New Rules for Servicers: Recent Bankruptcy Case Law Affecting Mortgage Servicing and Foreclosure Actions in South Carolina

[COLUMBIA, SC | THURSDAY, MARCH 24, 2022]  

Recently third-party creditor’s rights attorney Lucas S. Fautua was featured in the American Legal and Financial Network’s quarterly magazine THE ALFN ANGLE, with his article on recent bankruptcy case law and how it will affect mortgage servicing and foreclosure actions in South Carolina. Please see the full article here “New Rules for Servicers: Recent Bankruptcy Case Law Affecting Mortgage Servicing and Foreclosure Actions in South Carolina” connect with Mr. Fautua at lfautua@rplfirm.com

Celebrating 20 Years in Business

[COLUMBIA, SC| THURSDAY, OCTOBER 21, 2021]

Riley, Pope & Laney, LLC, a corporate and real estate law firm, Is proudly recognizing the 20th anniversary of the founding of the firm. Harkening back to the founding days of the firm, the Greater Columbia Business Monthly stated in a 2001 article “…the fast growing firm is experiencing tremendous success…”. In 2001 the firm’s founding partners Ted Riley, Lowndes Pope and Roy Laney, started the firm for the challenge and satisfaction of building a firm the way they felt it should be built and to be able to enjoy the ongoing creative process.  Firm Partner T. Lowndes Pope noted recently, “We started in Columbia and have exceeded our expectations for growth through offices in both Charlotte, NC and Charleston, SC. We thank all our dedicated and hardworking attorneys and staff for their contributions to our success.” For more information on the firm, its founding partners and current day practice areas, please see http://www.rplfirm.com .

RPL Welcomes William R. Stroud and Clara H. Mintz to our Charleston location

[COLUMBIA, SC | WEDNESDAY, OCTOBER 13, 2021]

Riley, Pope & Laney, LLC, a corporate and real estate law firm, is announcing that they have hired Clara H. Mintz Esq. and William Stroud, Esq., as attorneys in the transactional and commercial real estate group in the Charleston, South Carolina office. Ms. Mintz’s focus is on transactional residential and commercial real estate including sale, purchase, leasing and refinance.  She is a 2020 graduate of the University of Richmond School of Law. Mr. Stroud manages the firm’s Charleston office and focuses on commercial real estate including leasing and development. He graduated from the University of Richmond School of Law in 2017 and was recently recognized by Best Lawyers: Ones to Watch for his work in Real Estate, Land Use and Zoning 2021-22.

Firm Managing Partner T. Lowndes Pope noted, “We are excited about the addition of Clara and William to our growing service offerings and adding them along with excellent paralegal support. It positions our Charleston office for growth”. For more information on Ms. Mintz and Mr. Stroud, please go to www.rplfirm.com .

FIRM WELCOMES LUCAS FAUTUA TO THE COLUMBIA OFFICE

[COLUMBIA, SC | FRIDAY, SEPTEMBER 10, 2021]   

Riley Pope & Laney, LLC, a corporate and real estate law firm, is announcing that they have hired Lucas Fautua as an attorney in the third- party creditors' rights practice group. Mr. Fautua will be working in the firm's Columbia, SC office. A resident of Columbia, Mr. Fautua most recently served as a clerk to the Hon. David R. Duncan, United States Bankruptcy Court, District of South Carolina where he received accolades for his contribution. Firm Managing Partner T. Lowndes Pope noted, "We are excited about the addition of Lucas to the bankruptcy practice of the firm". Having been in the representation of lenders, investors, and mortgage servicers for over 20 years, the firm continues to expand its representation across its regional footprint. Mr. Fautua is licensed in South Carolina and is a graduate of the University of South Carolina School of Law. For more information regarding Lucas Fautua, Riley Pope & Laney, LLC, and their services in North Carolina and South Carolina, please go to www.rplfirm.com.

Does Vacant = Abandoned? Navigating CFPB Reg X as it relates to Foreclosure Referrals in the Carolinas

The CFPB Mortgage Servicing COVID-19 Rule is effective August 31, 2021 (the “Rule”). [i] The FHFA moratoriums expire on July 31, 2021 and will not be extended. [ii, iii]  However, FHFA has announced that its servicers must comply with the Rule starting August 1, 2021. [iv, v]

The Rule only applies to a mortgage loan secured by the borrower’s principal residence.  It does not apply to investment properties, second homes or reverse mortgages.  Also, loans that were more than 120 days delinquent prior to March 1, 2020 are exempt from the Rule.  And, loans in states with an expiration of the Statute of Limitations before January 1, 2022 are exempt.  These loans may be referred to foreclosure on August 1, 2021.

Until December 31, 2021 for loans that are subject to the Rule, the servicer must ensure that one of three procedural safeguards has been met before referring 120-day delinquent accounts for foreclosure.

  • The borrower was evaluated based on a complete loss mitigation application and existing foreclosure protection conditions are met:
  • The property is abandoned; or
  • The borrower is unresponsive to servicer outreach.

The first safeguard is the same as existing pre-COVID regulations.  It differs from COVID interim rules [vi] in that a complete application must be received prior to referral.  The Rule contains many loss mitigation and documentation requirements to meet this safeguard.  Because of the unveiled threat of strict enforcement contained in an April 2021 CFPB bulletin [vii], servicers may decide to hold these referrals until the Rule expires in 2022.

The second safeguard requires the servicer to follow state or local law for the definition of abandoned property.  This is challenging because many states will not likely statutorily define abandoned property (does vacant = abandoned?).  Unless there is clear and convincing evidence of abandonment, the servicer may not want to proceed.

The third safeguard of unresponsiveness includes many detailed and onerous requirements for compliance.  It is doubtful many servicers will want to walk the tightrope of the many time sensitive notice and contact requirements.

In conclusion, I predict that on August 1, 2021 the majority of servicers will only refer loans for foreclosure that were more than 120 days delinquent prior to March 1, 2020, as well as confirmed investment properties or second homes.  Most will wait until the procedural safeguards expire completely on January 1, 2022.

Federal Foreclosure Moratoriums’ Effect on Housing Prices

Alfred

It seems apparent that price trends in housing remain unsustainable. The S&P CoreLogic Case-Shiller 20-metro-area house price index has steadily risen since the middle of last year and has averaged 11% growth thus far in 2021.[i]  In fact, home prices have never been higher. The median existing-home sales price in May topped $350,000 for the first time, the National Association of Realtors said Tuesday. That figure is nearly 24% higher than a year ago, the biggest year-over-year price increase NAR has recorded in data going back to 1999.[ii]  All of this to the resultant frustration and exclusion of younger would-be buyers.[iii]

Part of price growth is tied to interest rates, which are being kept artificially low due to the Fed’s continued purchases of mortgage-backed securities, but rates appear to be only part of what’s happening.[iv]  Current reports estimate that due to years of underbuilding the U.S. housing market has a deficit of around 5.5 million units.[v]  Thus, clearly, inventory is also an issue driving prices. Which brings us to the current federal moratoriums on foreclosure and the effect they have in exacerbating a lack of available homes.

While it is no one’s wish to address a shortfall in housing exclusively through judicial sales, foreclosures serve an important role in our economy by allowing for the turnover of properties. All government programs have winners and losers, and some first-time buyers may find opportunities when the moratoriums are allowed to expire. As of this writing, an estimated 2.1 million homeowners remain in forbearance plans.[vi]  Overlapping the forbearance numbers, 2.5 million properties are 30 or more days past due and an additional 1.7 million remain 90 days or more past due, none of which are in foreclosure.[vii]  These numbers of course represent a significant portion of the shortfall mentioned earlier.

total

The prevention of unnecessary foreclosures should be, and in my experience is, a paramount goal of everyone in the mortgage industry. The forbearance program appears to have been a success, shown by the many folks who have entered into it and have been able to subsequently resume payments. In fact, about two thirds of homeowners who signed up for some type of mortgage forbearance during the Covid-19 pandemic have exited the programs.[viii]

However, through this success it seems clear that the housing market is unwell. Despite a strong economic recovery and historically low rates, home sales are slowing. As Sam Khater, Freddie Mac’s Chief Economist noted, slower sales have yet to translate into a “weaker home price trajectory because the shortage of inventory continues to cause pricing to remain elevated.”[ix]

Forbearance rates have largely tracked along income quartiles per zip code.[x]  It follows then that FHA borrowers represent the majority of the remaining loans in forbearance, indicating that many of these loans are secured by the types of homes sought out by first-time buyers. So many of whom have been stymied by the current housing market.[xi]   As such, it may be prudent now or in the near future to allow the normal systems surrounding foreclosure to function in order to determine which are unavoidable. Losing a home is always and clearly a tragedy, but at some point those who wish desperately to become homeowners must be granted the opportunity.