 426 10 8 1 4 Section 8 Tenants 427 10 8 2 State Law 427 10 8 2 1 Overview 427 10.8.2.2 State“GoodCause”EvictionStatutes 429 10 8 2 3 Other State Statutes Offer Protections to Tenants 430 10 8 2 3 1 In general 430 10 8 2 3 2 Notice requirements and lease protections 430 10 8 2 3 3 Notice to existing tenants of a pending

foreclosure 430 10 8 2 3 4 Disclosure of foreclosure to prospective

tenants 430 10 8 2 3 5 Utility shutoffs 431 10 8 2 3 6 Security deposits 431 10 8 2 3 7 Sealing eviction records 431 10 8 2 3 8 Cash for keys 431 10 8 2 4 Redemption or Purchase by Group of Tenants 431 10 8 3 Rights of Tenants If Their Landlord Files Bankruptcy 432 10 9 Former Owners in Possession of Property Following Foreclosure 432

Chapter 11 Manufactured Home Foreclosures and Repossessions 11 1 Overview 433 11 2 Must Foreclosure Procedures Be Followed to Retake Manufactured Home? 434 11 2 1 Introduction 434 11 2 2 Implications of Treatment of Manufactured Homes As

Realty or Personalty 436 11 2 3 Manufactured Home Real Property Conversion Statutes 437 11 2 3 1 Nature and Effect of Manufactured Home Real Property

Conversion Statutes 437 11 2 3 2 Listing of State Conversion Statutes 439 11 2 4 State Tax Statutes 446 11 2 5 Whether Manufactured Home Is Treated As Realty in Absence of a

State Statute 447 11 3 Repossession and Resale Procedures When Creditor Proceeds Under

Article 9 449 11 3 1 Introduction 449 11 3 2 Enforceable Security Interest As Precondition of Repossession 449 11 3 3 Default 450 11 3 4 Self- Help Repossession 450 11 3 5 Debtor’s Right of Redemption 450 11 3 6 Secured Party’s Sale of the Home 450 11.3.7 DeficiencyorSurplus 450 11 3 8 Creditor’s Option to Retain Home in Full Satisfaction of Debt 451 11 3 9 Remedies for Violations of Article 9 451

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11 4 State Restrictions on Seizure of Manufactured Homes; Breach of Peace in Repossession 451

11 5 Right to Cure Manufactured Home Default 452 11 5 1 State Right to Cure Statutes 452 11 5 2 Limited Right to Cure Under Federal Law 452 11 6 Truth in Lending Defenses in Manufactured Home Foreclosures 453 11 6 1 Damages Claims 453 11 6 2 Rescission 454 11 7 RESPA Defenses in Manufactured Home Foreclosures 454 11 8 Defenses Based on State Credit Statutes 456 11 9 Warranty Defenses 456 11 10 Homestead Exemption 457 11 11 Workout Agreements 458 11 12 Using Bankruptcy to Prevent Loss of a Manufactured Home 458 11 13 Raising Seller- Related Defenses Against the Foreclosing Creditor 459 11 14 Problems Relating to Manufactured Home Parks 459 11 15 Effect of Default on Debt or Rent for Land on Which Manufactured

Home Is Sited 460

Chapter 12 Forfeiture of Land Installment Sales Contracts 12 1 Introduction 463 12 2 Nature of Land Installment Sales Contracts 464 12 2 1 Legal Obligations of the Parties 464 12 2 2 Abuses Involving Installment Land Sales Contracts 466 12 3 Statutory Limitations on Forfeiture 467 12 3 1 Introduction 467 12 3 2 Notice and Right- to- Cure Requirements 467 12 3 3 Statutes Treating Land Installment Sales Contracts Like

Mortgage Loans 468 12 3 4 Other Statutory Protections for Buyers 469 12 3 5 Failure to Return a Surplus As an Unfair or Deceptive Practice 470 12 4 Judicial Limitations on Forfeiture 470 12 4 1 Judicial Treatment of Land Installment Contracts As Mortgages 470 12 4 2 Judicial Creation of Protections Against Forfeiture 472 12 5 Using Bankruptcy to Prevent Forfeiture 474 12 5 1 Can Installment Land Contract Be Treated As Creating a

Security Interest? 474 12 5 2 Debtor’s Options If Installment Land Contract Must Be Treated

As an Executory Contract in Bankruptcy 476 12 5 3 When Is It Too Late to File a Chapter 13 Case to Prevent Forfeiture

of an Installment Land Sale Contract? 476 12 5 4 Automatic Stay Issues 477 12 5 5 Setting Aside the Forfeiture 477

Chapter 13 Condominium and Homeowner Association Liens and Foreclosures 13 1 An Overview of the Process 479 13 1 1 The Power of the Condominium Association to Collect Dues and

Levy Assessments 479 13 1 2 Dual Threat of Foreclosure by Lender and Condominium Association 479 13 1 3 Overview of State Condominium Acts 479 13 1 4 Uniform Common Interest Ownership Act 480

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13 2 The Condominium Association’s Power to Foreclose 481 13 2 1 Scope of the Lien 481 13 2 1 1 Acceleration of Entire Amount of Assessments 481 13 2 1 2 Interest, Fees, and Costs 482 13 2 1 3 Fines for Violations of Association Rules 483 13 2 1 4 Priority of Lien 484 13 2 1 5 When Does the Lien Arise? 485 13 2 1 6 Automatic Lien vs Filing and/or Recordation

Requirement 486 13 2 2 Expiration/Extinguishment of the Lien 487 13 2 3 Statutory Limitations on the Association’s Ability to Foreclose 488 13 2 3 1 Introduction 488 13 2 3 2 Minimum Unpaid Assessment Requirement 488 13.2.3.3 HearingOpportunity,BoardRatification,andOther

Procedural Requirements 489 13 2 4 Premature Foreclosure 490 13 2 5 Foreclosure Is Not Mandatory 490 13 2 6 Foreclosure vs Personal Lawsuit Against Unit Owner 491 13 2 7 Deprivation of Property Rights 492 13 3 The Method of Foreclosure 492 13 3 1 Same Manner As a Lien on Real Property 492 13 3 2 Lien Recordation Requirements 493 13 3 3 Notice Requirements 493 13 3 3 1 Pre- Acceleration Notice 493 13 3 3 2 Notice or Statement of Delinquent Assessments Upon

Request by Unit Owner 493 13 3 3 3 Notice Prior to Filing or Imposing a Lien 494 13 3 3 4 Notice of Lien 495 13 3 3 5 Notice Prior to Sale 496 13 3 3 6 Post- Sale Notice 498 13 3 4 Reasonable Rental Claims by Association During Foreclosure 498 13 3 5 Recovery of Attorney Fees 499 13 4 The Unit Owner’s Ability to Contest the Lien or Foreclosure Sale 502 13 4 1 Statutory Procedures for Challenging the Lien 502 13 4 1 1 Alternative Dispute Resolution 502 13 4 1 2 Civil Action 503 13 4 1 3 Notice of Contest of Lien 503 13 4 2 Defenses and Counterclaims 504 13 4 2 1 Unreasonable Assessments and Fees 504 13 4 2 2 Preclusion of Defenses and Counterclaims in

State Laws 509 13 4 2 3 Failure to Provide upon Request a Timely Statement of

Amount Due 509 13 4 2 4 Defects in the Sale Process 510 13 4 2 4 1 Right to sell 510 13 4 2 4 2 Notice 510 13 4 2 4 3 Commercial reasonableness and inadequacy

of price 510 13 4 2 5 Failure to Accept Partial Payment While Claim Is in Dispute 512 13 4 2 6 Failure of Association to Ascertain Ownership 514 13.4.2.7 ConflictBetweentheDeclarationandtheStatute 514 13 4 2 8 Failure to Accept Reasonable Payment Plan 515

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Contents

13 4 3 Right to Cure Default 516 13 4 4 Payment in Chapter 13 Case 517 13 4 5 Protection from Foreclosure for Military Personnel 517 13 4 6 Mortgage Holder or Servicer Liability for Unpaid Assessments 518 13 5 After the Foreclosure Sale 518 13 5 1 Post- Sale Right of Redemption 518 13 5 2 Priority of Claims to Foreclosure Proceeds 519 13 5 3 Superpriority Lien Provisions in Condominium Acts 519 13 5 4 Entitlement of Association to Surplus Proceeds 524 13 5 5 Entitlement of Former Owners to Surplus Proceeds 524 13 5 6 Third Party Liability for Assessments Following Sale 525 13 5 7 Dischargeability of Assessments in Bankruptcy 527 13 6 Obligations of Tenants Where Owner Is Delinquent in Payments 529 13 7 Condominium Owner Bill of Rights and Responsibilities 530

Chapter 14 Preventing Foreclosure of Reverse Mortgages 14 1 Introduction 531 14 2 Overview of HECM Reverse Mortgages 531 14 3 Reverse Mortgage Foreclosure 533 14 3 1 Generally 533 14 3 2 Property Charge Defaults 534 14 3 3 Reverse Mortgage Maturity 537 14 3 3 1 Introduction 537 14 3 3 2 Non- Occupancy 538 14 3 3 3 Non- Borrowing Spouses 538 14 3 3 4 Foreclosure After Death of Homeowner 542 14 3 3 4 1 Overview 542 14 3 3 4 2 Procedural defenses 542 14 3 3 4 3 Amount necessary to prevent foreclosure 544 14 3 3 4 4 Using bankruptcy to prevent foreclosure 544 14 4 Raising Origination Claims 545 14 5 Raising Discrimination Claims 546

Chapter 15 Tax Liens and Tax Foreclosures 15 1 An Overview of the Process 549 15 2 Real Property Taxation Process 549 15 2 1 Property Assessment 549 15 2 2 The Tax Lien 550 15 2 2 1 Priority of Real Estate Tax Liens 550 15 2 2 2 Mortgage Holder Liability for Unpaid Taxes 550 15 2 3 The Tax Sale Process 551 15 2 3 1 Overview 551 15.2.3.2 NotificationofTaxSale 551 15 2 3 3 The Tax Sale 552 15 2 3 3 1 Tax sale by auction 552 15 2 3 3 2 Bidding procedure at auctions 552 15 2 3 3 3 Transfer without auction 553 15 2 3 3 4 Negotiated bulk sales 553 15 2 3 3 5 Securitization 553 15 2 3 4 Redemption and Foreclosure 553 15 3 Preventing Property Tax Foreclosures 554

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15 3 1 Minimizing Property Tax Liability 554 15 3 1 1 Overview 554 15 3 1 2 Challenging the Assessment 554 15 3 1 2 1 Assessment exceeds taxable value 554 15 3 1 2 2 Property is disproportionately assessed 554 15 3 1 2 3 Administrative procedures 554 15 3 1 3 Abatement, Exemption, and Deferral Programs 555 15 3 1 3 1 Special tax relief programs: overview 555 15 3 1 3 2 Types of programs 555 15 3 1 3 3 Seeking tax relief 557 15 3 1 4 Agreement and Compromise 557 15 3 1 5 Deferred Payment Plans 557 15 3 1 6 Payment in Chapter 13 Bankruptcy 557 15 3 1 7 Interest on Taxes 558 15 3 1 8 Relief from Tax Sales for Military Personnel 558 15 3 2 Contesting a Tax Sale 558 15 3 2 1 Overview 558 15 3 2 2 Taxpayer Defenses to a Judicial Tax Foreclosure 558 15 3 2 3 Enjoining a Sale Occurring Under a Non- Judicial

Process 559 15 3 3 Setting Aside a Completed Tax Sale 560 15 3 3 1 Overview 560 15 3 3 2 Grounds for Challenging Tax Sales 561 15 3 3 2 1 Generally 561 15 3 3 2 2 Defects in the tax lien or in the tax sale

process 562 15 3 3 2 3 Taxes are not owed 563 15 3 3 2 4 Fraud in the sale or redemption process, or in

the imposition of tax 563 15 3 3 2 5 Purchaser’s lack of legal authority to bid 564 15 3 3 2 6 Excusable neglect 564 15 3 3 2 7 Equitable grounds 564 15 3 3 2 8 Inadequacy of sale price 564 15 3 3 2 9 Avoidance in bankruptcy as fraudulent

conveyance 564 15 3 4 Constitutional Challenges to the Tax Sale 566 15 3 4 1 Tax Sales Subject to Due Process 566 15 3 4 2 General Notice Requirements 566 15 3 4 3 Adequate Notice 567 15 3 4 4 Notice of Post- Sale Procedures and Right of Redemption 571 15 3 4 5 Full and Adequate Opportunity to Protest 572 15 3 4 6 Asserting a Due Process Challenge 572 15 3 4 7 Tax Sale as Unconstitutional Taking of Homeowner’s

Equity in Property 572 15 4 Redemption Following Sale 573 15 4 1 Introduction 573 15 4 2 The Redemption Amount 574 15 4 3 Borrowing to Effectuate Redemption 574 15 4 4 Redemption in Bankruptcy 575 15 5 Fraud by Tax Sale Speculators 576 15 6 Private Collection and Enforcement of Tax Liens 577 15 7 Property Assessed Clean Energy (PACE) Tax Assessments 577

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Contents

Chapter 16 Foreclosure Rescue Scams 16 1 Introduction 579 16 2 What Is a Foreclosure Rescue Scam? 580 16 2 1 Generally 580 16 2 2 Sale- Leaseback Schemes 581 16 2 3 Inter Vivos Trusts 583 16.2.4 LoanModificationScams 584 16 2 5 Short Sale Scams 586 16 3 Investigating and Preparing a Foreclosure Rescue Scam Case 586 16 3 1 Recognizing a Foreclosure Rescue Scam 586 16 3 2 Gathering Information 588 16 3 2 1 The Homeowners’ Story 588 16 3 2 2 The Document Trail 588 16 3 2 2 1 The importance of the documents 588 16 3 2 2 2 Solicitation materials 589 16 3 2 2 3 Transaction documents 589 16 3 2 2 4 Local land records 590 16 3 2 2 5 Court records 591 16 3 2 2 6 Other documents 591 16 3 2 2 6 1 Generally 591 16 3 2 2 6 2 Payments to rescuer or lender 591 16 3 2 2 6 3 Rescuer’s loan documents 591 16 3 2 2 6 4 Appraisal 592 16 3 2 2 6 5 Reports of consumer

complaints 592 16 3 2 2 6 6 Corporate and business

documents 592 16 3 2 2 6 7 Internet searches 593 16 3 3 Identifying Possible Defendants 593 16 3 4 First Steps 594 16 3 4 1 Need for Quick Action and to Determine the Homeowner’s

Goals 594 16 3 4 2 Stop Eviction Proceedings 594 16 3 4 3 Reviewing the Deed 595 16 3 4 4 Evaluating Grounds for Rescission 595 16 3 4 5 Recording a Lis Pendens or Other Notice 595 16 3 4 6 Evaluating the Competency of the Consumer and

DeterminingWhetherFamilyMembersHaveConflicts of Interest 596

16 4 Legal Theories to Attack Foreclosure Rescue Scams 597 16 4 1 Construing the Transaction As a Loan 597 16 4 1 1 Overview 597 16 4 1 2 The Equitable Mortgage Doctrine 597 16 4 1 3 The Bona Fide Purchaser Defense 601 16 4 2 Truth in Lending 605 16 4 2 1 Introduction 605 16 4 2 2 The Right of Rescission 606 16 4 2 2 1 Generally 606 16 4 2 2 2 Exercising the right of rescission 607 16 4 2 2 3 The consumer’s tender obligation 607 16 4 2 3 Damages and Attorney Fees 608 16 4 2 4 Assignee Liability 609

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16 4 3 Home Ownership and Equity Protection Act 609 16 4 3 1 Scope 609 16 4 3 1 1 Overview of HOEPA 609 16 4 3 1 2 Example of APR trigger calculation 610 16 4 3 1 3 Example of points and fees trigger

calculation 610 16 4 3 2 Substantive Prohibitions 611 16 4 3 3 Expanded Assignee Liability 612 16 4 3 4 Remedies 612 16 4 4 The MARS Regulation 613 16 4 4 1 Introduction 613 16 4 4 2 Scope 613 16 4 4 3 Payment Restrictions 613 16 4 4 4 Other Prohibitions and Disclosures 614 16 4 4 5 Exemptions 615 16 4 4 5 1 General exemptions 615 16 4 4 5 2 Attorney exemption 615 16 4 4 5 2 1 Generally 615 16 4 4 5 2 2 Federal authority 616 16 4 4 6 No Private Right of Action 618 16 4 5 Unfair and Deceptive Acts and Practices (UDAP) Statutes 618 16 4 5 1 Overview of State UDAP Statutes 618 16 4 5 2 Comparison of UDAP and Fraud Claims 619 16 4 5 3 Comparison to TILA and HOEPA 620 16 4 5 4 Application of Substantive UDAP Standards to

Foreclosure Rescue Scams 620 16 4 5 5 UDAP Remedies 622 16 4 6 State Foreclosure Rescue Statutes 623 16 4 6 1 Introduction 623 16 4 6 2 Coverage 624 16 4 6 3 Right to Cancel 625 16 4 6 4 Substantive Prohibitions 626 16 4 6 5 Remedies 627 16 4 6 6 NCLC Model State Foreclosure Rescue Statute 627 16 4 7 Fraud and Civil Conspiracy 628 16 4 7 1 Introduction 628 16 4 7 2 Elements of a Fraud Claim 628 16 4 7 3 Fraud by Silence 629 16 4 7 4 Overcoming Exculpatory Contract Clauses 629 16 4 7 5 The Importance of Pattern Evidence 630 16 4 7 6 Remedies for Fraud 630 16 4 7 7 Acceptance of Fruits of Fraud, Civil Conspiracy,

Aiding and Abetting 631 16 4 8 Other Common Law Claims 631 16 4 8 1 Introduction 631 16 4 8 2 Unconscionability 632 16 4 8 3 Breach of Duty of Good Faith and Fair Dealing 633 16 4 8 4 Breach of Fiduciary Duty 633 16.4.8.5 IntentionalInflictionofEmotionalDistress 634 16 4 8 6 Other Common Law Claims 634 16 4 9 State Credit and Usury Laws 634 16 4 9 1 State Usury Laws and Their Penalties 634

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Contents

16 4 9 2 Choice of Law Clauses 635 16 4 9 3 Licensing Provisions of State Usury Laws 636 16 4 10 Other State Statutes 636 16 4 10 1 Introduction 636 16 4 10 2 Door- to- Door Sales Laws 636 16 4 10 3 State Credit Services or Credit Repair

Organization Laws 637 16 4 11 State Real Estate Requirements 638 16 4 11 1 Formal Requirements for Deeds 638 16 4 11 2 False Notarization 638 16 4 12 RICO 639 16 4 13 Real Estate Settlement Procedures Act 640 16 4 14 The SAFE Act 640 16 4 15 The Telemarketing Sales Rule 641 16 5 Challenging Foreclosure Rescue Scams in Bankruptcy 641 16 5 1 Generally 641 16 5 2 Stopping the Eviction 641 16 5 3 Voiding Title Transfers in Foreclosure Rescue Scams 642 16 5 3 1 Introduction 642 16 5 3 2 Trustees’ Powers to Avoid Transfers 642 16 5 3 2 1 Overview 642 16 5 3 2 2 Fraudulent transfers 642 16.5.3.2.3 Useof“strongarmclause” 643 16 5 3 3 Debtor’s Power to Avoid Title Transfers 643 16 5 3 3 1 Overview 643 16 5 3 3 2 Did the debtor conceal the property? 643 16 5 3 3 3 May the debtor exempt the property? 643 16 5 3 3 4 Was the transfer involuntary? 644 16 5 3 4 Persuading the Trustee to Avoid the Transfer 644 16 6 Getting Relief Outside Litigation 644

Appendix A Selected Provisions of the Servicemembers Civil Relief Act 645

Appendix B Selected Statutes and Regulations Pertaining to Mortgages Held or Insured by the Federal Government

B 1 Introduction 653 B 2 Loans Insured by the Department of Housing and Urban

Development (HUD) 653 B 2 1 Selected Statutes 653 B 2 2 Selected Regulations 656 B 2 3 HUD Handbooks and Mortgagee Letters 658 B 3 Loans Guaranteed by the Department of Veterans Affairs 658 B 3 1 Selected Statutes 658 B 3 2 Selected Regulations 664 B 3 3 VA Guaranteed Loans Circulars and Handbook 669 B 4 Loans Held by the Rural Housing Service (formerly the Farmers Home

Administration) 669 B 4 1 Selected Statutes 669 B 4 2 Selected Regulations 677 B 5 Loans Guaranteed by the Rural Housing Service, Selected Regulations 680 B 6 Rural Development Administrative Notices, Letters, and Handbooks 683

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Appendix C Reverse Mortgages C 1 Selected National Housing Act Provisions 685 C 2 Selected National Housing Act Regulations 688

Appendix D Summary of State Reverse Mortgage Laws 699

Appendix E Summary of State Foreclosure Laws 725

Appendix F Summary of State Real Estate Tax Abatement Laws 751

Appendix G Summary of State Tax Lien Foreclosure Laws 759

Appendix H Summary of State Condominium Laws 793

Appendix I Foreclosure Prevention Practice Aids and Sample Mortgage Documents

I 1 Sample Mortgage 809 I 2 Sample Promissory Note— Fixed Rate Mortgage 815 I 3 Sample Promissory Note— Adjustable Rate Mortgage 816 I 4 Sample Request for Information Under RESPA to Obtain Identity of

Mortgage Owner 818 I 5 Sample Notice As to Change of Servicer (RESPA) 819 I 6 Sample Notice As to Assignment, Sale, or Transfer of Ownership of

Mortgage Loan (TILA) 819

Appendix J Helpful Websites 821

Appendix K Glossaries K 1 Generalized Glossary 823 K 2 Specialized Glossary of Mortgage Servicing Terms 830

Index 833