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Category Archives: Note – Deed of Trust – Mortgage

What Borrowers Must Know About Voiding Liens in a Mortgage

06 Sunday Oct 2019

Posted by BNG in Appeal, Bankruptcy, Banks and Lenders, Borrower, Case Laws, Case Study, Federal Court, Foreclosure, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Legal Research, Litigation Strategies, Loan Modification, Mortgage fraud, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Pro Se Litigation, Real Estate Liens, State Court, Trial Strategies, Your Legal Rights

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enforceability of judgment lien, Foreclosure, foreclosure defense, homeowners, involuntary liens, Lien, lien stripping, lien voidance, liens, Loan, Loan servicing, Mortgage loan, Mortgage modification, Mortgage servicer, Pro se legal representation in the United States, Property Lien Disputes, property liens, Real Estate Liens, Removing Liens, Types of Real Estate Liens, Unperfected Liens, voluntary liens

There are numerous methods for voiding questionable liens in any given mortgage. In this post, we’ll discuss an interesting decision by the U.S. Court of Appeals for the Ninth Circuit in Bankruptcy Adversary Proceeding.

This decision from the U.S. Court of Appeals for the Ninth Circuit poses a serious threat to mortgage companies that service mortgages of chapter 13 debtors. Mortgage servicers should be aware of the case’s implications and adjust their internal case monitoring procedures as necessary.

Consider a common situation. A borrower files a chapter 13 bankruptcy case, and her mortgage servicer files a proof of claim for the mortgage balance. The borrower then objects to the proof of claim based on some purported technicality: the signature was forged, the endorsement was improper, the servicer lacks standing to enforce the note, etc. For whatever reason, the mortgage servicer does not respond to this objection, and the claim is disallowed by default.

When this happens, the borrower will often attempt to leverage a favorable settlement, like a mortgage modification, by filing a lawsuit to void the mortgage under 11 U.S.C. § 506(d). This provision allows a bankruptcy court to void a lien if the lien secures a claim that is not “allowed.” Because the mortgage was “disallowed” by default due to the mortgage servicer’s failure to respond, this statute theoretically allows the court to void the mortgage altogether.

Courts generally do not void mortgages that are substantively valid but were disallowed because of a default. The most common solution in these situations is a settlement and a motion to reconsider the disallowance under 11 U.S.C. § 502(j). Bankruptcy courts may grant these motions for “cause” at their discretion, which is typically satisfied if the mortgage servicer can prove the substantive validity of the mortgage. See generally In re Oudomsouk, 483 B.R. 502, 513-14 (Bankr. M.D. Tenn. 2012). This works to everyone’s advantage: the mortgage servicer gets paid through the bankruptcy, and the debtor avoids the risk of post-bankruptcy foreclosure if the lien’s validity is ultimately upheld after the case concludes.

The decision of the U.S. Court of Appeals for the Ninth Circuit in In re Blendheim may change this result. 2015 WL 5730015 (9th Cir. Oct. 7, 2015). In Blendheim, the debtors owned a condominium with two mortgages. After filing chapter 7 and obtaining a discharge of their unsecured debts, the debtors immediately filed a chapter 13 case to restructure their mortgages on the condominium (this process is known as a “chapter 20”). HSBC, the senior servicer, filed a proof of claim for the senior mortgage, but the debtors objected because (a) HSBC attached only the deed of trust, and not the promissory note, to the proof of claim, and (b) one of the signatures on the note was purportedly forged.

For reasons unknown, HSBC did not respond to the objection, and the bankruptcy court entered an order disallowing HSBC’s claim by default. Five months later, the debtors brought an adversary proceeding to void the mortgage under 11 U.S.C. § 506(d). Almost eighteen months after the bankruptcy court disallowed HSBC’s claim, HSBC filed a motion to reconsider the disallowance. HSBC also challenged the debtors’ attempt to void the mortgage because the disallowance was not actually litigated; it was the result of a default. The bankruptcy court disagreed, finding that (a) HSBC had no good reason for failing to respond to the claim objection, and (b) the statute plainly permitted lien avoidance in these circumstances. After the bankruptcy court confirmed the debtors’ plan, which provided for payment of only the junior mortgage, HSBC appealed.

On appeal, HSBC raised three primary issues. First, it argued that Section 506(d) should not operate to void its mortgage, notwithstanding the plain language of the statute, when the order disallowing the claim was not actually litigated but was based on a default. Second, it argued that even if the lien were properly voided under Section 506(d), the result could not be permanent because the debtors, having recently received a discharge in their chapter 7 case, were not eligible for a discharge in their chapter 13 case. Third, it argued that by losing its lien because of a default order in the bankruptcy case, as opposed to a formal lawsuit, it was denied due process.

The court disagreed with HSBC on each issue. First, it held that lien avoidance was appropriate. HSBC cited cases where courts refused to void a mortgage when a claim was disallowed for being filed late. The court distinguished these cases, holding that a creditor who files a late proof of claim is not “actively participating in the case” and therefore cannot have its state law lien rights impacted. See generally Dewsnup v. Timm, 502 U.S. 410, 418-19. But when a creditor timely files a proof of claim then willfully fails to respond to the debtors’ objection to the claim, the situation is fundamentally different. According to the court, the Bankruptcy Code plainly allows permanent lien avoidance when a creditor, like HSBC, “just sle[eps] on its rights and refuse[s] to defend its claim.” Blendheim, 2015 WL 5730015, at *11.

Next, the court addressed HSBC’s second argument and held that lien avoidance was appropriate even though the debtors were not eligible for a discharge. Acknowledging a split of authority, the court clarified that discharge affects only personal liability, not the in rem rights of creditors, so the cases on which HSBC relied were distinguishable. Nothing in the Bankruptcy Code prohibits lien avoidance just because a borrower has no right to a discharge.

Finally, the court held that HSBC’s due process was not offended. HSBC received notice of the claim objection and had ample time to respond.  Its failure to do so, while fatal to its lien, did not violate its due process rights.

What This Means for Mortgage Creditors

The Blendheim case may have serious implications for mortgage creditors. This situation is not an outlier: mortgage servicers commonly fail to respond to claim objections. his may be because of the quick deadline to respond to these objections or the use of separate legal counsel for handling administrative functions in bankruptcy versus defending adversary proceedings. Historically, when a claim is disallowed based on a creditor’s failure to respond to a claim objection, bankruptcy courts will grant a reconsideration motion under Section 502(j) if the creditor can prove the substantive validity of the mortgage.

After Blendheim, the result may be different. The Blendheim court, after all, did not seem to care about the underlying validity of HSBC’s claim. Instead, it focused on HSBC’s failure to respond without a good reason.

How does this Affect Mortgage Creditors

Mortgage servicers should be aware of this decision and should make sure that they are closely following the dockets of cases involving their borrowers in bankruptcy. If they don’t, they risk losing their mortgage lien, if any, altogether.

CASE STUDY:  HSBC v. BLENDHEIM

[The views expressed in this document are solely the views of the Author. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance]

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

If you are a homeowner already in Chapter 13 Bankruptcy with questionable liens on your property, you needs to proceed with Adversary Proceeding to challenge the validity of Security Interest or Lien on your home, Our Adversary Proceeding package may be just what you need.

Homeowners who are not yet in Bankruptcy should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

If you do Nothing, you will see the WRONG parties WITHOUT standing STEAL your home right under your nose, and by the time you realize it, it might be too late! If your property has been foreclosed, use the available options on our package to reverse already foreclosed home and reclaim your most prized possession! You can do it by yourself! START Today — STOP Foreclosure Tomorrow!

 

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How Homeowners Can Set Aside Foreclosure Sale

06 Sunday Oct 2019

Posted by BNG in Banks and Lenders, Borrower, Federal Court, Foreclosure, Foreclosure Crisis, Foreclosure Defense, Fraud, Judgment, Judicial States, Litigation Strategies, Mortgage fraud, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Pleadings, Pro Se Litigation, State Court, Trial Strategies, Your Legal Rights

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federal courts, Foreclosure, foreclosure defense, homeowners, Judicial States, Non-Judicial States, overture a foreclosure sale, Pro se legal representation in the United States, setting aside foreclosure sale, State Courts, wrongful foreclosure, wrongful foreclosure appeal, Wrongful Mortgage Foreclosure

What are the Reasons a Foreclosure Sale May Be Set Aside

Generally, to set aside a foreclosure sale, the homeowner must show:

– irregularity in the foreclosure process that makes the sale void under state law
– noncompliance with the terms of the mortgage, or
– an inadequate sale price that shocks the conscience.

Sometimes homeowners are not aware that a foreclosure sale has been scheduled until after it has already been completed. Even if your home has been sold, there are some instances where you might be able to have the foreclosure sale invalidated, though this is uncommon. This post will discuss how to set aside a foreclosure sale and the circumstances that might warrant it.

Irregularity in the Foreclosure Process

State statutes lay out the procedures for a foreclosure. If there are irregularities in the foreclosure process—meaning, the foreclosure is conducted in a manner not authorized by the statute—the sale can potentially be invalidated.

Some examples of irregularities in the foreclosure process are:

  • The loan servicer does not send notice to the borrower.
  • A state statute requires notice by advertising the sale in a newspaper, but the servicer does not place the advertisement.
  • The foreclosing lender did not get an assignment of the mortgage.

Example. In U.S. Bank v. Ibanez, the Massachusetts Supreme Judicial Court invalidated two foreclosure sales where the mortgages were assigned to the lender after the completion of the foreclosure sale. The court decided that the foreclosures were void because the lenders lacked legal authority to foreclose.

However, in some states, courts are reluctant to set aside a foreclosure sale based upon violations of foreclosure statutes unless the violation resulted in actual prejudice (harm) to the homeowner. For instance, the homeowner may have to show that the lender’s failure to follow the statutory requirements chilled the bidding at the foreclosure sale and, as a result, the homeowner was liable for a larger deficiency judgment.

Noncompliance With Terms of the Mortgage

If the lender or servicer fails to comply with the terms of the mortgage contract, this may constitute sufficient reason to set aside a foreclosure sale.

Example. Many mortgages and deeds of trust require that the lender or servicer send the borrowers a breach letter giving them 30 days to cure the default before starting a foreclosure. If the servicer doesn’t send a breach letter, this may provide grounds for invalidating the foreclosure.

Inadequacy of Sale Price

Inadequacy of sale price might justify setting aside a foreclosure sale if the price is so low that it “shocks the conscience” of the court. It is often difficult to get a sale set aside on this basis. Usually to get a sale invalidated for inadequacy of sale price, you will also need additional circumstances that warrant voiding the sale.

For instance, courts are more likely to set aside a sale if there is an inadequate sales price combined with:

  • some irregularity (such as if the sale was advertised to take place at 3:00 p.m., but was actually held at 11:00 a.m.), or
  • unfairness (like if the lender re-sold the property for a much higher price right after the foreclosure sale, which demonstrates that it could have received a higher price at the foreclosure sale).

Though keep in mind that some courts might be hesitant to void the sale unless the violation resulted in actual prejudice to the homeowner.

How to Set Aside the Foreclosure Sale

The procedures to set aside a foreclosure sale depend on whether the sale was judicial (where the lender forecloses through the state court system) or nonjudicial (which means the lender does not have to go through state court to get one).

Setting Aside a Sale in a Judicial Foreclosure

Attempting to invalidate the sale in a judicial foreclosure can typically be done in the following ways, depending on state law:

  • If the foreclosure case stays open through completion of the sale process, then you can raise an objection to the legitimacy of the sale in that case.
  • If the state judicial process terminates once the foreclosure judgment is entered (and not appealed), then you must either file a motion to reopen the case or file a separate action to void the sale.

The actual process is generally determined by statute, rule, or case law.

Setting Aside a Sale in a Nonjudicial Foreclosure

If the property was foreclosed non-judicially, the homeowner will usually have to file a lawsuit in state court to void the sale. It may also be possible in some instances to file bankruptcy and ask that the sale be set aside as part of the bankruptcy case.

There are a few nonjudicial foreclosure states that require a court to confirm the sale. In those states, the homeowner can sometimes raise objections to the sale in the confirmation process. However, in some states the confirmation process is limited to determining whether or not the property sold for fair market value at the foreclosure sale and the court will not review other issues.

What Happens if the Sale Is Set Aside?

If the foreclosure sale is set aside as void, title to the property is typically returned to the homeowner while the mortgage and other liens generally are re-established. However, if the property has been resold to another party following an invalidated sale, some state statutes provide that the subsequent sale to a good faith purchaser eliminates the foreclosed homeowner’s right to challenge the sale on procedural grounds. In these types of cases, the homeowner might be able to seek damages against the lender or servicer.

The reasons that justify, as well as, the procedures for, invalidating a foreclosure sale are complicated. So, if you are considering trying to set aside a foreclosure sale, the earlier you begin the fight using the content found within our package, the better chance of succeeding.

[The views expressed in this document are solely the views of the Author. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance]

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

If you do Nothing, you will see the WRONG parties WITHOUT standing STEAL your home right under your nose, and by the time you realize it, it might be too late! If your property has been foreclosed, use the available options on our package to reverse already foreclosed home and reclaim your most prized possession! You can do it by yourself! START Today — STOP Foreclosure Tomorrow!

If you are a homeowner already in Chapter 13 Bankruptcy and needs to proceed with Adversary Proceeding to challenge the validity of Security Interest or Lien on your home, Our Adversary Proceeding package may be just what you need.

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What Are the Options for Homeowners During Foreclosure

07 Sunday Apr 2019

Posted by BNG in Affirmative Defenses, Banks and Lenders, Foreclosure, Foreclosure Crisis, Judicial States, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Your Legal Rights

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avoid foreclosure, Consequences of a Foreclosure, Deed in lieu of foreclosure, homeowners, housing counselor, Judicial, judicial foreclosures, mortgage, mortgage company, Non-judicial, nonjudicial foreclosures, Options, Process for a Foreclosure

When faced with foreclosure, it’s important to know your options and understand all the potential solutions that may be available to help you avoid foreclosure. It’s also important to understand what can happen if you fail to take action and foreclosure becomes unavoidable. The process can be stressful, embarrassing, and it can have long-lasting consequences.

“What happens if my home is foreclosed on?”

Walking away from your home voluntarily, may seem like the best solution when your home is valued lower than what you owe. However, this action may lead to financial consequences in the future. In some states, you may be required to pay a portion of your mortgage debt even after the home has entered foreclosure. Also, the impact to your credit may make it difficult to rent or purchase a home in the future. It may be best to explore other options to foreclosure with your mortgage company before making a decision to leave your home.

Keep in mind, your mortgage company doesn’t want to foreclose on your home. Just like there are consequences for you, the foreclosure process is time-consuming and expensive for them. They want to work with you to resolve the situation. However, some homeowners simply don’t take advantage of the help available and foreclosure becomes the only option.

For example, foreclosure could result in you:

  • owing the mortgage company the deficiency balance of your mortgage (the deficiency balance is the remaining total mortgage balance after the sale price of the home)
  • lengthening the time you could receive a Fannie Mae mortgage to purchase your next home to at least 7 years

What is a Foreclosure?

A foreclosure is the legal process where your mortgage company obtains ownership of your home (i.e., repossess the property). A foreclosure occurs when the homeowner has failed to make payments and has defaulted or violated the terms of their mortgage loan.

A foreclosure can usually be avoided—even if you already received a foreclosure notice. See the chart (in “Foreclosure Comparison”) to compare some other options: Short Sale and Mortgage Release (Deed-in-Lieu of Foreclosure). No matter the option, you must take action as soon as you can.

What are the consequences of a Foreclosure?

  • Eviction from your home—you’ll lose your home and any equity that you may have established
  • Stress and uncertainty of not knowing exactly when you will have to leave your home
  • Damage to your credit—impacting your ability to get new housing, credit, and maybe even potential employment, for many years
  • May owe a deficiency balance after the foreclosure sale
  • Lose any relocation assistance or leasing opportunities that may be available with other options
  • Forfeit ability to get a Fannie Mae mortgage to purchase another home for at least 7 years (Fannie Mae guidelines)

What is the process for a Foreclosure?

There are two main types of foreclosure:

  • Judicial – supervised by a court with formal legal proceedings (civil law suit)
  • Non-judicial – non-court supervised

In both types of foreclosure, the homeowner receives the legal notice of foreclosure, the legal notice is published in the local paper (in most cases), and the home is sold at public auction. (For judicial foreclosures, you’ll be served with legal notice of the pending action, and the court will approve or set the foreclosure date and sale.)

The process and timing of a foreclosure can vary by state laws, and many other factors. However, your mortgage company can begin preparing the default notice/foreclosure proceedings on your home as early as 60 days after you have missed your first payment. That’s why you should take action early to begin working with your mortgage company to resolve your payment problems immediately.

How Do You Avoid Foreclosure?
The most important thing—take action now. You have nothing to lose (and everything to gain) by working with your mortgage company to avoid foreclosure.

If foreclosure is imminent, other options may no longer be available. However, you may still be able to leave your home without having to go through foreclosure. This means you won’t have a foreclosure on your credit history and you may qualify for relocation assistance to ease your transition to new housing.

Next steps

  1. Gather your financial information—Make sure you have your basic financial and loan information on hand when you call your mortgage company. You’ll need:
  • your mortgage statements, including information on a second mortgage (if applicable)
  • your other monthly debt payments (e.g., car or student loans, credit card payments), and
  • your income details (pay stubs and income tax returns).

2. Explain your current situation—Be ready to outline your current hardship and explain why you are having trouble making your mortgage payment, why this is a long-term problem and confirm that you are ready to leave your home to avoid foreclosure. Your mortgage company will need to understand the reasons why you are having difficulty in order to find the right solution for you.

Contact Your Mortgage Company — Tell them you are interested in a Mortgage Release and you want to see if you qualify.

Your mortgage company wants to help you avoid foreclosure and, in most cases, will be willing to work with you. The biggest mistake you can make is to wait any longer to take action. Contact your mortgage company today to determine if you can avoid foreclosure. If you need further assistance (before or after contacting your mortgage company), contact a housing counselor.

How is home ownership transferred?


When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

If you do Nothing, you will see the WRONG parties WITHOUT standing STEAL your home right under your nose, and by the time you realize it, it might be too late! If your property has been foreclosed, use the available options on our package to reverse already foreclosed home and reclaim your most prized possession! You can do it by yourself! START Today — STOP Foreclosure Tomorrow!

If you are a homeowner already in Chapter 13 Bankruptcy and needs to proceed with Adversary Proceeding to challenge the validity of Security Interest or Lien on your home, Our Adversary Proceeding package may be just what you need.

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What Homeowners Must Know About Deficiency Judgment After Foreclosure

20 Sunday Jan 2019

Posted by BNG in Banks and Lenders, Foreclosure Crisis, Foreclosure Defense, Judgment, Judicial States, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Restitution, State Court, Your Legal Rights

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after foreclosure, bank, Banks, Borrower, collection, Court, courts, Deficiency judgment, deficiency judgments, Foreclosure, homeowners, judicial foreclosures, lender, liability, loses, money, mortgage, non-judicial foreclosures, non-recourse, state, state law

A common misconception among consumers is that after foreclosure they will not owe their mortgage lender. Many homeowners who go through foreclosure are surprised to learn that they still owe money on their house, even though they no longer own it!

Most mortgage lenders require borrowers to personally guarantee the amount of the note, leaving the lender with two avenues of in the foreclosure scenario. Lenders can take back the real estate, and in many vases, sue the borrower personally if the house doesn’t sell for the full value of the money that was lent.

What is a ?

When a borrower loses their home to foreclosure and still owes their lender money after the sale, the remaining debt is usually referred to as a deficiency. Lenders can sue to recover this amount.

For example, if you owe $500,000 on your mortgage and can no longer afford to make payments on the note, your lender will institute foreclosure proceedings against you and will eventually sell your home at a public sale. If the home sells for $400,000 and your state allows lenders to collect deficiency judgments, you will owe your lender $100,000 once they obtain a judgment for the deficiency.

In many cases, this deficiency judgment is a tough pill to swallow for the borrower who just lost their home and yet still owes their lender after foreclosure.

Homeowners’ responsibility after foreclosure

Borrowers who are left facing a large deficiency judgment after foreclosure often turn to bankruptcy in order to protect their assets. In order to determine whether you will owe money to your lender after a foreclosure sale of your home, it is important to get a handle on two important items of information:

1. How much is your home worth?

Regardless of your state’s deficiency laws, if your home will sell at a foreclosure sale for more than what you owe, you will not be obligated to pay anything to your lender after foreclosure. Your lender is obligated to apply the sale price of your home to the  mortgage debt. Only when a home is “underwater” — meaning the borrower owes more on the mortgage than the home is worth — will he or she potentially face a deficiency judgment after a foreclosure.

2. Does your state have an Anti-Deficiency Statute?

Not all states allow lenders to collect on the note after a home has been foreclosed on. These states are referred to as “non-recourse” states because they only allow the lender to take back the collateral for the loan (your home). They do not allow the lender the additional remedy of going after the borrower’s personal assets if the sale of the home does not satisfy the mortgage.

Non-recourse mortgage states

In a non-recourse mortgage state, borrowers are not held personally liable for their mortgage. If the foreclosure sale does not generate enough money to satisfy the loan, the lender must accept the loss.

Some states that have anti-deficiency legislation qualify it by only making it applicable to seller-financed or “purchase-money” mortgages. North Carolina is a good example. North Carolina’s anti-deficiency statute applies when the seller of real estate provides the financing for the purchase. In such a situation, the legislature has prohibited the seller/lender from seeking a deficiency judgment after foreclosure. The purchase-money lender has recourse only against the collateral for the loan and not against the purchaser/borrower in her individual capacity. Banks who have made mortgages in North Carolina are allowed to seek deficiency judgments against borrowers.

The lesson to be learned is that if you owe more on your mortgage than your house is worth and the property is in a state that allows lenders to seek deficiency judgments, you may still owe money even after foreclosure.

Judicial and non-judicial foreclosures

A lender that wants to foreclose on your home has two foreclosure options: judicial and non-judicial. A judicial foreclosure is processed through the courts; some states require lenders to use this process. A non-judicial foreclosure is handled outside the court system.

It is advisable to consult with an experienced bankruptcy attorney to discuss how your state’s laws will affect you. Below is a list of states that have some form of anti-deficiency statute:

Alaska

You are not liable for the deficiency in a non-judicial foreclosure, but you may be liable for the deficiency in a judicial foreclosure.

Arizona

You are not liable for the deficiency if the home is a single one-family or single two-family home on a plot of less than 2 ½ acres. You must have lived in the home for at least 6 months.

California

You are not liable for the deficiency for purchase-money loans in non-judicial foreclosure. You are not liable for the deficiency in judicial foreclosure for property with four units or less, seller-financed loans, or refinances of purchase-money mortgages executed after January 1, 2013.

Connecticut

Under a “strict foreclosure,” you may be sued separately for the deficiency. If your home is sold under a “decree of sale,” you will liable for only half of the deficiency.

Florida

The lender must sue you for the deficiency, and whether you are liable is left to the discretion of the court. You will be given credit for the greater of the foreclosure price or the fair-market value of the home.

Hawaii

You are not liable for the deficiency in a non-judicial foreclosure if the property is residential and you live in it. You are liable for the deficiency in a judicial foreclosure.

Idaho

Your deficiency is limited to the difference between the fair-market value of your home and the foreclosure price.

Minnesota

For a non-judicial foreclosure, you are not liable for the deficiency. In a judicial foreclosure, you are liable but the jury will determine the fair-market value of your home and you will have to pay the difference between that and the foreclosure price.

Montana

You are not liable for the deficiency in a non-judicial foreclosure.

Nevada

You are not liable for the deficiency if your lender is a financial institution, the loan originated after October 1, 2009, the property is a single-family owner-occupied home, the mortgage debt was used to purchase the property, and you haven’t refinanced the mortgage.

New Mexico

You are not liable for the deficiency in a non-judicial foreclosure on the primary residence of a low-income household.

North Carolina

If the seller is finances your mortgage, you are not liable for the deficiency.

North Dakota

You are not liable for the deficiency if the property has less than four units and is on a plot of less than 40 acres.

Oklahoma

You are not liable for the deficiency if you notify the lender in writing at least 10 days before the foreclosure sale that you live in the home and opt out of deficiency judgment.

Oregon

You are not liable for the deficiency in non-judicial foreclosure or in judicial foreclosure on property with four or less units as long as you or a direct family member lives in one of the units.

Texas

You will receive credit for the fair-market value of the home. You are liable for the difference between your mortgage loan amount and the fair-market value.

Washington

You are not liable for the deficiency in a non-judicial foreclosure. You are liable for the deficiency for a judicial foreclosure.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

If you do Nothing, you will see the WRONG parties WITHOUT standing STEAL your home right under your nose, and by the time you realize it, it might be too late! If your property has been foreclosed, use the available options on our package to reverse already foreclosed home and reclaim your most prized possession! You can do it by yourself! START Today — STOP Foreclosure Tomorrow!

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What Homeowners Must Know About Foreclosure

12 Wednesday Sep 2018

Posted by BNG in Banks and Lenders, Credit, Federal Court, Foreclosure Crisis, Foreclosure Defense, Judicial States, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Pro Se Litigation, Real Estate Liens, State Court, Your Legal Rights

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adjustable rate mortgage loan, Adjustable-rate mortgage, avoid foreclosure, bank forecloses, Deed in lieu of foreclosure, Foreclosure, Foreclosure Crisis, foreclosure defense, foreclosure suit, foreclosures, homeowners, Loan, Loan servicing, mortgage, Mortgage loan, Mortgage modification, non-judicial foreclosure, Pro se legal representation in the United States, Promissory note, Real estate, Real Estate Settlement Procedures Act, RESPA

Facing a foreclosure can be daunting prospect for people in trouble with their mortgages, especially when they are unsure of what to do. Across the country, six out of 10 homeowners questioned said they wished they understood their mortgage and its terms better.

When the economy collapsed in 2008, foreclosure became a fact of life for millions of Americans.  About 250,000 new families enter into foreclosure every three months, according to the Federal Deposit Insurance Corporation.

The same percentage of homeowners also said they were unaware of what mortgage lenders can do to help them through their financial situation.

The first step to working through a possible foreclosure is to understand what a foreclosure means. When someone buys a property, they typically do not have enough money to pay for the purchase outright. So they take out a mortgage loan, which is a contract for purchase money that will be paid back over time.

A foreclosure consists of a lender trying to reclaim the title of a property that had been sold to someone using a loan. The borrower, usually the homeowner living in the house, is unable or unwilling to continue making mortgage payments. When this happens, the lender that provided the loan to the borrower will move to take back the property.

How do Foreclosures Work?

People enter into foreclosure for various reasons, but it typically follows a major change in their financial circumstances. A foreclosure can be the result of losing a job, medical problems that keep you from working, too many debts or a divorce.

Foreclosures often begin when the borrower stops making payments. When this happens, the loan becomes delinquent and the homeowner goes into default. The default status continues for about 90 days. During this time, the lender will get in touch with the borrower to see whether they will be able to pay the balance of the loan.

At this point, if the borrower cannot pay, the lender may file a Notice of Foreclosure, which begins the process. The lender will file foreclosure documents in a local court. This part of the process usually takes 120 days to nine months to complete. If borrowers need extra time, they can challenge the process in court, and that’s where our Foreclosure Defense Package comes in.

How do Foreclosures Relate to Debt?

Some people facing foreclosure find themselves in this position because of mounting debt that made it harder to make their mortgage payments.

A foreclosure can add to your financial problems if your state allows a deficiency judgment, which means the borrower owes the difference between what is owed on the foreclosed property and the amount it eventually sells for at an auction.

Thirty-eight states allow financial institutions to pursue borrowers for this money.

In cases when a lender does not use a deficiency judgment, a foreclosure can relieve some of your financial burden. Although it is a loss when a lender takes the home you partially paid for, it can be a start to rebuild your finances.

It is a good idea to work with a financial adviser or a debt counselor to understand what kind of debt you may incur during a foreclosure.

What Else Should I Know?

If you are thinking about going into foreclosure, there are a number of things to consider:

  • A foreclosure dramatically affects your credit score. Fair Isaac, the company that created FICO (credit) scores, drops credit scores from 85 points to 160 points after a foreclosure or short sale. The amount of the drop depends on other factors, such as previous credit score.
  •  Get in touch with your lender as soon as you are aware that you are having difficulty making payments. You may be able to avoid foreclosure by negotiating a new repayment plan or refinancing that works better for you.
  •  States have different rules on how foreclosures work. Understand your rights and get a sense of how long you can stay in your home once foreclosure proceedings begin.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/loan

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

If you do Nothing, you will see the WRONG parties WITHOUT standing STEAL your home right under your nose, and by the time you realize it, it might be too late! If your property has been foreclosed, use the available options on our package to reverse already foreclosed home and reclaim your most prized possession! You can do it by yourself! START Today — STOP Foreclosure Tomorrow!

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How Homeowners Can use “Produce the Note” in Judicial & Non-judicial Foreclosure States

24 Wednesday Jan 2018

Posted by BNG in Banks and Lenders, Fed, Federal Court, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Mortgage mediation, Non-Judicial States, Note - Deed of Trust - Mortgage, Pro Se Litigation, State Court, Your Legal Rights

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avoid foreclosure, borrowers, foreclose, foreclosing on home, foreclosure defense, foreclosure suit, home, homeowners, Lawsuit, lenders, lending and servicing, mortgages, Non-judicial Foreclosure States, note, Plaintiff, Produce the Note, true owners of the note

In some states, a lender can foreclose on your home without going to court. These are called non-judicial foreclosure states. You can still use the “Produce the Note” strategy in these states, but it takes a few more steps on your part.

First, the concept behind “Produce the Note” is this: When a homeowner is faced with a foreclosure suit, “Produce the Note” requires the lender to prove it has the actual authority to foreclose, by requiring it to officially produce the original promissory note in the lawsuit. But if there is no foreclosure lawsuit, what can homeowners do? In these “nonjudicial foreclosure” states, such as California, Texas, or the thirty or more other states with similar procedures, the homeowner has to file a lawsuit against the party trying to foreclose.

Here’s how it generally works:

In a state with nonjudicial foreclosure procedures, a foreclosure sale can be initiated by the lender without using court proceedings.
Homeowners receive a “Notice of Intent” letter informing them that a foreclosure sale will be scheduled unless the overdue debt is paid within a certain amount of time.
If the debt is not paid accordingly, a “Notice of Sale” is then sent informing the homeowner that a foreclosure sale will take place at a particular time and place.
No lawsuit is ever initiated by the lender and the courts are not involved.

Without a lawsuit, you cannot use judicial procedures to require the lender to “produce the note.”
Merely sending a private letter to the lender “demanding” that it produce the original note to the borrower may be met with utter disregard or outright refusal by the lender.

So, here’s what you can do:
In a nonjudicial foreclosure state, in order to protect yourself by demanding that the lender “produce the note,” it will be necessary for you to first actually file your own lawsuit. Even in such nonjudicial foreclosure states, no law prohibits you from instituting your own lawsuit challenging the right of a lender to foreclose on your property. The lawsuit would allege that:
the lender has sent a Notice of Intent to Foreclose; the homeowner is unsure as to whether the lender still possesses the original debt instrument, upon which the lender claims the right to foreclose; the homeowner wants proof of such authority; and the court should intervene and prevent the foreclosure from taking place unless and until such proof is presented.
Initiating litigation to protect your rights is never a simple process. Requirements as to what must be contained in a pleading, how the facts must be plead, who should be named in the pleading, and how the pleading should be officially “served” on the lender, all differ from state to state.

Once a lawsuit is initiated, however, all states have judicial procedures that allow a party to require the other side to produce relevant documents, and the “produce the note” strategy can be used.

Often times, the best way to protect your rights in these situations is to seek professional help from an attorney licensed to practice in your geographical area. Getting involved in a lawsuit by representing yourself, especially if you file the lawsuit yourself, is not easy, but you can do it. Every citizen is able to represent themselves and file a lawsuit on their own. It’s called pro se, which means “on ones own behalf.”

If you can afford a lawyer, then by all means, hire one. There are attorneys who specialize in real estate matters, and either advertise or can be found in the yellow pages. Most areas have bar associations that maintain lists of attorneys willing to help in specific areas of the law.
Finally, there are usually “legal aid” organizations around set up to assist individuals who may have difficulty paying for the services of an attorney. A good place to begin your search is by going to the Legal Services Corporation website.

So, even if you are in a non-judicial foreclosure state, you can use “Produce the Note.” This is your home, and if you want to fight for it, you do have a way.

If your home is currently in foreclosure, there may still be a chance to save it. As a result of lenders buying and selling mortgages your note could have changed hands several times over the course of the loan. But where is the actual note? In some warehouse somewhere? Make ‘em prove they own the debt they say you owe.

WHO OWNS THE NOTE?
Your goal is to make certain the institution suing you is, in fact, the owner of the note (see steps to follow below). There is only one original note for your mortgage that has your signature on it. This is the document that proves you owe the debt.
During the lending boom, most mortgages were flipped and sold to another lender or servicer or sliced up and sold to investors as securitized packages on Wall Street. In the rush to turn these over as fast as possible to make the most money, many of the new lenders did not get the proper paperwork to show they own the note and mortgage. This is the key to the produce the note strategy. Now, many lenders are moving to foreclose on homeowners, resulting in part from problems they created, and don’t have the proper paperwork to prove they have a right to foreclose.

THE HARM
If you don’t challenge your lender, the court will simply allow the foreclosure to proceed. It’s important to hold lenders accountable for their carelessness. This is the biggest asset in your life. It’s just a piece of paper to them, and one they likely either lost or destroyed.

When you get a copy of the foreclosure suit, many lenders now automatically include a count to re-establish the note. It often reads like this: “…the Mortgage note has either been lost or destroyed and the Plaintiff is unable to state the manner in which this occurred.” In other words, they are admitting they don’t have the note that proves they have a right to foreclose.
If the lender is allowed to proceed without that proof, there is a possibility another institution, which may have bought your note along the way, will also try to collect the same debt from you again.

A Tennessee borrower recently had precisely that happen to her. Her lender, Ameriquest, foreclosed on her in July of 2007. About three months later, another bank sent her a default notice for the mortgage on the house she just lost. She called to find out what was going on. After being transferred from place to place and left on hold for lengthy periods of time, no one could explain what happened. They said they would get back to her, but never did. Now, she faces the risk of having her credit continually damaged for a debt she no longer owes.

FIGHT FOR FAIRNESS
This process is not intended to help you get your house for free. The primary goal is to delay the foreclosure and put pressure on the lender to negotiate. Despite all the hype about lenders wanting to help homeowners avoid foreclosure, most borrowers know that’s not the reality.

Too many homeowners have experienced lender resistance to their efforts to work out a payment structure to keep them in their homes. Many lenders bear responsibility for these defaults, because they put borrowers into unfair loans using deceptive, hard-sell practices and then made the problem worse with predatory servicing.
Most homeowners just want these lenders to give them reasonable terms on their mortgages, many of which were predatory to begin with. With the help of judges who see through these predatory practices, lenders will feel the pressure to work with borrowers to keep them in their homes. Don’t forget lenders made incredible amounts of money by using irresponsible practices to issue and service these loans. That greed led to the foreclosure crisis we’re in today. Allowing lenders to continue foreclosing on home after home, destroying our neighborhoods and our economy hurts us all. So, make it hard for your lender to take your home. Make ‘em produce the note!

STEPS TO FOLLOW – You can either write Qualified Written Request RESPA Letter (QWR), to your lender. Alternatively, you can use the fill in the blank request forms usually available in your local Circuit Courts:

A. If your lender has already filed suit to foreclose on your home:

Use the first form. It’s a fill-in-the-blank legal request to your lender asking that the original note be produced, before it can proceed with the foreclosure. In some jurisdictions, the courts require the original request to be filed with the clerk of court and a copy of the request to be sent to the attorney representing the lender. To find out the rules where you live, call the Clerk of Court in your jurisdiction.

If the lender’s attorney does not respond within 30 days, file a motion to compel with the court and request that the court set a hearing on your motion. That, in effect, asks the judge to order the lender to produce the documents.

The judge will issue a ruling at your hearing. Many judges around the country are becoming more sympathetic to homeowners, because of the prevalence of predatory lending and servicing. In the past, many lenders have relied upon using lost note affidavits, but in many cases, that’s no longer enough to satisfy the judge. They are holding the lender to the letter of the law, requiring them to produce evidence that they are the true owners of the note. For example:

In October 2007, Ohio Federal Court Judge Christopher Boyko dismissed 14 foreclosure cases brought by investors, ruling they failed to prove they owned the properties they were trying to seize.

B. If you are in default, but your lender has not yet filed suit against you:

Use the second form. It’s a fill-in-the-blank letter to your lender which also requests they produce the original note, before taking foreclosure action against you.
If the lender does not respond and files suit against you to foreclose, follow the steps above.
UPDATE: CNN features The Consumer Warning Network and the “Produce The Note” strategy. Borrowers are putting this plan into action and getting results!

Consumer Warning Network Featured on CNN

Borrower wins more time to fight foreclosure! At a court hearing sometime ago, a Pinellas County, Florida Judge denied Wachovia the right to proceed with its foreclosure against borrower Jacqueline O’Brien (profiled in the CNN story). Instead, O’Brien was granted a continuance, as she pursues the produce the note strategy. Wachovia expressed interest in renegotiating the terms of the loan, rather than continuing the court battle.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

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How Homeowners Can Greatly Improve their Chances of Winning on Appeal

24 Wednesday Jan 2018

Posted by BNG in Appeal, Case Laws, Case Study, Discovery Strategies, Federal Court, Foreclosure Defense, Judicial States, Litigation Strategies, Non-Judicial States, Note - Deed of Trust - Mortgage, Pleadings, Pro Se Litigation, Scam Artists, Title Companies, Trial Strategies, Your Legal Rights

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Appeal, Court, District Court, Foreclosure, foreclosure defense, homeowners, Plaintiff, pro se, Pro se legal representation in the United States, State Court, United States district court

A seasoned Attorney will tell you that trying cases is one of the most exciting things a litigator does during his or her career but it is also certainly one of the most stressful. While in the trenches during trial, many litigators understandably focus all of their energies on winning the case at hand. But a good litigator knows that trial is often not the last say in the outcome of a case. The final outcome often rests at the appellate level, where a successful trial outcome can be affirmed, reversed, or something in between. The likelihood of success many times hinges on the substance of the record on appeal. The below discusses a variety of issues that trial litigators should keep in mind as they prepare and present their case so they position themselves in the best possible way for any appeals that follow.

Prepare Your Appellate Record From The Moment Your Case Begins

Perhaps one of the biggest misconceptions regarding preserving an adequate record on appeal is when a lawyer should start considering what should be in the record. In short, the answer is from the moment the complaint is filed. At that time, counsel should begin to think carefully about the elements of each asserted cause of action, potential defenses and their required elements, and the burden of proof for each. Every pleading should be drafted carefully to ensure that no arguments are waived in the event they are needed for an appeal. For instance, a complaint should allege with specificity all the factual and legal elements necessary to sustain a claim, while an answer should include any and all applicable affirmative defenses to avoid waiver. See, e.g., Travellers Int’l, A.G. v. Trans World Airlines, 41 F.3d 1570, 1580 (2d Cir. 1994) (“The general rule in federal courts is that a failure to plead an affirmative defense results in a waiver.”). Likewise, if you file a motion to dismiss, ensure that the motion contains all the necessary evidence that both a trial court and appellate court would need to find in your favor. Of particular importance in federal court practice is the pre-trial order. Under Federal

Rule of Civil Procedure 16, the pre-trial order establishes the boundaries of trial. See Elvis Presley Enterprises, Inc. v. Capece, 141 F.3d 188, 206 (5th Cir.1998) (“It is a well-settled rule that a joint pre-trial order signed by both parties supersedes all pleadings and governs the issues and evidence to be presented at trial.”). If the pre-trial order does not contain the pertinent claims, defenses or arguments that you wish to present at trial, you are likely also going to be out of luck on appeal.

Later on in the case, as the factual record becomes more fully developed, consider whether amending or supplementing the pleadings or other court submissions are necessary to make the record as accurate as possible. Most states follow the federal practice of allowing liberal amendments. However, these can be contested, particularly late in the process, closer to trial. While appellate review is often for abuse of discretion, formulating a strong motion in favor of or in opposition to an amendment can preserve the issue.

What to Keep in Mind as Your Case Proceeds

As the case develops, consider whether the elements you need to prove your case are sufficiently reflected in the information you obtain during discovery. If not, determine whether there are ways to obtain the information you need well before trial starts. By the time trial arrives, it may be too late to supplement the record to get before the trial judge and the appellate court what you need to win your case. In that regard, anything you have in writing that gets submitted to the court may very well end up being part of the record on review, so make sure it is accurate and understandable. Incomprehensible or incomplete submissions can muddy your appellate record and damage a successful appellate proceeding. In the same vein, make sure anything presented to the court prior to trial that you want to be part of the record is transcribed. Otherwise, there will be an insufficient record on appeal. This is particularly so when it comes to discovery disputes. Although they are common in present day litigation, judges hate discovery disputes. To preserve discovery issues for appeal, be sure to get a ruling, and make sure it is reflected in writing. Moreover, carefully review every pre-trial court order or other judicial communication, including court minutes, to ensure accuracy. Attempting to make corrections during the appellate process may not be possible.

Another significant area for appellate issues is the failure to timely identify experts. This is subject to an abuse of discretion standard of review, so it is important that one builds a record on the issue, particularly regarding any prejudice suffered by the untimely disclosure.

After Discovery Closes – The Motion in Limine

Once discovery has closed, consider carefully any motions in limine you may want to make. Although motions in limine are not strictly necessary, they are helpful in identifying evidentiary issues for the judge and counsel and increase the chances of a substantive objection, sidebar, and ruling when the issue arises at trial. One potential pitfall – some jurisdictions require a party to renew an objection at trial after a motion in limine has been denied, so make sure to do so if necessary. See, e.g., State ex. Rel Missouri Highway and Transp. Com’n v. Vitt, 785 S.W.2d 708, 711 (Mo. Ct. App. E.D. 1990) (“A motion in limine preserves nothing for review. Following denial of a motion in limine, a party must object at trial to preserve for appellate review the point at issue.”) (internal citation omitted). Also, if the Court delivers its ruling on a motion in limine orally, make sure it is transcribed properly by the court reporter.

Now the Trial – What to Keep in Mind

Above all else, when in doubt, object. Objections should be immediate and specifically describe the basis for the objection so the record is clear. Make the argument to win – every objection should be more than just reciting labels, and should provide sufficient information for the trial judge to decide the issue. The goal is not to be coy with the trial judge and hope for a lucky break, but to be prepared to make an argument to win the issue at trial or, alternatively, on appeal. In addition, if you are the party proffering the evidence, make sure the proffer is on the record and that you expressly state why the evidence is being offered. This may require pressing on the judge to get the full objection on the record. If you fail to do so, you risk the appellate court not reviewing the claim on appeal. See, e.g., National Bank of Andover v. Kansas Bankers Sur. Co., 290 Kan. 247, 274-75 (2010) (observing “purpose of a proffer is to make an adequate record of the evidence to be introduced … [and] preserves the issue for appeal and provides the appellate court an adequate record to review when determining whether the trial court erred in excluding the evidence.”). Also, always be careful of waiving any issues for appeal by agreeing to a judge’s proposed compromise on evidentiary issues.

An important but often overlooked consideration is the courtroom layout and dynamics. Well-thought and timely objections will be for naught if they are not transcribed. Sometimes the courtroom layout can make record preservation difficult. For example, if objections are made at sidebar conferences where the court reporter is not present, those objections may not make their way into the appellate record or be dependent on the after the fact recollections of others. See, e.g., Ohio App. R. 9(c) (describing procedures for preparing statement of evidence where transcript of proceedings is unavailable and providing trial court with final authority for settlement and approval). This should be avoided whenever possible.

Beyond objections, make sure all the evidence you need for your appeal is properly admitted by the trial court before the close of your case. All exhibits that were used at trial should be formally moved into evidence if there is any doubt as to whether they will be needed on appeal. If you had previously moved for summary judgment and lost, make sure you take the necessary steps at trial to preserve those summary judgment issues, especially in jurisdictions that do not allow interlocutory appeals.

Another important aspect of the trial is the jury instructions. Jury instructions should always be complete. Remember that the instructions you propose can be denied without error if any aspect of them is not accurate, so break them into small bites so that the judge can at least accept some parts. Specifically object to any jury instructions as necessary before the jury begins its deliberations. See, e.g., Fed. R. Civ. P. 51(c). Failure to do so will waive the right to have the instruction considered on appeal. See, e.g., ChooseCo, LLC v. Lean Forward Media, LLC, 364 Fed. Appx. 670, 672 (2d Cir. 2010) (finding that defendant’s objection to jury instructions and verdict form during jury deliberations did not comply with Fed. R. Civ. P. 51(c) and noting that the “[f]ailure to object to a jury instruction or the form of an interrogatory prior to the jury retiring results in a waiver of that objection.”).

Additionally, when you lodge your objections, make sure you explain why the jury charge is in error since general objections are insufficient. See, e.g., Victory Outreach Center v. Meslo, 281 Fed. Appx. 136, 139 (3d Cir. 2008) (holding that general objection to the court’s jury instructions and proposed alternative instructions, “were insufficient to preserve on appeal all potential challenges to the instructions” and were not in compliance with Fed. R. Civ. P. 51(c)(1)). If possible, have a set of written objections to the other side’s jury charges, and get the judge to rule on that, since judges like to hold such conferences off the record. Also, do not overlook the verdict form. Know that when you agree to a particular form (general or special), that will mean that you are probably taking certain risks and waiving certain arguments one way or the other. Give this thought, and make sure that you know the rules of your jurisdiction on verdict forms so you can object if necessary. See, e.g., Palm Bay Intern., Inc. v. Marchesi Di Barolo S.P.A., 796 F.Supp. 2d 396, 409 (E.D.N.Y. 2011) (objection to verdict sheet should be made before jury retires); Saridakis v. South Broward Hosp. Dist., 2010 WL 2274955, at *8 (S.D. Fla. 2010) (noting that Federal Rule of Civil Procedure 51(c)(2)(B) states that an objection is timely if “a party objects promptly after learning that the instruction or request will be … given or refused” and that the Eleventh Circuit “require[s] a party to object to a … jury verdict form prior to jury deliberations” or the party “waives its right to raise the issue on appeal.”). (internal quotations and citation omitted).

Finally, pay careful attention to the closing argument. This can be an area where winning at trial by convincing a jury may be at odds with preserving the issue on appeal. On the flip side, many litigators are loath to interrupt a closing argument to object. If you need to object to preserve an issue, do so.

Post-Judgment – Final Things to Consider

First, determine whether certain arguments must be made post-judgment to preserve those arguments for appeal. Some arguments (such as those attacking the sufficiency of the evidence) must be made at that time or they are waived. See, e.g., Webster v. Bass Enterprises Production Co., 114 Fed.Appx. 604, 605 (5th Cir. 2004) (holding that failure to challenge back pay award in post-judgment motion waived the issue on appeal absent exceptional circumstances that did not exist). Written motions post-judgment should include all relevant references to trial transcripts and evidence to make as complete and clean a factual record as possible

Second, when the appellate record is being compiled, carefully double check the record to ensure its accuracy. Many times the trial court clerk or court reporter accidentally omits portions of the record. If this is not caught and corrected in a timely manner, you may be stuck with a bad record. Most jurisdictions have procedures in place for supplementing and correcting the record but understand them well in advance so there is adequate time to address any discrepancies before the appellate briefing is due.

Conclusion

Too often even seasoned trial lawyers get tripped up on appeal by not having an orderly and complete record. A litigator must never lose sight of the factual and legal issues in a case and what an appellate court will need to consider in making the desired determinations. As demonstrated above, a winning record requires thought at all stages of the litigation, not just when the notice of appeal is filed. With proper preparation, attention to detail, and forethought, one can ensure that the proper record on appeal is never in doubt.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

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What Homeowners Needs to Know About Deed in Lieu of Foreclosure

25 Sunday May 2014

Posted by BNG in Banks and Lenders, Foreclosure Defense, Judicial States, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Your Legal Rights

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Homeowners faced with mortgage foreclosures often opted for Deed in Lieu of Foreclosure. However, is it the best possible option for the struggling homeowner?

“Can’t we negotiate? There must be a way to work this out so we can stay in our home!” This is one of the most common questions homeowners facing foreclosure ask themselves. We will give you some answers in this post.

Some Options are Better Than Others

Some — like going through the entire foreclosure process —will leave a black mark on your credit report for probably 10 years. Others — like simply walking away from the property — aren’t necessarily wise ways of dealing with the situation either.

Sometimes you’re out of options. Short of filing for bankruptcy (which only delays the inevitable, and does not STOP foreclosure in its tracks), sometimes your lender just isn’t willing to negotiate a loan workout or accept a short sale (agreeing to take less money on the sale of your property than the balance due on their underlying mortgage).

Then again, the lender MIGHT be willing to accept a deed-in-lieu of foreclosure. Depending on how severe your financial hardship is, and other factors, the deed-in-lieu would allow you to sign over legal ownership to your home for the lender’s agreement not to foreclose.

You are in effect giving up all claims and rights to the property in exchange for the ability to walk away from it without having to make another mortgage payment — and, possibly, without a mark on your credit report.

At the very most, maybe a light gray mark instead of a black mark, if any mark at all depending on whether the lender reports your mortgage as paid in full or not. Plus, once agreeing to the deed-in-lieu, the lender will likely have to waive its rights to any deficiency judgment, which saves you from having to pay off any deficiency amount awarded the lender by a court of law. However, should you find yourself in this situation where there may be a deficiency judgment involved, the best thing to do is to consult with a real estate attorney about possible options. You should contact a real estate attorney anyway if you are considering a deed-in-lieu because it involves you giving up some legal rights. However, if you suspect mortgage fraud on your real estate transaction or feel that laws where not followed by your lender during the foreclosure process, even after the home has been sold; you can take the “BULL BY THE HORNS” using the foreclosure defense package at http://www.fightforeclosure.net for a full blown litigation to save your home from mortgage fraud.

For further details about a deed-in-lieu, the U.S. Department of Housing and Urban Development (HUD) has both a detailed fact sheet about the deed-in-lieu option and frequently asked questions about disposing of a property this way.

Bottom Line About Deed in Lieu

A deed-in-lieu is a potential way out of foreclosure for distressed homeowners who are hard pressed to find their way back to financial solvency. It may not always be the best way, but it can be much better than going all the way through the foreclosure process or filing for bankruptcy unless you can muster enough courage to fight the Bank with the all inclusive package found here at http://www.fightforeclosure.net before it is too late.

If you find yourself in an unfortunate situation of losing or about to your home to wrongful fraudulent foreclosure, and need a complete package that will help you challenge these fraudsters and save your home from foreclosure either through loan modification or “Pro Se” litigation visit: http://www.fightforeclosure.net

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What Homeowners in Washington Needs to Know About Saving Their Homes

10 Saturday May 2014

Posted by BNG in Case Laws, Case Study, Federal Court, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Landlord and Tenant, Legal Research, Litigation Strategies, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Pro Se Litigation, RESPA, State Court, Your Legal Rights

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This outline covers mainly Washington law, but an effort has been made to include information that will be useful in most foreclosure contexts. Bankruptcy and tax issues pervade foreclosures, but are beyond the scope of this article. The focus is upon residential foreclosures as opposed to commercial foreclosures although there is substantial overlap.

                                   TABLE OF CONTENTS

I. GENERAL CONSIDERATIONS

A. WHETHER TO REINSTATE, DEFEND OR GIVE-UP
B. OFFENSIVE STRATEGY

II. DEFENDING NONJUDICIAL DEED OF TRUST FORECLOSURES
A. INTRODUCTION
B. PROCEDURE FOR RESTRAINING TRUSTEE’S SALES
C. DEFENSES BASED ON TRUSTEE MISCONDUCT
D. POST-SALE REMEDIES
E. SETTING ASIDE THE TRUSTEE’S SALE
F. ADDITIONAL STATUTORY REMEDIES
G. RAISING DEFENSES IN THE UNLAWFUL DETAINER
(EVICTION) ACTION
H. DAMAGES FOR WRONGFUL FORECLOSURE

III. DEFENDING JUDICIAL FORECLOSURES
A. INTRODUCTION
B. HOMESTEAD RIGHTS
C. UPSET PRICE
D. DEFICIENCY JUDGMENTS
E. REDEMPTION RIGHTS
F. POSSESSION AFTER SALE
G. POST FORECLOSURE RELIEF

IV. MISCELLANEOUS ISSUES
A. BANKRUPTCY
B. WORKOUTS (DEED IN LIEU)
C. LENDER LIABILITY
D. MOBILE HOME FORECLOSURES
E. TAX CONSEQUENCES OF FORECLOSURE

V. THE GOVERNMENT AS INSURER, GUARANTOR OR LENDER
A. INTRODUCTION
B. HUD WORKOUT OPTIONS
C. THE VA HOME LOAN PROGRAM
D. RURAL HOUSING LOANS

VI. RESOURCES

                          I. GENERAL CONSIDERATIONS

A. WHETHER TO REINSTATE, DEFEND OR GIVE-UP

By far the most important decision that must be initially made is whether the property is worth saving. This is often ignored and wasted effort is expended when there is no “equity” (realistic fair market value minus all debt, liens, property taxes, anticipated foreclosure costs, late fees, and selling costs) in the property.
The options are as follows:
1. Reinstatement. Pay the costs and late charges and stop the process. In most non-judicial foreclosures this is permitted up until the date of sale. In Washington the lender must allow reinstatement 10 days prior to the sale date. See RCW 61.24. Often a lender or relative will loan necessary funds and take a subordinate lien on the property to do so. The makes sense only if the new payments are within the means of the debtor.
2. Sell the Property. If there is equity, but no ability to reinstate, then immediately list and sell the property to recoup equity.
3. Obtain Foreclosure Relief. Most government insured loans (if, VA, FHA) have programs allowing (or requiring) lenders to assist defaulting borrowers. See discussion under §V infra. Check into these options immediately.
4. Give Up. This is actually an option as most state laws permit the debtor to remain in possession during the foreclosure process and redemption period rent-free. Most laws, especially in non-judicial foreclosure states – do not allow (or at least limit) deficiencies. Debtors contemplating bankruptcy should take advantage of homestead rights and redemption rights. If there is no equity or negative equity and no ability to make payments, there is no economic reason to try to avoid foreclosure.
5. Defend the Foreclosure. After all of the above have been considered, defense of the foreclosure may be warranted. This outline discusses some defenses that may result in re-instatement of the mortgage or recovery of equity.
B. OFFENSIVE STRATEGY
In addition to defenses that may be raised, there may be affirmative claims that can be brought against the lender which should be immediately determined and raised in a counterclaim or set-off or, in the case of non-judicial foreclosure, brought by separate suit and coupled with an injunction against continuing the non-judicial foreclosure. These claims can also be brought in bankruptcy. See, e.g. In re Perkins, 106 BR 863 (1989).
A few examples of affirmative claims:
1. Truth-in-Lending Act Violations. Often lenders will hand the debtor a claim, which can turn a debt into an asset. If the Truth-in-Lending disclosure statement is less than one year old, there may be damage claims for improper disclosure. See, 15 U.S.C. 1635. More importantly, there may be a right of rescission, which can be exercised up to three years after the closing resulting in a tremendous advantage to the borrower. See, e.g., Beach v. Ocwen Fed Bank, 118 S. Ct. 1408 (1998).
2. Usury. If a state usury law applies (usually on seller financed real estate), this can parlay a debt into an asset. Federal pre-emption generally prevents this, but there are exceptions. See, RCW 19.52.
3. Mortgage Broker Liability, Lender Liability, Unfair or Deceptive Acts or Practices. Numerous claims that arise in the mortgage financing context give rise to set-offs that can allow negotiation out of the foreclosure. See e.g. Mason v. Mortgage America, 114 Wn. 2d 842 (1990). Intentional breach of contract gives rise to emotional stress damages. See, Cooperstein v. Van Natter, 26 Wn. App. 91 (1980); Theis v. Federal Finance Co., 4 Wn. App. 146 (1971).
Under a new federal statute to regulate high interest, predatory loans, Congress enacted in 1994 the Home Ownership and Equity Protection Act (effective on loans after October 1, 1995). This amendment to the Truth-In-Lending Act requires greater disclosures in loans where a number of factors exist such as, points exceeding 8% and other excessive costs. Penalties include enhanced damages and rescission. See 15 U.S.C. 1602(u) and 15 U.S.C. 1640(a).
The Mortgage Broker Practices Act, RCW 31.04 and the Consumer Protection Act also have enhanced damages and attorney fees.

            II. DEFENDING NONJUDICIAL DEED OF TRUST FORECLOSURES

A. INTRODUCTION

The deed of trust is currently one of the most common devices for securing conventional and government insured or guaranteed real estate loans. The deed of trust may be typically foreclosed either judicially as a mortgage or non-judicially. Set forth below are the jurisdictional variations in security agreements and the most common foreclosure procedures#.

Nonjudicial

# 1

Jurisdiction
Customary Security Agreement
Customary Foreclosure Procedure

Alabama
Mortgage
Nonjudicial

Alaska
Deed of Trust
Nonjudicial

Arizona
Deed of Trust
Nonjudicial

Arkansas
Mortgage
Judicial

California
Deed of Trust
Nonjudicial

Colorado
Deed of Trust (Semi-judicial)
Public Trustee’s Sale

Connecticut
Mortgage

Judicial-Strict Foreclosure

Delaware
Mortgage
Judicial

Dis. of Col.
Deed of Trust
Nonjudicial

Florida
Mortgage
Judicial

Georgia
Security Deed
Nonjudicial

Hawaii
Mortgage
Judicial

Idaho
Mortgage
Judicial & Nonjudicial

Illinois
Mtg. & D.T.
Judicial

Indiana
Mortgage
Judicial

Iowa
Mortgage
Judicial

Kansas
Mortgage
Judicial

Kentucky
Mortgage
Judicial

Louisiana
Mortgage
Judicial

Maine
Mortgage
Judicial (Nonjudicial for Corporate Borrower)

Maryland
Deed of Trust
Nonjudicial

Massachusetts
Mortgage
Nonjudicial

Michigan
Mortgage
Nonjudicial

Minnesota
Mortgage
Nonjudicial

Mississippi
Deed of Trust
Nonjudicial

Missouri
Deed of Trust
Nonjudicial

Montana
Instlmnt. Contract
Nonjudicial

Nebraska
Deed of Trust Mortgage
Judicial & Nonjudicial

Nevada
Deed of Trust
Nonjudicial

New Hampshire
Mortgage
Nonjudicial

New Jersey
Mortgage
Judicial

New Mexico
Mortgage
Judicial

New York
Mortgage
Judicial

North Carolina
Deed of Trust
Judicial

North Dakota
Mortgage
Judicial

Ohio
Mortgage
Judicial

Oklahoma
Mortgage
Judicial

Oregon
Deed of Trust
Nonjudicial

Pennsylvania
Mortgage
Judicial

Puerto Rico
Mortgage
Judicial

Rhode Island
Mortgage
Nonjudicial

 

South Carolina
Mortgage
Judicial

South Dakota
Mortgage
Judicial & Nonjudicial

Tennessee
Deed of Trust
Nonjudicial

Texas
Deed of Trust
Nonjudicial

Utah
Deed of Trust
Nonjudicial

Vermont
Mortgage
Strict Foreclosure

Virgin Islands
Mortgage
Judicial

Virginia
Deed of Trust
Nonjudicial

Washington
Deed of Trust
Nonjudicial

West Virginia
Deed of Trust
Nonjudicial

Wisconsin
Mortgage
Judicial

Wyoming
Mtg. & Installment Contracts

foreclosure is allowed in approximately one-half of the states. Also listed are the states that permit nonjudicial foreclosure and their relevant statutes#. With nonjudicial foreclosure, it is not necessary to utilize the court for the foreclosure sale unless a deficiency judgment is sought. Nonjudicial foreclosure is often the preferred method of foreclosure because it is more efficient than judicial foreclosure and quicker. The nonjudicial foreclosure procedure has been found constitutional between private parties on the basis that there is no state action#, but there is a serious question as to whether the government can direct a lender to use a nonjudicial procedure#.

______________________________________________________________________________________

Judicial
# ALABAMA: ALA. CODE §§35-10-1 TO 35-10-10; [FORECLOSURE AFTER 12/1988 §§35-10-11 TO 35-10-16]
(1991).
Alaska: Alaska Stat. §§34.20.090 to 34.20.100 (1991).
Arizona: Ariz. Rev. Stat. Ann. §§33-807 to 33-814 (West 1991).
Arkansas: Ark. Code Ann. §§18-50-108; 18-50-116 (1987).
California: Cal. Civ. Code §§2924 to 2924(h) West 1992).
D.C.: D.C. Code Ann. §§45-715 to 45-718 (1991).
Georgia: Ga. Code Ann. §§9-13-141; 44-14-162.4; 44-14-48; 44-14-180 to 187 (Harrison 1991).
Idaho: Idaho Code §§6-101; 104; 45-1502 to 45-1506 (1991).
Iowa: Iowa Code Ann. §654.18 (West 1992).
Maine: Me. Rev. Stat. Ann. tit. 14, §§7-105; 7-202 (1988).
Massachusetts: Mass. Gen. Laws Ann. ch. 183, §§19, 21; ch. 244, §§11-15 (West 1992).
Michigan: Mich. Comp. Laws Ann. §§451-401 et seq.; 600.2431; 600.3201 et seq.; 600.3170 (West 1992).
Minnesota: Minn. Stat. Ann. §§580.01 to 580.30; 582.01 et seq. (West 1992).
Mississippi: Miss. Code Ann. §§11-5-111; 15-1-23; 89-1-55 (1972).
Missouri: Mo. Ann. Stat. §§442.290to 443.325 (Vernon 1992).
Montana: Mont. Code Ann. §§25-13-802; 71-1-111; 71-1-223 to 232, 71-1-311 to 317 (1991).
Nebraska: Neb. Rev. Stat. §§76-1001 to 1018 (1981).
Nevada: Nev. Rev. Stat. §§107.020; 107.025; 107.080 to 107.100; 40.050; 40.453 (Michie 1991).
New Hampshire: N.H. Rev. Stat. Ann. §§479:22 to 479:27 (1991).
New York: N.Y. Real Prop. Acts §§1401 to 1461 (McKinney 1992).
North Dakota: N.D. Cent. Code §35-22-01 (1992).
Oklahoma: Okla. Stat. Ann. tit. 46, §§40 to 49 (West 1992).
Oregon: Or. Rev. Stat. §§86.705 to 86.795 (1989).
Rhode Island: R.I. Gen. Laws §§34-11-22; 34-20-4; 34-23-3; 34-27-1 (1984).
South Dakota: S.D. Codified Laws Ann. §§21-48-1 to 21-48-26; 21-48A-1 to 21-48A-5 (1992).
Tennessee: Tenn. Code Ann. §§35-5-101 to 35-5-112 (1991). See, Note, Power of Sale Foreclosures in
Tennessee, 8 Mem. St. U.L. Rev. 871 (1978).
Texas: Tex. Prop. Code Ann. §§51-002; 51.003; 51.005 (West 1992).
Utah: Utah Code Ann. §§57-1-23 to 57-1-34 (1986).
Vermont: Vt. Stat. Ann. tit. 12, §§4531a to 4533 (1991).
Virginia: Va. Code Ann. §§55-59.1 to 55-59.4; 55-61 to 55-66.7 (Michie 1991).
Washington: Wash. Rev. Code Ann. §§61.24.010 to 61.24.130 (West 1992).

_______________________________________________________________________________________

West Virginia: W. Va. Code §§38-1-3 to 38-1-12 (1991).
Wyoming: Wyo. Stat. §§34-4-101 to 34-4-113 (1991).

# See Charmicor, Inc. v. Deaner, 572 F.2d 694 (9th Cir.1978); Northrip v. Federal National Mortgage Association, 527 F.2d 23 (6th Cir.1975); Barrera v. Security Building & Investment Corp., 519 F.2d 1166 (5th Cir. 1975); Bryant v. Jefferson Federal Savings & Loan Association, 509 F.2d 511 (D.C. Cir.1974); Lawson v. Smith, 402 F.Supp. 851 (N.D.Cal.1975); Global Industries, Inc. v. Harris, 376 F.Supp. 1379 (N.D.Ga.1974); Homestead Savings v. Darmiento, 230 Cal.App.3d 424, 281 Cal.Rptr. 367 (1991); Leininger v. Merchants & Farmers Bank, macon, 481 So.2d 1086 (Miss.1986); Wright v. Associates Financial Services Co. of Oregon, Inc., 59 Or.App.688, 651 P.2d 945 (1983), certiorari denied 464 U.S. 834, 104 S.Ct. 117, 78 L.Ed.2d 116 (1983); Kennebec Inc. v. Bank of the West, 88 Wash.2d 718, 565 P.2d 812 (1977); Dennison v. Jack, 172 W.Va. 147, 304 S.E.2d 300 (1983).
# Island Financial, Inc. v. Ballman, 92 Md.App. 125, 607 A.2d 76 (1992); Turner v. Blackburn, 389 F.Supp. 1250 (W.D.N.C.1975); Vail v. Derwinski, 946 F.2d 589 (8th Cir.1991), amended by 956 F.2d 812 (8th Cir.1992) and Boley v. Brown, 10 F.3d 218 (4th Cir.1993) which held that the VA’s control over the foreclosure process in VA guaranteed loan foreclosures constitutes sufficient governmental action to trigger due process protections. Accord, U.S. v. Whitney, 602 F. Supp. 722 (W.D. N.Y. 1985); U.S. v. Murdoch, 627 F. Supp. 272 (N.D. Ind. 1986). See Also Leen, Galbraith & Gant, Due Process and Deeds of Trust – Strange Bedfellows, 48 Wash.L.Rev. 763 (1973).

B. PROCEDURE FOR RESTRAINING TRUSTEE’S SALE

Anyone having an interest in the real property security, including the borrower, may restrain the non-judicial foreclosure of a deed of trust on any proper ground#. Proper grounds for enjoining a trustee’s sale include: (1) there is no default on the obligation, Salot v. Wershow, 157 CA.2d 352, 320 P.2d 926 (1958), (2) the deed of trust has been reinstated, (3) the notice of default, notice of sale, or proposed conduct of the sale is defective, Crummer v. Whitehead, 230 CA.2d 264, 40 CR 826 (1964), (4) the lender has waived the right to foreclose, (5) a workout/settlement has been agreed to, (6) equitable reasons that would entitle a debtor to close a sale of the property or complete a refinance, (7) to enforce government relief programs, and trustee misconduct. Finally, there may be defenses to the debt (i.e. usury, truth in lending violations, misrepresentation of the seller, breach of warranty by the seller, etc.) or set-offs, which substantially reduce the debt.

1. Time for Filing Action
The action can presumably be filed any time before the scheduled trustee’s sale, but the sooner the better. Under Washington law, if one seeks to restrain the sale, five days notice must be given to the trustee and the beneficiary. See the Revised Code of Washington (hereinafter “RCW”) 61.24.130(2); Note, supra, footnote 4. A trustor in California has at least one hundred and ten days (after the recording of the notice of default) to seek to enjoin the sale. In California, fifteen days are required for noticing a motion for a preliminary injunction. See CCP section 1005.

______________________________

# See, e.g., Reiserer v. Foothill Thrift and Loan, 208 Cal.App.3d 1082, 256 Cal.Rptr. 508 (1989) (unpublished opinion); Metropolitan Life Insurance Company v. La Mansion Hotels & Resorts, Ltd., 762 S.W.2d 646 (Tex.App.1988); Bekins Bar V Ranch v. Huth, 664 P.2d 455 (Utah 1983); National Life Insurance Co. v. Cady, 227 Ga. 475, 181 S.E.2d 382 (1971); Peoples National Bank v. Ostrander, 6 Wn.App. 28, 491 P.2d 1058 (1971). See, generally, note, Court Actions Contesting The Nonjudicial Foreclosure of Deeds of Trust in Washington, 59 Wash.L.Rev. 323 (1984); Restraining Orders in Non-Judicial Deed of Trust Foreclosures, Property Law Reporter, June 1987 (Vol. 3 Nos. 4 & 5).

2. Effect of Lis Pendens
Filing a lis pendens at the time the lawsuit is commenced constitutes constructive notice to purchasers and others dealing with the property of the claims and defenses asserted by the plaintiff#. Even if the plaintiff does not seek an order restraining the trustee’s sale or a restraining order is denied, purchasers at the sale acquire the property subject to the pending litigation#.

3. Notice of Application for Restraining Order
In Washington, a person seeking to restrain a trustee’s sale must give five days notice to the trustee setting forth when, where and before whom the application for the restraining order or injunction will be made. See RCW 61.24.130(2). See also Civil Rules 6 and 81 of the Civil Rules for Superior Court regarding computation of time.

________________________________

# Putnam Sand & Gravel Co. v. Albers, 14 CA3d 722, 92 CR 636 (1971).

# Avco Financial Services Loan, Inc. v. Hale, 36 Ohio App.3d 65, 520 N.E.2d 1378 (1987); Land Associates, Inc. v. Becker, 294 Or. 308, 656 P.2d 927 (1982), appeal after remand 74 Or.App. 444, 703 P.2d 1004 (1985).

4. Payment Obligation
When a preliminary injunction is sought, many states require the petitioner to post an injunction bond to protect the lender from injury because of the injunction#. Some courts require the party seeking the injunctive relief to pay to the court the amount due on the obligation#. If the amount due on the obligation is in dispute, most courts will require the borrower to tender at least what he/she acknowledges is due#.
Under Washington law, if the default is in making the monthly payment of principal, interest and reserves, the court requires such sum to be paid into the court every thirty days. See RCW 61.24.130(1)(a). A practice tip: even if local law does not require this, it would advantageous to offer to make ongoing payments. Then the creditor loses nothing during the pendency of the suit. In the case of default on a balloon payment, the statute requires that payment of the amount of the monthly interest at the new default rate shall be made to the court

clerk every thirty days. See RCW 61.24.130 (1)(b). If the property secured by the deed of trust is an owner occupied single family dwelling, then the court must require the party seeking to restrain the trustee’s sale to make the monthly payment of principal interest and reserves to the clerk of the court every 30 days. See RCW 61.24.130(1).
Although the amount that the party seeking to restrain the trustee’s sale must pay as a condition of continuing the restraining order would ordinarily be the regular monthly payment on the obligation, RCW 61.24.130(1)(a), when there is a balloon payment past due, RCW 61.24.130(1)(b) provides:

In the case of default in making payments of an obligation then fully payment by its terms, such sum shall be the amount of interest accruing monthly on said obligation at the non-default rate, paid to the clerk of the court every thirty days.

__________________________

# See Hummell v. Republic Federal Savings & Loan, 133 Cal.App.3d 49, 183 Cal.Rptr. 708 (4th Dist.1982); Broad & Locust Associates v. Locust-Broad Realty Co., 318 Pa.Super. 38, 464 A.2d 506 (1983); Strangis v. Metropolitan Bank, 385 N.W.2d 47 (Minn.App.1986); Franklin Savings Association v. Reese, 756 S.W.2d 14 (Tex.App.1988); Koegal v. Prudential Mutual Savings, Inc., 51 Wn.App. 108 (1988).

# See Ginther-Davis Center, Limited v. Houston National Bank, 600 S.W.2d 856 (Tex.Civ.App. 1980), error refused n.r.e.; see also Tiffany, Real Property, § 1549 (3d Ed. 1939) for a list of cases; Thompson, Real Property § 5179 (1957). Cf. Grella v. Berry, 647 S.W.2d 15 (Tex.App.1982).
# See Glines v. Theo R. Appel Realty Co., 201 Mo.App.596, 213 S.W. 498 (1919).

This is consistent with the intent to preserve the status quo while the lawsuit is pending and provide security only for prospective harm.

Failure to seek a restraint may constitute a waiver of all rights to challenge a sale for defects whenever the party who received notice of the right to enjoin the trustees sale, had actual or constructive knowledge of a defense to foreclosure prior to the sale, and failed to bring an action to enjoin the sale. The doctrine of waiver would thus preclude an action by a party to set aside a completed trustee’s sale#. Finally, RCW 61.24.130 allows the court to consider the grantor’s equity in determining the amount of security. This would significantly help a borrower avoid a costly bond. An appraisal showing equity should persuade a court that the lender is protected while the underlying dispute is resolved in court.

When a party knew or should have known that they might have a cause of action to set aside the sale but unreasonably delayed commencing the action, causing damage to the defendant, the doctrine of laches may bar the action#.

_________________________________

# Koegel v. Prudential Mutual Savings, Inc., 51 Wn. App. 108, 114 (1988); Steward v. Good, 51 Wn. App. 509, 515 (1988).

C. DEFENSES BASED ON TRUSTEE MISCONDUCT

Most defenses that are available in judicial foreclosures are also available in nonjudicial foreclosures of deeds of trust. Defenses may include violation of Truth-in-Lending, usury statutes, other consumer protection legislation, or special requirements when the government is the lender, insurer, or guarantor, infra. Other defenses are unique to nonjudicial foreclosure of deeds of trust because they relate to the particular obligations imposed upon trustees who conduct the sale of the real property.

1. Breach of Fiduciary Duties
A trustee selling property at a nonjudicial foreclosure sale has strict obligations imposed by law. In most states, “a trustee is treated as a fiduciary for both the borrower and the lender.”#

________________________________________________________________________________________

# Carlson v. Gibraltar Savings, 50 Wn. App. 424, 429 (1988).
# Baxter & Dunaway, The Law of Distressed Real Estate (Clark Boardman Company, Ltd., November 1990). See Spires v. Edgar, 513 S.W.2d 372 (Mo.1974).

In McPherson v. Purdue, 21 Wn. App. 450, 452-3, 585 P.2d 830 (1978), the court approved the following statement describing the duties of a trustee from California law:
Among those duties is that of bringing “the property to the hammer under every possible advantage to his cestui que trusts,” using all reasonable diligence to obtain the best price.

In Cox v. Helenius, 103 Wn.2d 383, 388, 693 P.2d 683 (1985), the Washington Supreme Court adopted the following view:
Because the deed of trust foreclosure process is conducted without review or confrontation by a court, the fiduciary duty imposed upon the trustee is “exceedingly high”.

The court went on to illuminate four duties of the trustee:

(1) The trustee is bound by his office to use diligence in presenting the sale under every possible advantage to the debtor as well as the creditor;

(2) The trustee must take reasonable and appropriate steps to avoid sacrifice of the debtor’s property and his interest;

(3) Once a course of conduct is undertaken that is reasonably calculated to instill a sense of reliance thereon by the grantor, that course of conduct can not be abandoned without notice to the grantor; and

(4) When an actual conflict of interest arises between the roles of attorney for the beneficiary and trustee, the attorney should withdraw from one position, thus preventing a breach of fiduciary duty.

In Blodgett v. Martsch, 590 P.2d 298 (UT 1978), it was stated that “the duty of the trustee under a trust deed is greater than the mere obligation to sell the pledged property, . . . it is a duty to treat the trustor fairly and in accordance with a high punctilio of honor.” The Supreme Court in Blodgett went even further and found that the breach of this confidential duty may be regarded as constructive fraud#.

The general rule is summarized in Nelson & Whitman, Real Estate Finance Law, (West Publishing Co., 3d Ed. 1994), §7.21:
. . . a trustee in a deed of trust is a fiduciary for both the mortgagor and mortgagee and must act impartially between them. As one leading decision has stated, “the trustee for sale is bound by his office to bring the estate to a sale under every possible advantage to the debtor as well as to the creditor, and he is bound to use not only good faith but also every requisite degree of diligence in conducting the sale and to attend equally to the interest of debtor and creditor alike, apprising both of the intention of selling, that each may take the means to procure an advantageous sale.”

Mills v. Mutual Building & Loan Association, 216 N.C. 664, 669, 6 S.E.2d 549, 554 (1940).
The fiduciary duty of a trustee to obtain the best possible price for trust property that it sells has been discussed in nonjudicial and other contexts#.

_______________________________________________________________________________________

# See also McHugh v. Church, 583 P.2d 210, 214 (Alaska 1978).

However, this “fiduciary” characterization of a trustee is not accepted in all jurisdictions. The California Supreme Court has stated,
“The similarities between a trustee of an express trust and a trustee under a deed of trust end with the name. ‘Just as a panda is not a true bear, a trustee of a deed of trust is not a true trustee.’ *** [T]he trustee under a deed of trust does not have a true trustee’s interest in, and control over, the trust property. Nor is it bound by the fiduciary duties that characterize a true trustee.”

Monterey S.P. Partnership v. W.L. Bangham, Inc. 49 Cal.3d 454, 462, 261 Cal.Rptr. 587,592 (1989).

In most jurisdictions, a trustee cannot, without the express consent of the trustor, purchase at the sale that he conducts#. A court may impose additional affirmative duties (beyond the statutory requirements) upon the trustee in certain circumstances.

This could include a requirement that a trustee’s sale be continued, if necessary, to prevent a total loss of the debtor’s equity. West v. Axtell, 322 Mo. 401, 17 S.W.2d 328 (1929). RCW 61.24.040(6) authorizes a trustee to continue a trustee’s sale for a period or periods totaling 120 days for “any cause he deems advantageous.”

___________________________

# See Cox v. Helenius, supra, at p. 389; Allard v. Pacific National Bank, 99 Wn. 2d 394, 405, 663 P.2d 104 (1983), modified by 99 Wn.2d 394, 773 P.2d 145 (1989). superseded by RCW 11.100.140 as stated in Conran v. Seafirst Bank, 1998 Wn.App. Lexis 156.. See also National Life Insurance Company v. Silverman, 454 F.2d 899, 915 (D.C. Cir. 1971), in which the court stated that the same good faith is required of trustees under a deed of trust of real estate as is required of other fiduciaries.

# See Smith v. Credico Industrial Loan Company, 234 Va. 514, 362 S.E.2d 735 (1987); Whitlow v. Mountain Trust Bank, 215 Va. 149, 207 S.E.2d 837 (1974).

However, the Washington Court of Appeals has ruled that the trustee need not exercise “due diligence” in notifying interested parties of an impending sale. Morrell v. Arctic Trading Co., 21 Wn. App. 302, 584 P.2d 983 (1978). Further, the general rule is that a trustee is not obligated to disclose liens or other interests which the purchaser could or should have discovered through his or her own investigation. Ivrey v. Karr, 182 Md. 463, 34 A.2d 847, 852 (1943). The Washington courts have held that even when a trustee is aware of defects in title, the trustee only undertakes an affirmative duty of full and accurate disclosure if s/he has made any representations or answered any questions concerning the title. McPherson v. Purdue, 21 Wn. App. 450, 453, 585 P.2d 830 (1978). However, despite this general rule, there is authority behind the proposition that a trustee has a fiduciary duty to restrain the sale due to defects known to the trustee. In Cox v. Helenius, 103 Wn.2d 383,*,693 P.2d 683 (1985), in which the trustee knew that the right to foreclose was disputed and that the attorney for the trustor had failed to restrain the sale, the court held that the trustee should have either informed the attorney for the trustor that she had failed to properly restrain the sale or delayed foreclosure. As a result of the trustee’s failure to do so, the sale was held void.

Trustees are not permitted to “chill the bidding” by making statements which would discourage bidding, for example, a statement that it is unlikely that the sale will be held because the debtor intends to reinstate#. If a trustee does engage in “chilled bidding”, the sale is subject to being set aside#.

____________________________________________________________________________________

# See, Nelson & Whitman, supra, Section 7.21; Dingus, Mortgages-Redemption After Foreclosure Sale in

Missouri, 25 Mo.L.REV. 261, 284 (1960).

# Biddle v. National Old Line Ins. Co., 513 S.W.2d 135 (Tex.Civ.App.1974), error refused n.r.e.; Sullivan v. Federal Farm Mortgage Corp., 62 Ga.App.402, 8 S.E.2d 126 (1940).

# Queen City Savings v. Manhalt, 111 Wn.2d 503 (1988).

2. Strict Construction of the Deed of Trust Statute
The nonjudicial foreclosure process is intended to be inexpensive and efficient while providing an adequate opportunity for preventing wrongful foreclosures and promoting the stability of land titles#. However, statutes allowing foreclosure under a power of sale contained within the trust deed or mortgage are usually strictly construed. Id. at 509.
Recent decisions have moved away from the strict construction ruling, holding that some technical violations of statutes governing nonjudicial foreclosures will not serve as grounds for setting aside sale when the error was non-prejudicial and correctable. See Koegal, supra at 113. An example of a non-prejudicial and correctable error is noncompliance with the requirement that the trustee record the notice of sale 90-days prior to the actual sale when actual notice of the sale was given to the debtors 90-days prior to the sale and the lack of recording caused no harm. Steward, supra at 515. Further, inconsequential defects often involve minor discrepancies regarding the notice of sale. In Bailey v. Pioneer Federal Savings and Loan Association, 210 Va. 558, 172 S.E.2d 730 (1970), where the first of four published notices omitted the place of the sale, the court held that since there was “substantial compliance” with the requirements specified by the deed of trust and since the parties were not affected in a “material way,” the sale was valid#. In another case, where the notice of sale was sent by regular rather than by statutorily required certified or registered mail and the mortgagor had actual notice of the sale for more than the statutory period prior to the sale, the sale was deemed valid#. Clearly a grantor must show some prejudice.

D. POST-SALE REMEDIES

1. Statutory Presumptions
The Washington Deed of Trust Act contains statutory presumptions in connection with a trustee’s sale that are similar to those found in most other states. # RCW 61.24.040(7) provides, in part:

. . . the [trustee’s] deed shall recite the facts showing that the sale was conducted in compliance with all of the requirements of this chapter and of the deed of trust, which recital shall be prima facie evidence of such compliance and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value.

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# See also Tarleton v. Griffin Federal Savings Bank, 202 Ga.App. 454, 415 S.E.2d 4 (1992); Concepts, Inc. v. First Security Realty Services, Inc., 743 P.2d 1158 (Utah 1987).

# Macon-Atlanta State Bank v. Gall, 666 S.W.2d 934 (Mo.App.1984). For a complete list of defects considered “insubstantial”, see Graham v. Oliver, 659 S.W.2d 601, 604 (Mo.App.1983).
# See also Cal. Civ. Code § 2924 (West 1981); Utah Code Ann.1953, 57-1-28; West’s Colo.Rev.Stat. Ann. §38-39-115; Or.Rev.Stat. 86.780; So.Dak.Compiled Laws 21-48-23.

Such provisions are designed to protect bona fide purchasers and to assure that the title passed through a trustee’s sale will be readily insurable. However, although the required recitals are described as “conclusive” in favor of bona fide purchasers and encumbrancers for value, there is extensive case law setting forth the basis for rebutting these presumptions. They also don’t apply to a dispute between the grantor and grantee. See, generally, Nelson & Whitman, Real Estate Finance Law, (2d ed. 1985) § 7.21 ff. Some states employ other means of stabilizing titles, such as title insurance. Yet another means of stabilizing titles is to include a provision in the deed of trust that in the event of a trustee’s sale, the recital will be conclusive proof of the facts. See, Johnson v. Johnson, 25 Wn. 2d 797 (1946); Glidden v. Municipal Authority, 111 Wn. 2d 341 (1988), modified By Glidden v. Municipal Authority, 764 P.2d 647 (1988).

2. The Bona Fide Purchaser
The law is well settled that a bona fide purchaser, in order to achieve that status, must have purchased the property “for value.” See RCW 61.24.040(7).

The general rule is set forth in Phillips v. Latham, 523 S.W.2d 19, 24 (Tex. 1975):

[The purchaser] cannot claim to be a good-faith purchaser for value because the jury found . . . that the sale price of $691.43 was grossly inadequate. These findings are not attacked for lack of evidence. Although good faith does not necessarily require payment of the full value of the property, a purchaser who pays a grossly inadequate price cannot be considered a good-faith purchaser for value.

Further, if a lis pendens has been recorded, it “will cause the purchaser to take subject to the plaintiff’s claims.” Bernhardt, California Mortgage & Deed of Trust Practice (2d Edition 1990).

 

A purchaser will not then constitute a bona fide purchaser able to utilize the presumptions of regularity in recitals of the trustee’s deed. See CC § 2924. The beneficiary of a deed of trust is not a bona fide purchaser. See Johnson, supra.

E. SETTING ASIDE THE TRUSTEE’S SALE

Setting aside a trustee’s sale is largely a matter for the trial court’s discretion. Crummer v. Whitehead, 230 Cal. App. 2d 264, 40 Cal. Rptr. 826 (1964); Brown v. Busch, 152 Ca. App. 2d 200, 313 P.2d 19 (1957). After a trustee’s sale has taken place, a trustor or junior lienor may bring an action in equity to set aside the sale. See Crummer v. Whitehead, 230 Cal. App. 2d 264, 40 Cal. Rptr. 826 (1964); see also Note, “Court Actions Contesting The Nonjudicial Foreclosure of Deeds of Trust In Washington,” 59 Wash.L.Rev. 323 (1984)#.

An action may be brought to set aside a trustee’s sale under circumstances where the trustee’s sale is void. Cox v. Helenius, 103 Wn.2d 383, 693 P.2d 683 (1985). In those circumstances where the defect in the trustee’s sale procedure does not render the trustee’s sale void, the court will probably apply equitable principles in deciding what relief, if any, is available to the parties. A general discussion of equitable principles in contexts other than trustee’s sale can be found in Eastlake Community Council v. Roanoake Associates, 82 Wn.2d 475, 513 P.2d 36 (1973) and Arnold v. Melani, 75 Wn.2d 143, 437 P.2d 908 (1968). Although it is preferable to raise any defenses to the obligations secured by the deed of trust or other defects in the nonjudicial foreclosure process prior to the trustee’s sale, a trustee’s sale can presumably be set aside if there was a good reason for not restraining it. Possible reasons could include those described below.

__________________________________________________________________________________

# Attempting to Set Aside Deed of Trust Foreclosure Because of Trustee’s Fiduciary Breach, 53 Missouri L. Rev. 151 (1988).

1. Breach of the Trustee’s Duty

a. Inadequate Sale Price

The general rule on using inadequate sale price to set aside a deed of trust sale is stated in Nelson & Whitman, supra, § 7.21:

All jurisdictions adhere to the recognized rule that mere inadequacy of the foreclosure sale price will not invalidate a sale, absent fraud, unfairness, or other irregularity. Stating the rule in a slightly different manner, courts sometimes say that inadequacy of the sale price is an insufficient ground unless it is so gross as to shock the conscience of the court, warranting an inference of fraud or imposition#.

In Cox v. Helenius, supra, at p. 388, the court indicated that the inadequate sale price coupled with the trustee’s actions, would have resulted in a void sale, even if not restrained.

Generally, unless the sale price is grossly inadequate, other irregularities or unfairness must exist. However, considerable authority exists to support setting aside a sale when, coupled with an inadequate sale price, there is any other reason warranting equitable relief. Nelson & Whitman, Real Estate Finance Law, supra.

b. Hostility or Indifference to Rights of Debtor.

In Dingus, supra, at 289, it is stated:

In an action to set aside a foreclosure sale under a deed of trust, evidence showing that the trustee was hostile and wholly indifferent to any right of the mortgagor warrants setting aside the sale. Lunsford v. Davis, 254 S.W. 878 (Mo. 1923).

CF. Cox v. Helenius, supra.

c. Other Trustee Misconduct

Other trustee misconduct that would give rise to grounds for setting aside a trustees sale could include “chilled bidding” where the trustee acts in a manner that discourages other parties from bidding on the property#. Actions by the trustee which lull the debtor into inaction may also give rise to grounds for avoiding the sale#. Particular note should also be made of the discussion in Cox v. Helenius, supra, at p.390 in which trustees who serve a dual role as trustee and attorney for the beneficiary are directed to transfer one role to another person where an actual conflict of interest arises.

2. Absence of Other Foreclosure Requisites

RCW 61.24.030 sets forth the requisites to non-judicial foreclosure. Failure to meet these requisites may render the trustee’s sale void. In Cox v. Helenius, 103 Wn.2d 383, 693 P.2d 683 (1985), the court concluded that a trustee’s sale was void under circumstances where the borrower had filed an action contesting the obligation and that action was pending at the time of the trustee’s sale. The action was filed after service of the notice of default but before service of the notice of foreclosure and trustee’s sale.

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# Nelson & Whitman, supra, Section 7.21. Dingus, supra, at p. 274; see also Biddle v. National Old Line Insurance Co., 513 S.W.2d 135 (Tex.Civ.App. 1974).

# Dingus, supra, at pp. 272-73; Cox v. Helenius, supra, at p. 389.

The decision in Cox was based on language in the Deed of Trust Act that made it a requisite to foreclosure that “no action is pending on an obligation secured by the deed of trust.” That part of the Cox decision was legislative overruled by Chapter 193, Law of 1985, Reg. Sess., which amended RCW 61.24.030(4) to read as follows:

That no action commenced by the beneficiary of the deed of trust is now pending to seek satisfaction of an obligation secured by the deed of trust in any court by reason of the grantor’s default on the obligation secured;

As a result of the amendment, pendency of an action on the obligation brought by the grantor does not render a subsequent trustee’s sale void. Only pending actions commenced by the beneficiary to seek satisfaction of the obligation secured by the deed of trust operate as a bar to nonjudicial foreclosure. The trustee must be properly appointed and be appointed before the trustee has authority to act. When an eager trustee “jumps the gun” the actions are equally void.

F. ADDITIONAL STATUTORY REMEDIES

1. Confirmation of Sale Price.

Many states (but not Washington) require confirmation that the nonjudicial sale resulted in a fair value to the debtor. Below is listed the states that have adopted fair market value statutes#. Fair market value statutes are usually used to limit deficiency judgments to the difference between the fair market value and the debt. Failure to confirm the sale within the statutory period is usually a bar to a deficiency. For example, in Georgia the court must be petitioned for a confirmation of the sale if a deficiency judgment is sought.

2. Redemption in Nonjudicial Foreclosures.

Approximately one-half of the states allow for redemption after foreclosure, although not Washington. Some states allow redemption after a nonjudicial sale. See Minnesota Statutes Annotated § 580 et seq. Generally, the grantor can remain in possession during the redemption period, rent the property (retaining the rents) and/or sell the property (or sell the redemption rights).

G. RAISING DEFENSES IN THE UNLAWFUL DETAINER (EVICTION) ACTION

________________________________

# Arizona: Ariz. Rev. Stat. Ann. §33-814(A) (1989).
California: Cal. Civ. Code §580a (1989); Id. §726 (1989); Kirkpatrick v. Stelling, 36 Cal. App.2d 658, 98
P.2d 566, appeal dismissed, 311 U.S. 607 (1940); Risenfeld, California Legislation Curbing Deficiency
Judgments, 48 Calif. L. rev. 705 (1960). See infra, California jurisdictional summary in Part 1.
Georgia: Ga. Code Ann. §§44-14-161, -162 (1989).
Idaho: Idaho Code §§6-108, 45-1512 (1988).
Michigan: Mich. Comp. Laws Ann. §§600.3170, .3280 (1989).
Nebraska: Neb. Rev. Stat. §76-1013 (1989).
Nevada: Nev. Rev. Stat. §40.457 (1988).
New Jersey: N.J. Stat. Ann. §2A:50-3 (1989).
New York: N.Y. Real Prop. Acts Law §1371 (McKinney 1979 and Supp. 1990).
North Carolina: N.C. Gen. Stat. §45-21.36 (1988).
North Dakota: N.D. Cent. Code §32-19-06 (Supp. 1989).
Oklahoma: Okla. Stat. tit. 12, §686 (1990).
Pennsylvania: Pa. Stat. Ann. tit. 12 §§2621.1, .6 (Purdon 1967).
South Dakota: S.D. Comp. Laws Ann. §§21-47-16, -48-14 (1989).
Utah: Utah Code Ann. §57-1-32 (1989).
Washington: Wash. Rev. Code Ann. §61.12.060 (1989).
Wisconsin: Wis. Stat. §846.165 (1988).

In Washington, RCW 61.24.060 specifies that the purchaser at a trustee’s sale is entitled to possession of the property on the 20th day following the sale. If the grantor or person claiming through the grantor refuses to vacate the property, the purchaser is entitled to bring an action to recover possession of the property pursuant to the unlawful detainer statute, RCW 59.12. Ordinarily, parties in possession will not be allowed to raise some defenses in the unlawful detainer action that could have been raised prior to the trustee’s sale#. In most states defenses in an eviction action are severely limited. Despite these early cases restricting defenses in unlawful detainer, e.g. Peoples National Bank v. Ostander, 6 Wn. App. 28 (1971), a more recent case, Cox v. Helenius, 103 Wash. 2d 208 (1985), allowed defenses to be raised that the sale was void because of defects in the foreclosure process itself. In fact, Cox v. Helenius was initially a unlawful detainer action in the King County Superior Court. In Savings Bank of Puget Sound v. Mink, 49 Wn. App. 204 (1987), Division One of the Court of Appeals, held that a number of defenses raised by the appellant (Truth-in-Lending violations, infliction of emotional distress, defamation, slander, etc.) were not properly assertable in an unlawful detainer action but ruled that:

However, in Cox v. Helenius, supra, the Supreme Court recognized that there may be circumstances surrounding the foreclosure process that will void the sale and thus destroy any right to possession in the purchaser at the sale. In Cox, the Court recognized two bases for post sale relief: defects in the foreclosure process itself, i.e., failure to observe the statutory prescriptions and the existence of an actual conflict of interest on the part of the trustee…

_________________________________

# People’s National Bank v. Ostrander, 6 Wn. App. 28, 491 P.2d 1058 (1970). See, however, Crummer v. Whitehead, 230 Cal. App. 2d 264 (1964) contra declined to follow by Eardley v. Greenberg, 160 Az.518, 774 P.2d 822 (Az.App. Div. 1 1989); MCA, Inc., v. Universal Diversified Enterprises Corp., 27 Cal. App. 3d 170 (1972). contra declined to follow by Eardley v. Greenberg, 160 Az.518, 774 P.2d 822 (Az.App. Div. 1 1989) But in a bankruptcy proceeding, defenses may be raised after the sale if the debtor is in possession.

B. The Deed of Trust Act must be construed strictly against lenders and in favor of borrowers.

Washington law is similarly clear that the Deed of Trust Act, being non-judicial in nature and without the scrutiny by courts until the unlawful detainer stage, is strictly construed against lenders and in favor of borrowers. Queen City Savings and Loan v. Mannhalt, 111

In order to avoid the jurisdictional and other problems that arise when trying to litigate claims in the unlawful detainer action, it is recommended that a separate action be filed to set aside the trustee’s sale and that the two actions be consolidated.

H. DAMAGES FOR WRONGFUL FORECLOSURE

There is a damage claim for the tort of wrongful foreclosure. The claim may also exist as a breach of contract claim. See, Theis v. Federal Finance Co., 4 Wn. App. 146 (1971); Cox v. Helenius, supra.

  III. DEFENDING JUDICIAL FORECLOSURES

A. INTRODUCTION

The same range of defenses is generally available to the borrower in both nonjudicial and judicial foreclosures. Defenses may include fraud or misrepresentation, violations of Truth-in-Lending, violations of usury statutes, violations of other consumer protection acts, or failure to comply with applicable regulations when the government is the lender, insurer, or guarantor. Other defenses, however, are unique to judicial foreclosures and must be raised affirmatively. Most rights are set forth in statutes and they must be asserted in compliance with the particular requirements of the law. The judicial foreclosure statutes are set forth below#.

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# Alabama: Ala. Code §§6-9-140 to 150; 164; 35-10-2 to 35-10-12; (1977).
Alaska: Alaska Stat. §§90.45.170 to .220 (1991).
Arizona: Ariz. Rev. Stat. Ann. §§33-721 to 33-728 (1991).
Arkansas: Ark. Code Ann. §§18-49-103 to 106 (1987).
California: Cal. Civ. proc. §§725a to 730.5 (West 1991).
Colorado: Colo. Rev. Stat. Ann. §§38-38-101 to 38-38-111 (West 1991).
Connecticut: Conn. Gen. Stat. Ann. §§49-24 to 49-31 (West 1991).
Delaware: Del. Code Ann. tit. 10 §§5061 to 5067 (1991).
D.C.: D.C. Code Ann. §45-716 (1981).
Florida: Fla. Stat. Ann. §702.01 (West 1992).
Georgia: Ga. Code Ann. §§9-13-140; 44-14-48 to 44-14-49; 44-14-184; 187; 189 (1991).
Hawaii: Haw. Rev. Stat. §§667-1 to 667-7 (1991)
Idaho: Idaho Code §§6-101 to 6-103; 45-1502 to 45-1503 (1991).
Illinois: Ill. Ann. Stat. Ch. 10, para. 15-1404; 15-1501 to 15-1512 (Smith-Hurd 1987).
Indiana: Ind. Code Ann. §32-8-11-3 (Burns 1980)
Iowa: Iowa Code Ann. §654.18 (West 1992).
Kansas: Kan. Stat. Ann. §60-2410 (1990).
Kentucky: Ky. Rev. Stat. Ann. §§381.190; 426.525 (Michie 1991).
Louisiana: La. Code Civ. Proc. Ann. art. 2631 (West 1992).
Maine: Me. Rev. Stat. Ann. tit. 14, §§6321 to 6325 (West 1991).
Maryland: Md. Real Prop. Code Ann. §7-202 (1988).
Massachusetts: Mass. Gen. Laws Ann. ch. 244, §1 (West 1992).
Michigan: Mich. Comp. Laws Ann. §§600.3101 to 600.3130 (West 1992).
Minnesota: Minn. Stat. Ann. §§581.01 to 581.12 (1992).
Mississippi: Miss. Code Ann. §§89-1-53; 89-1-55 (1972).
Missouri: Mo. Ann. Stat. §§443.190 (Vernon 1992).
Montana: Mont. Code Ann. §§71-1-222; 232; 311; 25-13-802 (1991).
Nebraska: Neb. Rev. Stat. §§25-2137 to 25-2147 (1991).
Nevada: Nev. Rev. Ann. Stat. §§40.430; 40.435 (Michie 1991).
New Hampshire: N.H. Rev. Stat. Ann. §§479:19 to 479:27 (1991).
New Jersey: N.J. Stat. Ann. §2A:50-2 (West 1991).
New Mexico: N.M. Stat. Ann. §§39-5-1 to 39-5-23; 48-7-7 (1991).

New York: N.Y. Real Prop. Acts Law §§1321; 1325 to 1355 (McKinney 1992).
North Carolina: N.C. Gen. Stat. §§45-21.16; 45-21.17; 45-38 (1991).
North Dakota: N.D. Cent. Code §32-19-01 to 32-19-40 (1992).
Ohio: Ohio Rev. Code Ann. §2323.07 (Anderson 1984).
Oklahoma: Okla. Stat. Ann. tit. 12, §686 (West 1992).
Oregon: Or. Rev. Stat. §§88.010 et seq. (1989).
Pennsylvania: Pa. Stat. Ann. tit. 21, §§274; 715; Pa. Rules Civ. Proc. Rules 1141 to 1150; 3180 to 3183;
3232; 3244; 3256; 3257.
Rhode Island: R.I. Gen. Laws §34-27-1 (1984).
South Carolina: S.C. Code Ann. §§15-7-10; 29-3-650 (Law Co-op 1990).
South Dakota: S.D. Codified Laws Ann. §§21-47-1 to 25; 21-48A-4 (1991).
Tennessee: Tenn. Code Ann. §21-1-803 (1991).
Texas: Tex. Prop. Code Ann. §§51-002; 51.004; 51.005 (West 1992).
Utah: Utah Code Ann. §§78-37-1 to 78-37-9 (1986).
Vermont: Vt. Stat. Ann. tit. 12, §4528 (1991).
Virgin Islands: V.I. Code Ann. tit. 28, §531 to 535 (1991).
Virginia: Va. Code Ann. §§55-59.4; 55-61 (Michie 1981).
Washington: Wash. Rev. Code Ann. §§61.12.040; 61.12.060 (West 1992).
West Virginia: W. Va. Code §§55-12-1 to 55-12-8 (1991).
Wisconsin: Wis. Stat. Ann. §§846.01 to 846.25 (West 1991 (Repealed).
Wyoming: Wyo. Stat. §§1-18-101 to 1-18-112 (199).

B. HOMESTEAD RIGHTS

If the plaintiff’s complaint seeks possession of the property at the sheriff’s sale and the homeowner wishes to remain on the premises during the redemption period, then the homeowner should plead the existence of homestead rights in the answer so as not to waive them. State, ex rel., O’Brien v. Superior Court, 173 Wash. 679, 24 P.2d 117 (1933); State, ex rel., White v. Douglas, 6 Wn.2d 356, 107 P.2d 593 (1940).

C. UPSET PRICE

Some states authorize the court to establish an upset price (or minimum bid amount) in a foreclosure sale. In Washington, RCW 61.12.060 authorizes the court where a deficiency is sought, in ordering a sheriff’s sale, to take judicial notice of economic conditions and, after a proper hearing, fix a minimum or upset price for which the mortgaged premises must be sold before the sale will be confirmed. If a depressed real estate market justifies seeking an upset price, then the mortgagor should request in the answer that one be set. See, McClure v. Delguzzi, 53 Wn. App. 404 (1989). Some states give this power to the courts with any sale without reference to any other valuation method. See e.g. Kan. Stat. §60-2415(b) (1988); Mich. Comp. Laws Ann. §600.3155 (1919). The court has great discretion in arriving at and setting an upset price if the statute fails to specify the method to be used in calculating the price. There is always the danger that in the absence of statutory standards, the power to set the upset price will be abused#.

D. DEFICIENCY JUDGMENTS

A deficiency judgment results when the amount for which the property is sold at the sheriff’s sale is less than the amount of the judgment entered in the foreclosure action. A deficiency judgment in connection with a foreclosure is enforceable like any other money judgment. If the mortgage or other instrument contains an express agreement for the payment of money, then the lender may seek a deficiency judgment. See RCW 61.12.070. In Thompson v. Smith, 58 Wn. App. 361 (1990), Division I, held the acceptance of a deed in lieu of foreclosure triggers the anti-deficiency provisions of the Deed of Trust Act, 61.24.100. The procedural requirements for obtaining a deficiency judgment vary, but must be strictly adhered to or the right will be lost. In general, an action must be brought within a statutorily set amount of time following the foreclosure sale. For example, California Civ. Proc. Code § 726 (Supp. 1984) (three months); N.Y. Real Prop. Acts. Law § 1371 (2) (McKinney 1979) (ninety days); and Pennsylvania Stat. Ann. tit. 12, section 2621.7 (1967) (six months). Many states also have time limits for the completion of the execution of a deficiency. Maryland Rules, Rule W75 (b)(3) (1984) (three years); and Ohio Rev. Code Ann. § 2329.08 (Anderson 1981) (two years on land with dwelling for two families or less or used as a farm dwelling). Some states have longer redemption periods when a deficiency is sought. e.g. Wisconsin (6-12 months); Washington (8-12 months).

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# See Michigan Trust Co. v. Dutmers, 265 Mich. 651, 252 N.W. 478 (1933).

E. REDEMPTION RIGHTS

Approximately one-half of the states have statutes that give a borrower the right to redeem the property after the foreclosure sale. This right has specific statutory time limits. The time period for redemption varies from thirty days to three years after the foreclosure sale. Strict compliance with the statutory requirements is mandatory.

Under Washington law, if the lender seeks a deficiency judgment or if the mortgage does not contain a clause that the property is not for agricultural purposes, then the redemption period is one year from the date of the sheriff’s sale. See RCW 6.23.020.

If the lender does not seek a deficiency judgment and the mortgage contains a clause that the property is not being used for agricultural purposes, than the redemption period is eight months. Id.

There is no statutory redemption period if there is a structure on the land and the court finds that the property has been abandoned for six months prior to the decree of foreclosure. See RCW 61.12.093. This section is not applicable to property that is used primarily for agricultural purposes. RCW 61.12.095.

The purchaser at the sheriff’s sale, or the purchaser’s assignee, must send notice to the judgment debtor every two months that the redemption period is expiring. Failure to give any of the notices in the manner and containing the information required by statute will operate to extend the redemption period. RCW 6.23.080.

Any party seeking to redeem must give the sheriff at least five days written notice of the intention to apply to the sheriff for that purpose. RCW 6.23.080(1). The amount necessary to redeem is the amount of the bid at the sheriff’s sale, interest thereon at the rate provided in the judgment to the time of redemption, any assessment or taxes which the purchaser has paid after circumstances, other sums that were paid on prior liens or obligations. RCW 6.23.020.

Redemption rights are freely alienable and a property owner can sell the homestead during the redemption period free of judgment liens. Great Northwest Federal Savings and Loan Association v. T.B. and R.F. Jones, Inc., 23 Wn. App. 55, 596 P.2d 1059 (1979). This is an important right and is often overlooked. For example, in VA loans the sale price is very low because the VA deducts its anticipated costs of holding and resale. Therefore, the property can be redeemed for that amount. There, lenders routinely advise debtors to move out at the beginning of the period, which they do not legally have to do.

The debtor can sometimes rent the property and the rents retained during the redemption period.

F. POSSESSION AFTER SALE

If the homeowner exercises his redemption rights and there is a purchaser in possession, then the homeowner can apply for a writ of assistance to secure possession of the property anytime before the expiration of the redemption period. If the homeowner has no right to claim a homestead or is not occupying the property as a homestead during redemption period, then the lender can apply for a writ of assistance at the time of the foreclosure decree to obtain possession of the property. A writ of assistance is similar to a writ of restitution and is executed by the sheriff. The purchaser at the sheriff’s sale normally has no right to possession until after receipt of a sheriff’s deed#.

G. POST FORECLOSURE RELIEF

A foreclosure can be vacated under rules allowing vacating judgments, e.g. F.R.Civ.P 60(b); See also Godsden & Farba, Under What Circumstances Can a Foreclosure Sale be Set Aside Under New York Law, New York State Bar Journal (May 1993).

    IV. MISCELLANEOUS ISSUES

A. BANKRUPTCY

Bankruptcy has a significant impact on real estate foreclosures and is beyond the scope of this outline. Under section 362 (a) of the Bankruptcy Code, filing any of the three types of bankruptcy stays all foreclosure proceedings. See 11 U.S.C.A. § 362 (a)(4); Murphy, The Automatic Stay in Bankruptcy, 34 Clev.St.L.Rev. 597 (1986). A stay has been held to apply to a possessory interest after foreclosure to allow a challenge to the validity of the foreclosure in an adversary action in bankruptcy court. In re Campos, No. 93-04719 (W.D. WN-B.Ct, Order of July 9, 1993). The stay applies to both judicial and nonjudicial foreclosures and it also applies whether or not the foreclosure was begun before the bankruptcy. See 11 U.S.C.A. § 362 (a). The only notable exception to the automatic stay is for foreclosures brought by the Secretary of HUD on federally insured mortgages for real estate involving five or more units. See 11 U.S.C.A. § 362 (b)(8).

A trustee in a bankruptcy may also undo a foreclosure as a fraudulent transfer if a creditor gets a windfall. See II U.S.C. §547 and §548, within 90 days or within one year if an “insider” forecloses#.

A portion of the equity under state or federal law may be protected from creditors, although not from secured creditors.

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# Norlin v. Montgomery, 59 Wn.2d 268, 357 P.2d 621 (1961). The mortgagee’s right to possession of the property is not lost through default or abandonment. overruled on other grounds. Howard v. Edgren, 62 Wn.2d 884, 385 P.2d 41 (1963).

B. WORKOUTS (DEED IN LIEU)

A deed is sometimes given by a mortgagor in lieu of foreclosure and in satisfaction of a mortgage debt. Such a workout “is subject to close scrutiny in an effort to determine whether it was voluntarily entered into on the part of the mortgagor under conditions free of undue influence, oppression, unfairness or unconscientious advantage. Further the burden of proving the fairness rests with the mortgagee.” Robar v. Ellingson, 301 N.W.2d 653, 657-658 (N.D.1981) (insufficient threshold evidence of oppression or unfairness to trigger mortgagee’s burden of proof). Courts also tend to find the deed in lieu of foreclosure to be another mortgage transaction in the form of an absolute deed. Peugh v. Davis, 96 U.S. (6 Otto) 332, 24 L.Ed. 775 (1877). See also, Noelker v. Wehmeyer, 392 S.W.2d 409 (Mo.App.1965). When a mortgagee takes a deed in lieu there is the possibility that the conveyance will be avoided under bankruptcy laws. It should be noted that if other liens have been created against a property after the time of the original mortgage, the deed in lieu will not cut off those liens. See Note, 31 Mo.L.Rev. 312, 314 (1966). A deed in lieu should contain a comprehensive agreement regarding any deficiency claims, etc.

________________________

# See Durrett v. Washington National Ins., 621 F.2d 201 (5th Cir. 1980); cf. In re Madrid, 725 F.2d 1197 (9th Cir. 1984). Compare state fraudulent conveyances statutes, e.g, RCW 19.40.031.

C. LENDER LIABILITY

It is possible to use theories of lender liability to assist in successfully negotiating a workout, or an avoidance of foreclosure. This principally occurs in commercial foreclosures but there are some strategies that apply to the residential setting. This may involve persuading the lender that failing to reach a workout agreement may result in a claim against the lender, absolving the borrower from liability on the loan and/or granting an affirmative judgment against the lender. Some of the useful theories of lender liability are breach of agreement to lend, breach of loan agreement, failure to renew term note/wrongful termination, promissory estoppel, lender interference, and negligent loan management. Some of the common law defenses for a borrower are fraud, duress, usury and negligence. Further, because banks are so closely regulated, a borrower should also explore statutory violations. For a detailed treatment of workouts, see Dunaway, supra, (Vol. 1, Chapter 4B)#.

_____________________________

# See also, Penthouse International v. Dominion Fed. S&L, 665 F. Supp. 301 (S.D. N.Y. 1987, rev. 855 F.2d 963 (2nd Cir. 1988); Joques v. First National, 515 A.2d 756 (Md. 1976); KMC v. Irving Trust, 757 F.2d 752 (6th Cir. 1985); Douglas-Hamilton, Creditor Libilities Resulting From Improper Interference with Financially Troubled Debtor, 31 Bus. Law J. 343 (1975).

D. MOBILE HOME FORECLOSURES

Generally, mobile homes are repossessed under Article 9-503 of the Uniform Commercial Code, and are beyond the scope of this outline. Many states limit deficiencies in purchase money security agreements and/or allow reinstatement. There are many abuses in the sales of mobile homes and the various consumer protection laws (and usury laws) provide a fertile source of potential defenses. See generally, Unfair and Deceptive Practices, National Consumer Law Center (2nd ed.), paragraph 5.4.8.

E. TAX CONSEQUENCES OF FORECLOSURE

Although beyond the scope of this outline, there are tax consequences when property is foreclosed, particularly in commercial transactions.

First, a foreclosure or deed in lieu of foreclosure is treated as a sale or exchange. Treas. Rep. 1-001-2; Rev. Ruling 73-36, 1973-1 CB 372. The amount realized (gained) is the greater of the sales proceeds or the debt satisfied. Parker v. Delaney, 186 F.2d 455 (1st Cir. 1950). When debt is cancelled (such as by an anti-deficiency statute), a gain may be generated. IRS Code §61(a).

Second, when home equity debt plus purchase debts exceeds the value of the property, a taxable gain can be generated. Finally, if the debtor is “insolvent” when the foreclosure occurs, §108(a)(1)(A) of the IRS Code excludes income (gain) to the extent the debtor is insolvent. This is complicated and a tax expert should be consulted to analyze any potential tax bite upon foreclosure. See generally, Dunaway, supra, for a detailed analysis of the tax consequences of foreclosure.

V. THE GOVERNMENT AS INSURER, GUARANTOR OR LENDER

A. INTRODUCTION

There are a variety of federal home ownership programs that may provide special protections for homeowners who are faced with the prospect of foreclosure. These protections generally apply regardless of whether the security divide used is a mortgage or deed of trust. The programs range from home loans insured by the Department of Housing and Urban Development (HUD) or guaranteed by the Veteran’s Administration (VA) to programs such as the Farmer’s Home Administration (FmHA) home ownership program where the government acts as a direct lender. The procedures which must be followed by loan servicers and applicable governmental agencies are described below. Also, Fannie Mae published in 1997 a Foreclosure Manual for loan services, which outlines various workouts and other loss mitigation procedures.

When the government controls the loan (or the lender) its actions are subject to the protection of the due process provision of the Fifth Amendment to the U.S. Constitution#. This calls into question the use of nonjudicial foreclosure as there is no opportunity to be heard and notice is usually deficient or, at best, minimal.

B. HUD WORKOUT OPTIONS

1. Applicability

Homeowners who have a HUD insured mortgage or deed of trust may be eligible for relief through the HUD foreclosure prevention program. HUD regulations also require that lenders meet certain servicing responsibilities before proceeding with foreclosure. Regulations for loss mitigation are found at 24 C.F.R. Sec. 203.605.

2. Procedure when the Homeowner is in Default

a. Delinquency Required for Foreclosure.

The servicer shall not turn the action over for foreclosure until at least three full monthly payments are unpaid after application of any partial payments. 24 C.F.R. Sec. 203. The servicer is required to send a HUD brochure on avoiding foreclosure to the borrower informing them of their right to seek various alternatives to foreclosure.

The servicer must allow reinstatement even after foreclosure has been started if the homeowner tenders all amounts to bring the account current, including costs and attorney fees. 24 C.F.R. Sec. 203.

_______________________________

# See Vail v. Brown, 946 F.2d 589 (8th Cir. 1991); Johnson v. U.S. Dept. of Agriculture, 734 F.2d 774 (11th Cir. 1984); United States v. Murdoch, 627 F. Supp. 272 (N.D. Ind. 1985); Boley v. Brown, 10 F.3d 218 (4th Cir. 1993).

b. Forbearance Relief.

The homeowner may be eligible for special forbearance relief if it is found that the default was due to circumstances beyond the homeowners’ control. 24 C.F.R. Sec. 203. The homeowner and the lender are authorized to enter into a forbearance agreement providing for:
i. Increase, reduction, or suspension of regular payments for a specified period;

ii. Resumption of regular payments after expiration of the forbearance period;

iii. Arrangements for payment of the delinquent amount before the maturity date of the mortgage or at a subsequent date.

Suspension or reduction or payments shall not exceed 18 months under these special forbearance relief provisions.

c. Recasting of Mortgage.

HUD has the authority to approve a recasting agreement to extend the term of the mortgage and reduce the monthly payments. 24 C.F.R. Sec. 203.

HUD’s actions may be declared unlawful and set aside if the court finds it to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. See Federal National Mortgage Association v. Rathgens, 595 F. Supp. 552 (S.D. Ohio 1984); Butler v. Secretary of Housing and Urban Development, 595 F. Supp. 1041 (E.D. Pa. 1984). See, generally, Ferrell v. Pierce, 560 F. Supp. 1344 (N.D. Ill. 1983).

In Brown v. Kemp, 714 F. Supp. 445 (W.D. Wash. 1989) the court found HUD’s decision for an assignment program application to be informal agency action and thus reviewable under the “arbitrary” and “capricious” standard.
Failure to follow servicing requirements or comply with the HUD assignment regulations or handbook provisions may also constitute an equitable defense to foreclosure#.

C. THE VA HOME LOAN PROGRAM

1. Applicability

Homeowners who have a VA guaranteed mortgage or deed of trust may be eligible for relief through a VA recommended forbearance program or “refunding” of the loan. Regulations promulgated at 38 C.F.R. Sec. 36.4300, et seq., and VA servicing handbooks establish a policy of forbearance when a loan is in default. The VA is reluctant to enforce these regulations against lenders.

___________________________

# See, Bankers Life Company v. Denton, 120 Ill. App. 3d 676, 458 N.E.2d 203 (1983); Brown v. Lynn, 385 F. Supp. 986 (N.D. Ill. 1974); GNMA v. Screen, 379 N.Y.S.2d 327 (1976); Cross v. FNMA, 359 So.2d 464 (1978); FNMA v. Ricks, 372 N.Y.S.2d 485 (1975); contra, Robert v. Cameron Brown Co., 556 F.2d 356 (5th Cir. 1977); Hernandez v. Prudential Mortgage Corporation, 553 F.2d 241 (1st Cir. 1977).

2. Forbearance Relief

Lenders are officially encouraged to grant forbearance relief for mortgagors who default on their loans due to circumstances beyond their control. Lender’s Handbook, VA Pamphlet No. 26-7 (Revised) and VA Manual 26-3. These rights should be pursued with the lender immediately.

3. Refunding Loans

The Veteran’s Administration is authorized to “refund” loans when borrowers meet certain criteria. Refunding the loan is when the VA pays the lender in full and takes an assignment of the loan and security in cases where the loan is in default. The VA then owns the loan and the veteran makes payments to the VA directly. Although 38 C.F.R. Sec. 36.4318 authorize refunding, the regulations are much more vague than those promulgated in connection with the HUD assignment program.

4. Judicial Review

The VA decision to deny assignment of a VA loan is committed to agency discretion within the meaning of the federal Administrative Procedures Act, 5 U.S.C. Sec. 701(a)(2), and is not reviewable. Rank v. Nimmo, 677 F.2d 692 (9th Cir. 1982).

The courts have ruled that a borrower has no express or implied right of action in federal court to enforce duties, which VA or lenders might have under VA publications with respect to forbearance assistance. See, Rank v. Nimmo, supra; Gatter v. Nimmo, 672 P.2d 343 (3rd Cir. 1982); Simpson v. Clelend, 640 F.2d 1354 (D.C. Cir. 1981). But, see, Union National Bank v. Cobbs, 567 A.2d 719 (1989) (failure to follow VA Handbook an equitable defense).

Failure to follow VA publications, however, may be an equitable defense to foreclosure under state law. See, Simpson v. Cleland, supra.

5. Waiver of Debt/Release of Liability

Federal statutes, VA regulations and guidelines require the VA to waive a deficiency (or indemnity) debt, after a foreclosure, when equity and good conscience require it. 38 C.F.R. §1.965(a)(3). The VA is reluctant to follow its own regulations and must be pressed. The Court of Veterans Appeals (CVA) reverses over 50% of denial of waivers – an astonishing measure of the VA’s failure to follow clear federal law! See The Veterans Advocate, Vol. 5, No. 10, P. 93 (June 1994). The VA urged its regional offices to avoid CVA rulings until forced to retract this directive. See The Veterans Advocate, supra. The VA also ignores the six-year statute of limitations when demanding payment. 28 U.S.C. 2415.

Secondly, the VA can determine that the claimed debt is invalid, such as when the veteran is eligible for a retroactive release of liability. This occurs when the VA would have released the veterans when the property was sold to a qualifying purchaser who assumes the debt. 38 U.S.C. 3713(b); Travelstead v. Derwinski, 978 F.2d 1244 (Fed. Cir. 1992).

The VA has the burden to determine whether the veteran should be released.

6. Deficiency Judgments and VA Loans

It is the policy of VA to order an appraisal prior to a judicial or nonjudicial foreclosure sale and to instruct the lender to bid the amount of the appraisal at the sale. This “appraisal” is always below fair market value and includes the VA’s anticipated costs of holding and liquidating the property. 38 U.S.C. 3732(c); 38 C.F.R. §36.4320. Ordinarily, on pre-1989 laws, VA will not waive its right to seek a deficiency judgment in a judicial foreclosure and will reserve its right to seek a deficiency against a borrower, even in the case of a nonjudicial foreclosure of a deed of trust, notwithstanding the anti-deficiency language of RCW 61.24.100. On loans made after 1989 changes in the VA program, deficiencies are not sought.

Although, United States v. Shimer, 367 U.S. 374 (1960) appears to authorize this VA deficiency policy, the Washington non-judicial deed of trust foreclosure procedure which retains judicial foreclosure and preservation of the right to seek a deficiency judgment as an option, seems to make United States v. Shimer, distinguishable.

In United States v. Vallejo, 660 F. Supp. 535 (1987), the court held that the VA must follow Washington foreclosure law, including the anti-deficiency provisions of the Deed of Trust Act as the “federal common law”. This ruling was subsequently followed in a class action, Whitehead v. Derwinski, 904 F.2d 1362 (9th Cir. 1990), wherein the VA has been permanently enjoined from collecting $63 million in claims and ordered to repay millions in illegally collected deficiencies. This issue of the application of various state laws as to federally insured loans is not clear, as the Ninth Circuit overruled Whitehead in Carter v. Derwinski, 987 F.2d 611 (9th Cir. – en banc – 1993). Subsequent decisions still create doubt as to whether United States v. Shimer, supra, is still good law#.

_________________________

# See, United States v. Yazell, 382 U.S. 341 (1966); United States v. Kimbell Foods, Inc., 440 U.S. 715 (1979); United States v. Ellis. 714 F.2d 953 (9th Cir. 1983); United States v. Haddon Haciendas Co., 541 F.2d 777 (9th Cir. 1976).

At the very least, if the lender is instructed by the VA to preserve the right to seek a deficiency against the borrower, then the lender should be required to foreclose the deed of trust judicially as a mortgage.

D. RURAL HOUSING SECTION 502 LOANS

1. Applicability

The Rural Housing Service (RHS) formerly, the Farmer’s Home Administration, is authorized to grant interest credit and provide moratorium relief for homeowners who fall behind on their loan payments due to circumstances beyond their control. Regulations for moratorium relief and interest credit are found at 7 C.F.R. Sec. 3550 et seq and must be complied with prior to foreclosure. United States v. Rodriguez, 453 F. Supp. 21 (E.D. Wn. 1978). See, 42 U.S.C. §1472. All servicing of RHS loans is handled at the Centralized Servicing Center in St. Louis, MO (phone: 1-800-793-8861).

2. Interest Credit

If a homeowner falls behind on his RHS loan because of circumstances beyond his or her control, then RHS has the authority to accept principal only and waive the interest payments. Although RHS is supposed to use this remedy before considering moratorium relief, it rarely does.

3. Moratorium Relief

If a homeowner falls behind in loan payments because of circumstances beyond his or her control, RHS may suspend payments or reduce payments for six months. Moratorium relief may be extended for additional six-month segments up to a total of three years#.

Once a homeowner has been granted moratorium relief, RHS cannot grant it again for five years. If a homeowner cannot resume payments in three years from when moratorium relief began, then it will begin foreclosure proceedings.

After moratorium relief has been extended, the homeowner can make additional partial payments to catch up the delinquent amount or, the loan can be reamortized. RHS will restructure the loan, 7 U.S.C. 2001.

4. Waiver of Redemption and Homestead Rights

Form mortgages used by RHS purported to waive the homeowner’s redemption rights and homestead rights in the event of foreclosure. It is questionable whether such a waiver is enforceable#.

____________________________

# See generally, Note, Agricultural Law: FmHA Farm Foreclosures, An Analysis of Deferral Relief, 23 Washburn L.J. 287 (Winter 1984); Newborne, Defenses to a FmHA Foreclosure, 15 NYU Review of Law and Social Change, 313 (1987).

5. Homestead Protection
See, 7 U.S.C. 2000.
6. Lease/Buy-Back
See, 7 U.S.C. 1985 (e).

                                    VI. RESOURCES

The following treatises are excellent sources of basic information about all aspects of the foreclosure process. Dunaway, The Law of Distressed Property (4 volumes – Clark Boardman Co. 1994 and suppls.; Nelson & Whitman, Real Estate Finance Law (West 3rd Ed. 1994); Bernhardt, California Mortgages and Deed of Trust Practice, (3rd ed. 2000 University of Calif.), Repossessions and Foreclosures (4th ed. 2000) National Consumer Law Center. See also, Fuchs, Defending Non-Judicial Residential Foreclosures, Texas Bar J (November 1984).

____________________________

# See, United States v. Kimbell Foods, Inc., 440 U.S. 715 (1979); United States v. Haddon Haciendas, 541 F.2d 777 (9th Cir. 1976); United States v. MacKenzie, 510 F.2d 39 (9th Cir. 1975); United States v. Stadium Apts., Inc., 425 F.2d 358 (9th Cir.), (1970), cert. den. 400 U.S. 926, 91 S. Ct. 187 (1970); Phillips v. Blaser, 13 Wn.2d 439, 125 P.2d 291 (1942).

If you find yourself in an unfortunate situation of losing or about to your home to wrongful fraudulent foreclosure, and need a complete package  that will help you challenge these fraudsters and save your home from foreclosure visit: http://www.fightforeclosure.net

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Judicial Versus Non-Judicial Foreclosure

31 Thursday Oct 2013

Posted by BNG in Foreclosure Crisis, Foreclosure Defense, Judicial States, Non-Judicial States, Note - Deed of Trust - Mortgage, Pro Se Litigation, Your Legal Rights

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Foreclosure-Process2-1024x791

In many discussions about mortgage foreclosures the terms
judicial and non-judicial foreclosure are used. They involve very different processes. These terms refer to how individual states handle real estate foreclosure. Under both systems, time frames and terms vary widely from state to state. The following is a brief, general description of both
processes. The accompanying chart (see last page) depicts the varying time frames involved in the judicial foreclosure process.

foreclosure-stockdenslowfigure-1image-6922538539_image-69225_38539
Judicial Foreclosures

A judicial foreclosure is a court proceeding that begins when the lender files a complaint and records a notice in the public land records announcing a claim on the property to potential buyers, creditors and other interested parties. The complaint describes the debt, the borrower’s default and the amount owed. The complaint asks the court to allow the lender to foreclose its lien and take possession of the property as a remedy for non-payment.

foreclosureexplained

The homeowner is served notice of the complaint, either by mail, direct service or publication of the notice. The defendant (borrower) is permitted to dispute the facts (such as show that payments were made), offer defenses or present counterclaims by answering the complaint, filing a separate suit, and/or by attending a hearing arranged by the court. If the defendant shows there are differences of material facts, a trial will be held by the court to determine if foreclosure should occur. In the vast
majority of cases, however, the foreclosure action is undisputed because the borrower is in default and cannot offer facts to the contrary. If the court determines the homeowner did default and that the debt is valid, it will issue a judgment in favor of the servicer for the total amount owed, including costs for the foreclosure process. In order for the judge to determine the amount of the judgment, the servicer submits paperwork through an affidavit that itemizes the amounts due.

Twenty two states use judicial procedures as the primary way to foreclose.
These include: Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.

In all other states, foreclosure is usually handled by attorneys who follow a state-provided process. In the mortgage documents, borrowers give lenders the “power of sale” outside of judicial process in the event of an uncured default. Documentation or affidavit issues are not common in these states because of the non-judicial nature of the process.

ar131472849801331
Next, the court will authorize a sheriff’s sale. The sale is an auction of the property open to anyone, and must be held in a public place. Procedures for a sheriff’s sale in each locality differ, but the individual with the highest bid is granted the property. After the sale is confirmed by the court, the deed, which transfers ownership, is prepared, recorded and the highest bidder becomes the owner of the property.

In most cases, the highest bidder is the servicer, who takes title of the property. The servicer then can sell the property. At this point, it is called
real estate owned (REO).

Visio-foreclosure timeline.vsd
Non-Judicial Foreclosures

The requirements for non-judicial foreclosure are established by state statute; there is no court intervention. When the default occurs, the homeowner is mailed a default letter and in many states a
Notice of Default is recorded, at or about the same time. The homeowner may cure the debt during a prescribed period; if not, a Notice of Sale is mailed to the homeowner, posted in public places, recorded
at the county’s recorder’s office, and published in area newspapers
/legal publications. When the legally required notice period (determined by each state) has expired, a public auction is held and the highest
bidder becomes the owner of the property, subject to recordation of the deed. Prior to the sale, if the borrower disagrees with the facts of the case, he or she can try to file a lawsuit to enjoin the trustee’s sale.

short_sale_table_2

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and needed solutions to defend or reclaim your home please visit: http://www.fightforeclosure.net

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Summary judgment Supreme Court of United States Tax lien tenant in common Tenants After Foreclosure Tenants Without a Lease Tennessee Texas The Dodd Frank Act and CFPB The TRID Rule Thomas Glaski TILA time-barred judgment Times New Roman Times Roman Timing Title 12 of the United States Code Title Agent Tolerance and Redisclosure Transferring Property TransUnion trial Trial court TRO true owners of the note Trust deed (real estate) Trustee Truth in Lending Act Tuesday Typeface Types of Real Estate Liens U.S. Bancorp U.S. Securities and Exchange Commission UCC Underwriter Uniform Commercial Code United States United States Attorney United States Code United States Congress United States Court of Appeals for the First Circuit United States Department of Housing and Urban Development United States Department of Justice United States district court United States District Court for the Eastern District of California United States federal courts United States federal judge Unperfected Liens US Bank US Securities and Exchange Commission valuation voluntary liens Wall Street Warehouse Lender Warehouseman Washington Washington Mutual Wells Fargo Wells Fargo Bank withdrawal of reference write of execution wrongful foreclosure wrongful foreclosure appeal Wrongful Mortgage Foreclosure Yield spread premium

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