By Eva Massimino, Esq.

Bendett & McHugh, P.C.

USFN Member (CT, ME, MA, NH, RI, VT)

The Table --not just any table, the table. It’s the place from which all important decisions seem to flow. Where policy and strategy discussions are held. Where “important people” decide “important things.” The decisions made at the table impact the lives and careers of many who are not involved in the conversations leading up to them. Too often, these decisions are made without providing a voice to entire groups of people. The table becomes an echo chamber of ideas and fails to consider the diverse needs of the people it impacts. So, how do we ensure diverse voices are heard? How do we get a seat at the table? And once there, how do we use our seats to serve more than just our own interests?

Historically, the tables where decisions are made have been treated as exclusive clubs with all the seats occupied by like-minded people from similar backgrounds. It is certainly intimidating to encounter a group of leaders and come to the realization that none of them look like you, none of them come from where you came from, and you cannot connect with them from a perspective of a shared experience. We may have much to offer, but self-doubt will sneak up on even the most confident person in the face of a group of decision makers who do not reflect them. In reality, we all thrive when there are people of all ages, genders, races, ethnicities, and socioeconomic backgrounds contributing to the decision-making process. This realization is spreading, and the value of diversity at the table is becoming clearer. However, the effort cannot be unilateral. It takes work from both those who wish to gain a seat at the table and those who need to make room for others to join.

It goes without saying that a seat must be earned. To occupy a position of influence, we absolutely must be willing to put in the work to learn the skills valued by our industry. We also must be willing to continue to learn from people of all experience levels around us. But hard work alone doesn’t guarantee that our voices will be heard, our opinions valued, and our hard-earned expertise requested. Diversity of opinions requires a representative diversity of people seated at the table. Breaking into a group of decision makers in our industry requires some showmanship—especially if we are trying to present a new idea or perspective. The initial reaction to change may be doubt, fear, and skepticism. If we want our voices to be heard, we should also be trustworthy and confident in our skills and expertise.

With a backdrop of expertise, we simply cannot be afraid to make our opinions known. Our perspectives and contributions may have significant value, and our participation can be a catalyst for an innovative solution. Valuable contribution alone should earn us a seat at the table. In our industry, knowing how to deliver a message is just as important as the message. We need to be able to communicate clearly and persuasively to convince others to not only take a moment to listen to our new perspectives, but also to trust that our ideas are worth trying. With confidence in our message, our expertise, and the value of our contribution, perhaps it is time to simply pull up a seat without an invitation. It may mean approaching the problem from a different angle, presenting our ideas in a different way, or it may just require leading by example and starting a new table. There may not be room for everyone at the table, but there is most definitely room for all perspectives, and we should feel confident that our ideals are represented.

With a seat at the table secured, what’s next? With “power” comes responsibility. Once we have earned a seat at the table with diverse and innovative ideas and perspectives, the drive to make a positive impact should not sputter when we finally acquire some influence. Most importantly, we must be willing to shatter the echo chamber and work to make room at the table for others who can help round out the conversation. Skill and influence are empty without the willingness to mentor newcomers and nurture innovation and diversity. Transparency surrounding our journey and our own hurdles can go a long way in encouraging others to bring their ideas to the table sparking progress, inclusivity, and the satisfaction of knowing we are each making an impact.

Diversity at the table is not just an initiative, it’s a resource that has not been fully tapped. There are countless voices that have not been given the platform to be heard, and they can make a major impact. If you are seated at the table, scoot over and make some room. If you haven’t been offered a seat yet, pull up a chair. Let’s talk.

Copyright @2022

USFN Report - Winter 2022

By Geoffrey Milne, Esq. and Victoria Forcella, Esq.

McCalla Raymer Leibert Pierce, LLC *

USFN Member (AL, CA, CT, FL, GA, IL, KY, MS, NV, NJ, NY, OH, OR, TX, WA)

Servicers and their counsel will want to follow closely the decision of the Connecticut Supreme Court which granted Certification on November 23, 2021 in KeyBank, NA v. Yazar, PSC-210159, to address two key issues under the Emergency Mortgage Assistance Act (“EMAP”). The Court granted the Petition as to whether the EMAP statute involves subject matter jurisdiction and whether a servicer can rely upon an EMAP notice issued in a previous foreclosure, which was then dismissed. Litigation regarding EMAP notices has become rampant over the past few years, pausing foreclosures under the argument that a defective notice implicates subject matter jurisdiction. It is certainly possible that the law is about to change in this area based on the Court’s order granting Certification.

EMAP’s goal is to provide eligible borrowers with mortgage assistance during the pendency of a foreclosure. The EMAP program requires that its loans be repaid by consumers, and consequently, is not often used by borrowers. When it is used, the statutory framework allows a borrower to obtain EMAP assistance while a pending foreclosure is effectively placed on hold. Regardless, the statute requires a written notice prior to the commencement of a consumer foreclosure.

In 2020, the Connecticut Appellate Court held in MTGLQ Investors, L.P. v. Hammons[1] that a foreclosing plaintiff’s failure to provide the defendant mortgagor with the notice required by § 8-265ee (a) of EMAP constituted a jurisdictional defect requiring dismissal of the action. This means that a foreclosure judgment is subject to dismissal because the Court never had the power to hear the case due to the defect in the notice. The issue can be raised years after a case is filed and even after judgment enters.  The impact of the Hammons decision on servicers is substantial. If the EMAP notice was defective for any reason, such as failure to send by certified mail to the property address, then the foreclosure judgment was fatally defective, the case was dismissed, and a borrower could seek attorneys’ fees under Connecticut’s consumer fee statute, CGS 42-150bb. After Hammons, servicers saw a flurry of motions to dismiss claiming defective EMAP notices, delaying their cases.

In 2021, the Connecticut Appellate Court was faced with another case involving a challenge to an EMAP notice in KeyBank, NA v. Yazar[2].  In Yazar, the borrower executed a note and mortgage payable to First Niagara Bank, N.A. The loan became delinquent in 2016, and First Niagara issued separate default and EMAP notices to the borrower. About two months later, KeyBank acquired First Niagara by merger. In January 2017, KeyBank commenced a foreclosure which was dismissed for failure to provide mediation notices. About eight months later, KeyBank re-filed an action for foreclosure relying upon the prior EMAP notice sent in 2016. The plaintiff filed a motion for summary judgment on liability only, which was granted by the trial court, over an objection that the borrower had not received[3] an EMAP notice. After entry of a judgment of strict foreclosure, the borrower filed an appeal challenging the sufficiency of the EMAP notice. The borrower argued that the trial court lacked subject matter jurisdiction because the plaintiff failed to comply with the EMAP notice requirement of § 8-265ee (a). The plaintiff argued that the 2016 EMAP notice, sent prior to the first foreclosure, satisfied the statute. The Appellate Court reversed, finding that the EMAP notice was not sufficient, and remanded to the trial court to dismiss the case for a lack of subject matter jurisdiction. Fortunately, the bank filed a Petition for Certification, which was granted by the Connecticut Supreme Court.

The argument advanced by KeyBank on the Petition for Certification through its counsel, McCalla Raymer Leibert Pierce, LLC, was that a mortgage foreclosure is not a creature of statute; rather, its origins are deeply rooted in over two centuries of Connecticut common law. The common law right of foreclosure has existed in Connecticut since prior to 1825.[4] Recognition that a mortgage foreclosure is a common law cause of action is critical to an analysis of whether strict compliance with the EMAP’s notice requirements is jurisdictional. When the legislature intends to modify or restrict a common law cause of action, it is required to state expressly that it is doing so because such rights are being modified or limited. Statutes change common law rights “only if the language of the legislature plainly and unambiguously reflects such an intent.”[5] When the legislature is modifying or changing common law rights, it must state explicitly that it intends to abrogate them.[6] There is nothing in the legislative history of EMAP, as well as its 2009 amendments, to demonstrate that the legislature intended to abrogate common law rights as part of its enactment. The original act did not expand or limit the ability to file a mortgage foreclosure; neither did the 2009 amendments address limitations on subject matter jurisdiction.

The second issue which the CT Supreme Court granted Certification on is whether an EMAP notice sent by a mortgagee in a prior mortgage foreclosure (which was dismissed) can be relied upon in connection with a second foreclosure action commenced against the borrower based on the same default under the same mortgage. This issue is equally important to servicers, in that the EMAP notice relied upon by the lender in Yazar had been issued by a predecessor in interest, which had subsequently merged with KeyBank.  Normally, a surviving bank after a merger can rely upon the actions of the predecessor in interest. This issue has another practical benefit to servicers. Sometimes, a foreclosure is administratively dismissed based on the dormancy program. When the suit is re-filed, the lender has to address whether a new EMAP notice is required, even if the new suit is based on the same default as the prior case.

            It is likely that the Yazar case will be argued in 2022 before the Connecticut Supreme Court. It will be the first time that Court has addressed EMAP. It presents an excellent opportunity to clarify the law under EMAP, possibly to the benefit of servicers.

By Sally Garrison, Esq.

The Mortgage Law Firm *

USFN Member (AZ, CA, HI, OK, OR, WA)

A recent Supreme Court of the State of Oklahoma ruling in McBee v. Shanahan Home Design, 2021 OK 60 may be indicative of the potential impacts of COVID-19 administrative orders and the resulting delays in timelines.

The Supreme Court of the State of Oklahoma issued three successive emergency administrative orders impacting the availability of court services in response to the COVID-19 pandemic. These orders limited district court procedures and suspended certain deadlines in judicial matters.

The first emergency administrative order stated, “Subject to constitutional limitations, all deadlines and procedures whether prescribed by statute, rule or order in any civil, juvenile or criminal case shall be suspended by 30 days from the date of this order. This suspension also applies to appellate rules and procedures for the Supreme Court, the Court of Criminal Appeals, and the Court of Civil Appeals.” First Emergency Joint Order Regarding the COVID-19 State of Disaster, 2020 OK 25, ¶ 3, 462 P.3d 704, 704-05.

The second emergency administrative order continued the suspension described in the first emergency administrative order through May 15, 2020. Second Emergency Joint Order Regarding the Covid-19 State of Disaster, 2020 OK 24, ¶3, 462 P.3d 262, 262. It further directed that “[a]ll courthouses shall be closed to the public with exceptions for emergencies as permitted by local order,” and that “[c]ourt clerks and judges should be using email, fax, and drop boxes for acceptance of written materials.” Second Emergency Joint Order Regarding the Covid-19 State of Disaster, 2020 OK 24, ¶¶ 6-7, 462 P.3d 262, 262.

            The third emergency administrative order continued the suspension further, and clarified as follows:

5. Paragraphs 4 and 5 of the Second Emergency Joint Order remain in effect to May 15, 2020. In all cases, the period from March 16, 2020 to May 15, 2020, during which all rules and procedures, and deadlines, whether prescribed by statute, rule or order in any civil, juvenile or criminal case were suspended, will be treated as a tolling period. May 16th shall be the first day counted in determining the remaining time to act. The entire time permitted by statute, rule or procedure is not renewed.

6. Beginning on May 16, 2020, all rules and procedures, and all deadlines whether prescribed by statute, rule or order in any civil, juvenile or criminal case, shall be enforced, including all appellate rules and procedures for the Supreme Court, the Court of Criminal Appeals, and the Court of Civil Appeals.

7. For all cases pending before March 16, 2020, the deadlines are extended for only the amount of days remaining to complete the action. For example, if the rule required the filing of an appellate brief within 20 days, and as of March 16, ten (10) days remained to file the brief, then the party has 10 days with May 16, 2020 being the first day.

Third Emergency Joint Order Regarding the Covid-19 State of Disaster, 2020 OK 23, ¶¶ 5-7, 462 P.3d 703, 703.

            On November 19, 2019, Vickie McBee filed suit against Shanahan Home Design, LLC, and Biggs Backhoe, Inc., related to the design and construction of her residence. McBee’s counsel did not issue summons prior to the issuance of the Oklahoma Supreme Court’s emergency administrative orders. On May 18, 2020, after the expiration of those orders, McBee’s counsel caused summons to be issued. Biggs Backhoe was served on July 8, 2020. Shanahan Home Design was served on July 16, 2020. McBee v. Shanahan Home Design. LLC, et al., 2021 OK 60, ¶¶ 4-5.

            In Oklahoma, the plaintiff has 180 days after filing its petition to serve the defendant. Okla. Stat. tit. 12, §2004(I). Both defendants argued that service was untimely and that the action should be dismissed. In response, McBee argued that the emergency administrative orders suspended the time for service even though summons had not been issued before the emergency administrative orders were effective. The trial court agreed with the defendants and concluded that the suspension did not apply because the summons had not been issued before the orders took effect. Id., at ¶¶ 6-7.

            The Oklahoma Supreme Court retained the matter on appeal, reversing and remanding the trial court’s decision. The Court found that “general administrative authority over all courts in this State, including the temporary assignment of any judge to a court other than that for which he was selected, is hereby vested in the Supreme Court and shall be exercised by the Chief Justice in accordance with its rules.” Id. at ¶12 (citing Okla. Const. art. VII, § 6). The McBee Court went on to say, “[u]nder the State Constitution and Rule 2, it is unquestionable that the Supreme Court, acting through the Chief Justice, had authority to take proper measures and issue such orders as were deemed necessary for the safe operation of state courthouses and its employees.” Id. at ¶13. The McBee Court noted, “[t]he tolling of time limitations was just one in a litany of safety measures implemented by the emergency orders to better protect courthouse employees and the public from further spread of Covid-19.” Id. at ¶15.

            The Court defined “tolling” as “the temporary suspension of statutory time bar for bringing a suit because of either some ‘disability’ on the part of the plaintiff which prevents that person from commencing the action or some activity on the part of the defendant forestalling prosecution of the claim against the defendant." Id. at ¶18 (quoting Thompson v. Anchor Glass Container Corp., 2003 OK 39, ¶ 9 n. 13, 73 P.3d 836, 838). The McBee Court further reasoned, “[i]n the present case, there are a number of factors that constitute disability on the part of the plaintiff, including, but not limited to, the fact that society was in the midst of a global pandemic. Most courthouses were closed to the public because of Covid-19. Additionally, the third SCAD order expressly stated that the statute of limitations in any civil case would be extended. Consequently, McBee's potential reliance on this Court's orders clearly stating that the statute of limitations on all civil cases pending would toll further establishes a disability for purposes of tolling.” Id. at ¶18.

The Court provided the following application for guidance: “For all cases pending before March 16, 2020, the deadlines are extended for only the amount of days remaining to complete the action. For example, if the rule required the filing of an appellate brief within 20 days, and as of March 16, ten (10) days remained to file the brief, then the party has 10 days with May 16, 2020, being the first day.”  Id. at ¶18. As applied to the case at bar, from the date the petition was filed, to the date the first order took effect, 117 days elapsed. Consequently, McBee had 63 days remaining, beginning on May 16, 2020, to complete service. Therefore, McBee completed service on both defendants in the time allowed because of the available tolling.

As our industry returns to its usual processes, it appears that the interruptions caused by the pandemic and the emergency executive orders of the Oklahoma Supreme Court will be applied to all operative timelines in existence. While this particular opportunity for timeline enlargement is likely already behind us, it is important to consider its effect as applied to issues that have a long life, like jurisdiction and service. Further, the Court’s finding in McBee may be an indication of how it will treat delays caused by moratoria impacting various timelines for the industry at large.

Copyright @2022

USFN Report - Winter 2022

Mark Rothfuss joined the McCalla Raymer Leibert Pierce, LLC (“MRLP”) (USFN Member – AL, CA, CT, FL, GA, IL, KY, MS, NV, NJ, NY, OH, OR, TX, WA) management team as Partner of Ohio and Kentucky Foreclosure and Litigation Practice. Rothfuss brings over 18 years of experience and default servicing knowledge to the MRLP family. Marty Stone, the Managing Partner and CEO of MRLP said, “We are very excited to have Mark join our team. As we have carefully prepared to grow our firm for the future, we have been open to strategic talent and partnerships with industry leaders.”

Schiller, Knapp, Lefkowitz & Hertzel, LLP (USFN Member – NJ, NY, PA, VT) is pleased to announce that Mario A. Serra, Jr. has joined the firm as Managing Partner of its New Jersey practice area. He will oversee the New Jersey office and assist with overall firm operations for the default practice serving the states of New Jersey, New York, Pennsylvania, and Vermont.

The Maryland Department of Housing has established a Homeowner Assistance Fund (HAF). The fund was established to assist struggling homeowners with their financial issues due to impacts from COVID-19. The program is intended as a last resort option for those homeowners that cannot successfully obtain a loss mitigation option thru their servicer.

The Commissioner is expecting servicers to make homeowners aware of the HAF if all other loss mitigation options have been exhausted. The Commissioner is expecting the servicers to comply with loss mitigation review when the borrower does notify them that they have applied for this assistance.

Communication received from the Maryland Department of Labor regarding this fund and their expectations is attached.

by Victor Kang, Esq.
Rubin Lublin, LLC*
USFN Member ( AL, GA, MS, TN)

Part two of a two-part series.

Without dating yourself, how many folks remember the old trope of the loveable guy trying to take care of the family and home? From Michael Keaton’s Mr. Mom to John Candy’s Uncle Buck to modern versions like Adam Sandler in Big Daddy, Eddie Murphy in Daddy Day Care, and The Rock in The Game Plan, it’s always an easy laugh to see the rough and tough alpha male take care of kids and perform what were stereotypically female roles of cooking, cleaning, and rearing children. As gender roles have evolved to where many of the domestic duties are now shared, there remain some positions in various industries where females still dominate the workforce.

For example, in our industry, there are several roles that are often female dominated. According to the Census Bureau, almost 81% of bank tellers are female. And, among law firms, 72.8% of paralegals are women. In recent years, these numbers have shifted from the 1960s, where the numbers were almost entirely lopsided. Other roles in the court, like court reporters and clerks have also been traditionally  staffed by females. The stereotype is that paralegals, clerks, and bank tellers are seen as administrative and secretarial roles that are “suitable” for women.  As we all can attest, this is simply not true. As the work and expectations of staff have changed, the roles have evolved to become more than just sitting at a desk and answering a phone while typing. As technology has improved, so has the skills of the workforce. As shocking as it may seem, even today, there are some attorneys who do not have their own email or computer and rely solely on their staff to type letters and pleadings. Some may even have an old Dictaphone sitting around. But as the needs of the legal community evolve, the role has now developed to where the duties and responsibilities are no longer purely secretarial. This change has helped remove many of the stereotypes associated with support roles in the legal and banking community.

Another role that has been traditionally female dominated is that of the caregiver. From early education teachers, to social workers, to massage and occupational therapists, positions that require empathy, care, and more nurturing instincts have been seen as female only roles. As those comedic movies mentioned above have shown – men are just as capable of being effective caregivers. As stereotypes fade about how men must be macho, type-A, aloof, emotionless beings, more opportunities have opened for those who can connect emotionally with those in need. Our society has also recognized that anybody can be good at working with children and those in need of assistance. But, even with gradual changes in attitude, men are still barely represented in early education roles, as studies estimate that workers who are male range from 1.4% to 3%. Men in these fields still often deal with stigmas or being labeled as not being a “real man.” Researchers have shown that having a diverse, early interaction with men, especially in single-parent households, can help broaden a child’s growth and development. And further, by having males in this uncommon role, it can help shatter stereotypes that would otherwise be reinforced in a female-dominate role. Famed tennis player Novak Djokovic has a foundation that advocates for the importance of men in early childhood education.  The National Association for the Education of Young Children also provides services to help recruit men to these roles.

Lastly, as we return to pre-pandemic life,  many of us are returning to flying and traveling. In our travels, we often notice certain roles that have traditionally been lopsided for one gender or the other. For example, female pilots still make up only 5% of the commercial airlines in the U.S. And, on the flip side, flight attendants remain heavily female, although the percentage of men has increased in the U.S. from 19% to 26% since 1980. This growing number can be attributed to the changing expectations of flight attendants. For the older crowd, many can remember that flight attendants were also called stewardesses, and they were often viewed as eye candy for the traveling man. Uniforms were tightfitting,  and sometimes left little to the imagination.  Back when flying was a luxury afforded to a few and the clientele was mostly male, stewardesses were sexualized to be a cocktail waitress in the sky. Some airlines even forbade men from becoming attendants. Thankfully, now, flight attendants have evolved to more than just a drink server. The security and safety of the flight is of the utmost importance. Flight attendants provide more than just peanuts and Coke; they assist the pilots in providing a smooth and safe flight. By having a diverse crew, this can also help in emergency situations and help keep the cabin calm. Many of the stereotypes of a male flight attendant are luckily being overshadowed by the immense benefits of this role – from free flight benefits to flexible schedules to being able to see the world.

In the end, often many of the jobs and roles that are uncommon for men seem to have a common thread - that the job is seen as feminine or not “manly.” But, as those roles are either evolved or completely changed, it has helped to increase the diversity of the workforce. As gender roles continue to blur, no longer can it be easily claimed that a man is not good at typing or caring for children. While differences may exist on a biological level, many of the perceived strengths and weaknesses are born through generations of stereotyping. As we continue to break down those misconceptions, changing the mindset and expectations of traditionally female roles will continue to help create the best results for our industry and others.

Copyright © 2021 USFN. All rights reserved.

December 2021 USFN Report

by Eva Massimino, Esq.

Bendett & McHugh, P.C.*

USFN Member (CT, ME, MA, NH, RI, VT)

On September 7, 2017, in Federal National Mortgage Association v. Deschaine, 2017 ME 190, the Maine Supreme Court held that once a promissory note is accelerated, the payments required by the note become indivisible, and there can be no new default under the note and mortgage. Due to the indivisibility of the payments, if there is a dismissal of a foreclosure action with prejudice, the lender is precluded from filing another foreclosure at a future date based on a continuing default. The practical impact of Deschaine was that a loan became unenforceable if a foreclosure action was dismissed with prejudice, resulting in a house free from an enforceable mortgage obligation.

Defenses sounding in insufficiencies in pre-foreclosure demand notices have become more frequent and particular, creating significant concern over initiating foreclosure with even the slightest error in the demand notice. Servicers and foreclosure counsel in the area have worked together to help stop and hopefully reverse the trend of minor deficiencies resulting in a windfall for the borrower. The efforts have been slow and frustrating and have resulted in increasingly conservative practice throughout the state.

Recently, we have had some signal that the tide may be turning. The composition of the Maine Supreme Judicial Court has changed. With this change has seemingly come a willingness to temper the need for strict statutory compliance with the state’s demand notice requirements against the severity of a notice’s defect.

On October 12, 2021, the Maine Supreme Judicial Court decided 1900 Capital Trust II v. Moynihan. The Plaintiff in Moynihan provided a demand notice in support of its foreclosure that had a minor discrepancy in the itemization provided which resulted in a $6 difference in the amount due on the loan to reinstate. The court affirmed that given the minor nature of the discrepancy in the notice, the Plaintiff nevertheless met its burden to foreclose the subject mortgage. The holding suggests that there is a reasonableness standard that will also be applied when reviewing demand notices under the strict compliance requirements previously established in Maine.

In addition, there may be some hope in adopting strategies which have been successful in other states. Namely, there may be a circumstance or a process that can be established to revoke acceleration prior to judgment entry by forgiving past due payments and inviting the borrower to resume payments under the existing mortgage terms. The process would effectively revive the note obligations and permit foreclosure if the default were to recur.

Only time will tell if we are truly witnessing a reversal of the “free house” trend, but for now there is at least some indication of a shift in the right direction.

Copyright © 2021 USFN. All rights reserved.

December 2021 USFN Report

by Eva Massimino, Esq.

Bendett & McHugh, P.C.*

USFN Member (CT, ME, MA, NH, RI, VT)

More than four years ago, in the matter of Zullo v. HMC Assets, LLC, et.al., the Land Court in Massachusetts held that a foreclosing entity must be in actual possession of the note, or in the case of a lost or destroyed note, be the entity that was in possession of the note and entitled to enforce it at the time of loss or destruction. While the case is no longer shocking news, strategies for dealing with the result are still developing.

The nature of the dispute in Zullo involved a claim brought by the Plaintiff that asserted HMC did not have standing to foreclose on his property. To establish its standing, HMC presented a Lost Note Affidavit signed by its predecessor in interest DLJ. The servicer for DLJ lost the original of the note before HMC was transferred all interest in the note from DLJ.  In a non-binding case, Massachusetts statutes relating to the enforcement of notes had previously been interpreted to mean that a note that was lost or destroyed by one entity could not be enforced by another entity who presented a lost note affidavit executed by the former party. The Land Court in Zullo held very close to the black letter law of the UCC Section 3-309 stating: “In interpreting whether enforcement rights to the Note may be transferred from DLJ to HMC through the Lost Note Affidavit, the specific language of Article 3 dictates the ability of DLJ to use the Lost Note Affidavit to assign the Note. Common law principles of assignability are not taken into consideration. Because possession is a key requirement of enforceability, § 3-309 specifically prohibited DLJ to use the Lost Note Affidavit to effect such a transfer of rights.”

The Zullo decision wreaked havoc in Massachusetts for loans where the note had been lost prior to sale. Initially there was optimism surrounding an appeal and legislative action, however, neither yielded a fruitful result.  It triggered a need for a viable strategy that could allow enforcement of instruments that were potentially unenforceable as a result of the case. One such strategy that has brought measured success is a negotiated agreement to proceed with foreclosure in the name of the entity that lost the note and a declaratory action authorizing the foreclosure. While the process is lengthy and the relationship between the current and former servicer somewhat abnormal, it is a path forward where otherwise none existed. It is important to note that this option is not available where the entity that lost the note is now defunct or where authorization to proceed cannot be obtained.

In light of the limited options for enforcement of lost or destroyed notes, it remains of the utmost importance that appropriate diligence is provided to the purchase of loans in Massachusetts. Given the known risk, parties seeking to purchase loans where the physical note cannot be transferred should seek the advice of counsel before exercising what may be a fruitless endeavor.

Copyright © 2021 USFN. All rights reserved.

December 2021 USFN Report

USDA has published updated guidance concerning its schedule of Acceptable State Liquidation Costs and Fees. A link to updated Chapter 18 of the SFH Guaranteed Loan Program Handbook is below. The description of “Acceptable Liquidation Fees and Costs” starts on page 11, and the updated schedule itself (Attachment 18-C) starts on page 58. Attachment 18-C appears to have been updated on August 13, 2021, although there does not appear to have been an announcement of this change from agency. For that reason, USFN is sending this update to ensure that all of our members are aware of this important change.

View the updated document here: https://www.rd.usda.gov/files/3555-1chapter18.pdf

Copyright © 2021 USFN. All rights reserved.

by E. Edward (“Ed”) Farnsworth, Jr., Esq.

Samuel I. White, P.C.
USFN Member (DC, MD, VA, WV)

For the longest time, Virginia held steadfast to discretionary appellate review by the Virginia Supreme Court in civil matters, making them the lone holdout nationally in this regard. While Virginia does have an intermediate appellate court, the Virginia Court of Appeals (“Court of Appeals”), its jurisdiction was limited to criminal cases, domestic relations, workers’ compensation, and state administrative rulings. Currently, if an unsuccessful civil litigant desires to appeal they must petition the Virginia Supreme Court who has discretion to accept or reject the case. Appellants face an uphill battle because only about 25% of petitions are granted annually. However, a new day has dawned for Virginia appellants thanks to the passage of Virginia Senate Bill 1261.

Starting January 1, 2022, all civil litigants will have an appeal of right to the Court of Appeals. Criminal defendants will also have an appeal of right to the Court of Appeals, but this article will focus solely on civil matters. A random panel of three Court of Appeals’ judges will consider each appeal. This new right will be tempered, however, by the fact that the new legislation empowers the Court of Appeals to dispense with oral arguments and decide the appeal on the briefs and record where the panel finds the appeal meritless, or the issue presented has been dispositively determined by previous binding precedent and the appellant has not requested a reversal, modification, or extension. A losing party may petition the Virginia Supreme Court for a further appeal, which follows the previous discretionary appellate process.

The new appellate procedure is going to impact Virginia litigation in several ways. First, Virginia Court of Appeals’ decisions will result in more binding precedent. Currently, precedent from the Virginia Supreme Court develops at a stately pace because of the small number of appeals accepted annually. Settlement strategy and considerations will also change a bit. Parties will no longer feel the same level of appellate risk that existed when each had to face only a 25% chance of their appeal being accepted if they lost. This shared risk encouraged settlement in some cases. Now, the potential elongated length and increased costs of the new appellate process will likely become a more pressing settlement consideration.

In the default servicing context, this new right will elongate timelines and litigation costs for defending foreclosure challenges and prosecuting eviction matters. Regarding evictions, a borrower already has a right to appeal a grant of possession by the General District Court to the Circuit Court. The new procedure adds yet another appeal of right layer. This additional layer of appellate right could profoundly increase eviction timelines and costs beyond what has become the expectation for default servicing clients. Strategically, emphasis will need to be placed on securing robust supersedeas and appeal bonds—both of which are available in Virginia. Careful attention to potential procedural grounds to quash appeals will also be important. In eviction matters, an increase in the size of “cash for keys” offers may also be warranted for contested cases.

For attorneys in the other 49 states, an appeal of right is nothing new and is part of the litigation landscape. However, in Virginia this is new territory, so default servicing attorneys will need to become even more familiar with the appellate process to properly navigate its contours and nuances on behalf of clients.

Copyright © 2021 USFN. All rights reserved.

October 2021 e-Update

by Sara M. Buchanan, Esq.

Bendett & McHugh, P.C.

USFN Member (CT, MA, ME, NH, RI, VT)

On September 29, 2021, the United States District Court for the District of Connecticut issued a decision, In re Tumba, 3:20cv832 (MPS), vacating the Bankruptcy Court’s order denying the creditor’s motion for relief from the automatic stay. The District Court determined the Bankruptcy Court erred in determining the debtor was a “mortgagor” for purposes of Conn. Gen. Stat. § 49-15 and therefore entitled to the suspension of foreclosure proceedings the statute affords mortgagors who file for bankruptcy.

In Connecticut there are two possible foreclosure judgments – 1) a foreclosure by sale in which the property is publically auctioned on a date set by the court or 2) a strict foreclosure where the court sets dates of redemption (“Law Days”) for the owners and junior lienholder after which, if no one redeems, absolute title will vest in the foreclosing entity. Previously the Second Circuit Court of Appeals held that the automatic stay caused by a bankruptcy filing after a judgment of strict foreclosure did apply to, or prevent, the running of the Law Days. See In re Canney, 284 F.3d 362 (2d Cir. 2002). Instead the Second Circuit held that bankruptcy code §108(b) acted to extend the law days to a date that was at least sixty days from the date of the bankruptcy filing. The Connecticut Appellate Court also came to the same conclusion in deciding that a borrower lost her home when she thought the automatic stay would have prevented title from passing to the bank. See Provident Bank v. Lewitt, 84 Conn.App. 204 (2004).

To protect debtors from the Second Circuit and Connecticut Appellate Court rulings, the Connecticut legislature passed Conn. Gen. Stat. §49-15(b) which provides that a judgment of strict foreclosure “shall be opened automatically” upon the filing of a bankruptcy petition by a mortgagor. When the statute applies the Law Days will stop running when the bankruptcy petition is filed.

Both the Connecticut Bankruptcy Court and the United States District Court had the occasion to determine who qualified as a “mortgagor” for the purposes of § 49-15(b). In this case the debtor’s husband executed a mortgage on the subject property. The debtor was not a signatory to the mortgage or underlying note and held no interest in the property when the mortgage was executed. When the debtor’s husband died intestate, she inherited the real property through the probate proceedings. The creditor commenced a foreclosure action in state court and obtained a judgment of strict foreclosure and a law day for the equity of redemption was assigned to the debtor. The debtor filed a Chapter 11 bankruptcy petition prior to the passing of the law day.

In order to proceed with evicting the debtor the creditor moved for relief from the automatic stay under 11 U.S.C. § 362(d)(2) on the basis that it had obtained a judgment of strict foreclosure in state court with regard to the subject property, the law day passed without redemption, and the creditor was now the owner of the property. The Bankruptcy Court determined the debtor, as a successor in interest to the prior mortgagor, was herself a “mortgagor” under § 49-15(b) and therefore entitled to the automatic opening of the strict foreclosure judgment and the suspension of the running of the law days upon the filing of the bankruptcy petition. Consequently, the motion for relief from stay was denied.

Upon appeal the creditor argued that while § 49-15(b) did not specifically define the term “mortgagor,” the court must look to the plain meaning of the term when determining if the debtor was entitled to the protections under the statute. The District Court agreed the term “mortgagor” “has a common, well-established meaning,” citing to the Black’s Law Dictionary definition of a mortgagor as “[s]omeone who mortgages property; the mortgage-debtor, or borrower.” 1214 (11^th ed. 2019). The adoption of more expansive definitions of “mortgagor” in other mortgage related statutes further supports the argument that the legislature intended for the ordinary meaning of the term to apply in § 49-15(b) and deemed it only necessary to define the term when it wanted to change the term from its ordinary meaning.

Because the debtor was not a “mortgagor” within the meaning of § 49-15(b), the District Court ruled that the judgment of strict foreclosure was not automatically opened upon the filing of her bankruptcy petition and the law day was merely extended by sixty days under 11 U.S.C. §108(b). The District Court further held that because the debtor did not redeem within that sixty day period, title to the property vested in the creditor and neither the debtor nor her bankruptcy estate had any further interest in the property.

This case clarifies that only those parties that are mortgagors under the plain meaning of the word are entitled to the protections of § 49-15(b) and underscores the importance in Connecticut of evaluating a debtor’s status as a mortgagor when determining if and when title may vest by strict foreclosure in the creditor.

Copyright © 2021 USFN. All rights reserved.

October 2021 e-Update

by Maggie Garden

Bendett & McHugh, P.C.

USFN Member (CT, MA, ME, NH, RI, VT)

by Sally Garrison, Esq.

The Mortgage Law Firm

USFN Member (AZ, CA, HI, OK, OR, WA)

Language is a powerful thing. It describes the world around us; defines expectations; and becomes the narrative in our minds. Yet, it has limits and unanticipated consequences. As Alan Watts said, “The menu is not the meal.” So, if the purpose of language is communicating accurately – maybe even beautifully – then as awareness and understanding evolve, so too must language.

First, the problem: The words we choose create expectations, boundaries, and implications. The problem arrives when those expectations, boundaries, and implications result in excluding groups from fully engaging. The exclusionary results act as gatekeepers for opportunities and growth, maintaining the accustomed status quo. Those results may be intentional, but often they are not. Intentional gatekeeping can only be addressed with education, argument, and policy. Unintentional gatekeeping can be harder to address because it is undetected and unconsidered.

So, what is the impact of unintentional exclusionary language?  Global management consulting firm McKinsey & Co. has published compelling findings from the McKinsey Global Survey on inclusion in the workplace (https://www.mckinsey.com/business-functions/organization/our-insights/understanding-organizational-barriers-to-a-more-inclusive-workplace). The study evaluated the respondents’ feelings of authenticity, belonging, and comfort. The data was collected before the COVID-19 pandemic, but was published in June 2020. The findings suggest that many of the respondents consider inclusiveness in career decisions. However, approximately half of the respondents do not feel included.

Some notable statistics include that while 70% of the senior leadership respondents feel included, no other group scores as high: vice presidents and more junior roles scored 44%; women and ethnic/racial minorities were at 50%; and non-minority respondents scored 55%. Thirty-nine percent of the respondents turned down jobs or decided not to pursue an opportunity due to a perceived lack of inclusion associated with that opportunity. However, when grouped by demographic the numbers shift: 50% of LGBTQ+ respondents have decided not to pursue an opportunity due to the perceived lack of inclusion; 44% of women; and 45% of ethnic/racial minorities.

Business language has taken a beating with phrases like “synergy,” “thinking outside the box,” “leverage,” “taking it offline,” and the like. Even so, business language has met inclusionary challenges before: changing “chairman” to “chair” or “chairperson;” forms were edited to change the salutation from “Mr.” to Mr./Mrs./Ms.; and “John Doe” was changed to “John or Jane Doe.” Those changes were an indication of progress, but we have passed those landmarks and language has fallen behind again.

For example, Mr./Mrs./Ms. may not be accurate. Mx. is now available as a gender-neutral honorific. Further, John and Jane Doe are not the only options; perhaps, Occupant(s) is more inclusive and apt. The point is not to make the changes and be done with the effort. The point is to continually evaluate how you are addressing people and ideas to ensure you are being intentionally inclusive and eliminating false barriers.

How can we adapt? First, perfection is not the goal, progress is and it is ongoing. Don’t let fear or discomfort with new language be an impediment. Change is hard for many. It can foster resentment and discomfort. So, as with all things, with practice comes confidence and comfort. Next, evaluate your “go to” phrases and look for the casually exclusionary. It can be as small as referring to your team as “guys,” or assuming the CEO you are referencing is a man. Start to work towards eliminating those sneaky gatekeepers. Enlist a trusted colleague or friend to help you; it is amazing what others identify that you miss. Educate yourself. You can be more intentional when you know what the issues and hurdles are.

Copyright © 2021 USFN. All rights reserved.

Fall 2021 USFN Report