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Forum on Foreclosure December 2, 2008 Maryland Cooperative Extension Legal Aspects of Foreclosure Prevention Diane Cipollone Attorney & Director Sustainable Homeownership Project Civil Justice Inc. dcipollone@civiljusticenetwork.org Sustainable Homeownership Project Civil Justice Inc. 520 West Fayette Street, Suite 410 Baltimore, MD 21201 Phone: 410-706-0174 Fax 410-706-3196 Carrie McCully - Project Coordinator cmccully@civiljusticenetwork.org Sustainable Homeownership Project • Civil Justice established SHP in October 2007, with funding from State Department of Housing & Community Development to: Provide legal advice and training for housing counselors at DHCD funded agencies Intervene as necessary with mortgage servicers Provide training to the private bar in foreclosure defense Sustainable Homeownership Project • Gradual shift from housing counselors’ reliance on Civil Justice to statewide network of pro bono attorneys Connect counselors to pro bono attorneys for individual case support and representation Keep counselors apprised of developments with mortgage servicers Sustainable Homeownership Project • Current Role of Civil Justice Train and mentor pro bono attorneys Keep attorneys apprised of developments with mortgage servicers Develop sample pleadings for pro bono attorneys Keep attorneys apprised of court decisions Legal Aspects of Foreclosure Prevention • New Regulations, Agreements and Legislation Servicer’s Duty of Care Maryland Mortgage Servicer’s Agreement New Foreclosure Process Laws Legal Aspects of Foreclosure Prevention • Obligations of Mortgage Loan Servicers • Applies to servicers licensed by State of MD • Servicer’s Duty of Care Requires servicers to promptly respond to homeowners seeking timely help and information about their mortgage loan accounts Servicers must also pursue loss mitigation where possible Legal Aspects of Foreclosure Prevention • Possible Defenses to Foreclosure Maryland Mortgage Servicer Agreement Voluntary agreements reached with HSBC, Ocwen, GMAC ResCap, Litton Loan Servicing, AmeriNational Community Services and Citi Timelines to acknowledge receipt of loss mitigation package and make a decision Legal Aspects of Foreclosure Prevention • Maryland Mortgage Servicers Agreement Cooling Off Period – Halt foreclosure action, accrual of fees and penalties after acknowledging receipt of completed loss mitigation package and rendering decision Designate staff to work with advocates Other aspects relating to technology, reporting and outreach Maryland’s New Foreclosure Process Law • The 2008 foreclosure process law applies to: Owners of “residential property" defined as real property improved by four or fewer single family dwelling units Foreclosure actions filed in the Circuit Court on or after April 4, 2008 Filing date of foreclosure action, not foreclosure sale date, determines applicability of new foreclosure process laws Maryland’s New Foreclosure Process Law • New foreclosure process laws do not apply Foreclosure action filed prior to April 4, 2008 but sale cancelled/now rescheduled Homeowner filed bankruptcy Bankruptcy is dismissed by court Homeowner entered into repayment plan or other workout agreement with mortgage servicer Homeowner defaults on workout plan Maryland’s New Foreclosure Process Law • Foreclosure actions filed in the Circuit Court on or after April 4, 2008 At least 45 days before filing - Loan servicer or lender’s attorney must send all borrowers and record owners “Notice of Intent to Foreclose” (NOI) by certified mail and regular mail Maryland’s New Foreclosure Process Law • Foreclosure actions filed in the Circuit Court on or after April 4, 2008 Loan servicer or lender’s attorney must also send a copy of NOI to Commissioner of Financial Regulation Commissioner of Financial Regulation sends letter to homeowners informing them of resources to help them avoid foreclosure Maryland’s New Foreclosure Process Law Interim Form of “Notice of Intent to Foreclose” (Sample copies Attachment A) Borrowers and Record Owners Example: Husband is the only borrower on Note Husband and wife on title/deed Record Owners – all those on title to the property Maryland’s New Foreclosure Process Law • NOI does NOT indicate a sale date • NOI Provides Other Important Information Date of Notice and Date of Default Start dates to calculate earliest date that a foreclosure action can be filed Maryland’s New Foreclosure Process Law • NOI Provides Other Important Information Date of last payment Total Amount Owed Maryland’s New Foreclosure Process Law • NOI Provides Other Important Information Name of Secured Party (owner of Note /investor) Identity of Secured Party is VERY IMPORTANT Loan servicer may or may not be the secured party Owner/Investor determines loss mitigation options Maryland’s New Foreclosure Process Law • NOI Provides Important Information Name of Original Lender (from Note) Name and telephone number of loan servicer and loss mitigation phone number Maryland’s New Foreclosure Process Law • NOI Provides Important Information Earliest date that foreclosure action can be filed Do the math – date is the later of: 45 days after Date of Notice and 90 days from the default date Maryland’s New Foreclosure Process Law • Homeowners misunderstand dates in NOI Think the payment due date is a sale date Have moved from their homes to avoid eviction Miss opportunity for counseling or legal assistance Maryland’s New Foreclosure Process Law • If homeowners call saying they have a sale date – ask them to read document to you Only document that provides foreclosure sale date is a letter from lender’s attorney Sample sale date letter (Attachment B) Maryland’s New Foreclosure Process Law • After foreclosure action is filed Personal service now required Borrower and all Record Owners must be personally served with papers filed in court Filing and papers filed referred to as “Order to Docket” Maryland’s New Foreclosure Process Law • Personal service now required Personal service by process server Hands documents to borrowers and record owners Leaves documents at property with resident of household of suitable age and discretion Maryland’s New Foreclosure Process Law •Leave documents at property with resident of suitable age and discretion Husband and wife are on title Wife answers door and accepts service for herself and husband Other adult in household can accept service Maryland’s New Foreclosure Process Law • Personal service Process server should leave a copy of the documents for each person served Affidavit of service must be filed in court describing date served, method of service and who accepted service Evading service is pointless Maryland’s New Foreclosure Process Law • Personal Service Alternate service allowed After at least two good faith attempts at personal service on separate days, can serve by mailing, both certified and first class mail AND posting on the property Maryland’s New Foreclosure Process Law • Alternate service allowed Posting on the property Leaving a copy of the documents at owner’s door/posting in conspicuous place on the property Affidavit of service must be filed with court stating date documents mailed and property posted Maryland’s New Foreclosure Process Law • Has a foreclosure sale date been set?  Sale date cannot be scheduled less than 45 days after homeowners served with Order to Docket  New foreclosure law specifies list of documents that must be included in Order to docket Maryland’s New Foreclosure Process Law • Has a foreclosure sale date been set?  Notice of Sale date must be published for 3 successive weeks in a newspaper of general circulation in the county where the action is pending Maryland’s New Foreclosure Process Law • Has a foreclosure sale date been set?  Homeowner is notified of sale date via letter sent by regular mail and certified mail  Letter must be sent not more than 30 days and not less than 10 days before the date of sale  Refusal to pick up certified mail does not help homeowner Maryland’s New Foreclosure Process Law • Has a foreclosure sale date been set?  Failure to receive letter  Not a defense to the foreclosure action unless foreclosure attorney cannot produce proof of mailing with certified mail receipt (white date stamped receipt)  If letter not mailed, sale is cancelled but new sale date would be set and letter sent with new date Maryland’s New Foreclosure Process Law • New foreclosure process law requires lender to:  Accept from homeowner payment of amount due to cure default up to one business day before foreclosure auction Foreclosure Prevention Pro Bono Project • Pro Bono Project partners include: Civil Justice Pro Bono Resource Center State Department of Housing & Community Development Department of Labor, Licensing & Regulation Pro Bono Referral Programs Foreclosure Prevention Pro Bono Project • Pro Bono Referral Programs Allegheny Law Foundation, Inc. Maryland Volunteer Lawyers Service Montgomery County, Maryland, Lawyer Referral Program Community Legal Services Foreclosure Prevention Pro Bono Project • Who is eligible for Pro Bono Legal Services Homeowners in owner-occupied property Homeowner does not own any other property or a time share Connecting Homeowners to Pro Bono Attorneys • Who is eligible for Pro Bono Legal Services Homeowner’s income not considered Homeowner is not currently represented by an attorney on a mortgage related matter or matter involving the property (such as bankruptcy, divorce or estate matters) Connecting Homeowners to Pro Bono Attorneys • Case Status Eligibility Criteria Homeowner has received any of the following: Letter from lender or lender’s attorney referring loan to foreclosure Notice of Intent to Foreclose Notice that foreclosure action has been or will soon be filed Foreclosure Prevention Pro Bono Project • Homeowner referred to Pro Bono Referral Program by: Maryland HOPE Hotline 1-877-462-7555 Counselor working on specific case Agencies that cannot assist homeowner imminent sale dates and post sale situations Foreclosure Prevention Pro Bono Project • How Pro Bono Attorneys Can Help: Direct Representation Brief Assistance and Advice at Workshops Assist counselor in specific case Foreclosure Prevention Pro Bono Project • Direct Representation – Attorney accepts foreclosure defense cases directly from a pro bono referral program covering county in which homeowner resides - such as Maryland Volunteer Lawyers Service (Greater Baltimore Region) Community Legal Services (Prince George’s County), etc. Foreclosure Prevention Pro Bono Project • Brief Assistance and Advice – Provide brief advice and counsel to homeowners at Foreclosure Solutions Workshops for the public Homeowners pre-register for Workshops organized by housing counseling agencies, elected officials, churches, community organizations, etc. Many attorneys have taken cases from Workshops Foreclosure Prevention Pro Bono Project • At Workshops, pro bono attorneys: Analyze a homeowner’s situation Review their documents Make recommendations • Civil Justice attorneys guide and consult with pro bono attorneys at the Workshops Foreclosure Prevention Pro Bono Project • Assist counselor in specific case Protocols developed to connect counselors to pro bono attorneys for individual case support and representation Foreclosure Prevention Defenses to Foreclosure • Range of ways attorneys can help Intervene/negotiate with mortgage servicer to obtain loan modification Obtain cancellation of sale to allow time for loss mitigation/sale of home/short sale Review workout offered by mortgage servicer Foreclosure Prevention Defenses to Foreclosure • Negotiate loan modification A change in one or more terms of the Note Freezing or reducing the interest rate, extending the term of the mortgage (the number of payments) Negotiate short sale or deed in lieu of foreclosure as full satisfaction of debt Foreclosure Prevention Defenses to Foreclosure • Raise defenses in foreclosure action Procedural issues – violation of procedures under new foreclosure laws, improper service, “standing”, “unclean hands” to seek injunction to stop a sale Defenses to Foreclosure Actions • Many homeowners have already requested loss mitigation on their own  Attorney analyzes prior workout to demonstrate it was unaffordable and likely to fail  Did servicer also violate Maryland’s Duty of Care law? Defenses to Foreclosure Actions • “Unclean Hands” – Wells Fargo v. Neal • Document servicer’s actions regarding:     Client’s prior attempts to obtain workout Efforts of housing counselor Attorney’s efforts to negotiate Adherence to HOPE NOW Alliance Servicing Guidelines or other applicable guidelines Foreclosure Prevention Defenses to Foreclosure • Legal assistance after the sale File good faith Exceptions to the Sale Negotiate Rescission of Foreclosure Sale Negotiate agreed upon move-out date Negotiate “cash for keys” Foreclosure Prevention Pro Bono Project • Preventing Loans Likely to End in Foreclosure First Time Homebuyers Free Legal Service Civil Justice developing panels of pro bono and low-bono attorneys to review: Purchase and Sale Agreements Loan Documents BEFORE SIGNED BY PURCHASER/BORROWER Foreclosure Prevention Pro Bono Project • First Time Homebuyers Free Legal Service Housing counselors refer first time homebuyers to Civil Justice for review of purchase contract and loan documents prior to signing Inform clients that review of documents is available if they are considering refinance in the future Eligibility criteria being developed for pro bono or low-bono representation