By Keith L. Abramson, Esq.

Frenkel LambertWeisman & Gordon, LLP

USFN Member (FL, NJ, NY)

On May 20, 2026, the New York Appellate Division, Second Department, issued a Decision and Order in US Bank National Association v. Nelson, ___ N.Y.S.3d ___ (2d Dept. 2026), involving the borrowers’ attempt to amend their answers, post-Judgment of Foreclosure and Sale, to raise a defense that the plaintiff lacked standing.

RPAPL 1302-a, which became effective on December 23, 2019, states, in relevant part:

Notwithstanding the provisions of subdivision (e) of rule thirty-two hundred eleven of the civil practice law and rules, any objection or defense based on the plaintiff’s lack of standing in a foreclosure proceeding related to a home loan, as defined in paragraph (a) of subdivision six of section thirteen hundred four of this article, shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss.  A defendant may not raise an objection or defense of lack of standing following a foreclosure sale, however, unless the judgment of foreclosure and sale was issued upon defendant’s default.  (emphasis added). 

Since its enactment, defendants in foreclosure actions have tried to persuade the courts that RPAPL 1302-a allows defendants to raise a defense based on lack of standing “at any time.”  The Appellate Division’s decision in Nelson is the latest in a number of cases in which the court continues to dispel that notion[1].

To understand the court’s decision in Nelson, it is important to consider the procedural history of the case. Nelson was commenced in September 2009, a decade before RPAPL 1302-a was enacted. The defendants interposed timely answers to the complaint but did not include the defense of lack of standing. Plaintiff was awarded summary judgment in 2015 over the defendants’ opposition, and defendants did not attempt to raise the defense at that time. Later, when the plaintiff moved for a Judgment of Foreclosure and Sale, defendants opposed and filed a cross-motion, arguing for the first time, inter alia, that plaintiff lacked standing to commence the action. By Decision and Order dated December 15, 2015, the court granted the plaintiff’s motion and denied the cross-motion, holding that the standing defense should have been raised previously when plaintiff successfully sought summary judgment and an order of reference. The defendants’ first appeal followed.

On January 23, 2019, still prior to the enactment of RPAPL 1302-a, the Appellate Division, Second Department, affirmed the Judgment of Foreclosure and Sale, holding in part that the defendants waived the defense of lack of standing by failing to raise the affirmative defense in their answers. US Bank National Association v. Nelson, 169 A.D.3d 110, 93 N.Y.S.3d 138 (2d Dept. 2019). Defendants moved for leave to reargue the appeal or, in the alternative, for leave to appeal to the Court of Appeals. The court denied leave to reargue but granted leave to appeal to the Court of Appeals.

On December 17, 2020, the New York State Court of Appeals handed down its Memorandum opinion affirming the order of the Appellate Division. The Court concluded that, “under the circumstances of this case, Supreme Court did not err in granting plaintiff’s motions for summary judgment and for a judgment of foreclosure and sale.” US Bank National Association v. Nelson, 36 N.Y.3d 998, 999, 163 N.E.3d 49, 139 N.Y.S.3d 118 (2020). The Court held that, under the law in effect at the time of the orders appealed from, the defense of lack of standing had been waived by the defendants by failing to raise standing in their answers or in pre-answer motions as required by CPLR 3211(e).  Id. The Court expressly stated that it did not reach the issue of whether RPAPL 1302-a, enacted while the appeal was pending, would afford defendants an opportunity to raise standing at this stage of the litigation, and the Court remitted to the Supreme Court for further proceedings.

Back in Supreme Court, the defendants moved for leave to amend their answers to add a defense that the plaintiff lacked standing, to vacate summary judgment and the judgment of foreclosure and sale, and for related relief. In their motion, defendants argued that, pursuant to RPAPL 1302-a, “the defense of standing is not waivable and can be raised at any time prior to a foreclosure sale.”  Plaintiff opposed, and the trial court, relying heavily on the language of the Court of Appeals’ opinion, held that “1302-a does not allow a defendant who defended the action on the merits to raise standing following the grant of judgment of foreclosure and sale.” Unlike at the motion for summary judgment stage, where attempts to raise standing for the first time should be credited, the court observed that “[t]here appears to be no appellate precedent supporting the proposition that a non-defaulting defendant can raise a standing defense post-JFS.”  Accordingly, the defendants’ motion was denied by the trial court. Once again, the defendants appealed.

The Appellate Division affirmed, holding that “the Supreme Court, upon determining that RPAPL 1302-a did not provide an independent basis to vacate a judgment of foreclosure and sale, properly denied the defendants’ motion”.  Nelson, supra, ___, N.Y.S.3d ___ (2d Dept. 2026). It remains to be seen whether the defendants will seek leave to appeal to the Court of Appeals, or whether such leave will be granted.  But for now, the law is clear: A defense that the plaintiff lacks standing may not be raised “at any time.”  More specifically, RPAPL 1302-a does not permit a non-defaulting defendant to raise a standing defense post-Judgment of Foreclosure and Sale.

Copyright © 2026 USFN

USFNews - June 10, 2026

By Andy Saag, Esq.

Tiffany& Bosco, P.A.*

USFN Member (AL, AZ, CA, FL, KY, NV, NM, OH, WV)

Executive Summary of HB315

On April 15, 2026, HB 315 became law in Alabama. The new law, which is effective October 1, 2026, authorizes, but does not require, Class 1 municipalities — which in Alabama means Birmingham — to require owners of vacant properties[1] to register, maintain, and pay fees for buildings sitting empty for more than three months. The law allows for a registration fee of $250 with a 150% increase per year, capping at $1,000, and the law may be enforced through unannounced inspections and fines, with unpaid fines potentially resulting in a lien being placed on the property. Property owners are generally required to register within 30 days of a property being deemed vacant or assuming ownership, or within 90 days if ownership was acquired through foreclosure. 

Why HB 315 May Matter to Foreclosure Buyers

If Birmingham adopts a vacant property registration program, as it is authorized to do, a servicer or investor that acquires a vacant property by foreclosure or deed in lieu of foreclosure inside city limits will be subject to the requirements of said program The ordinance may allow registration within 90 days after assuming ownership, and the same 90-day window also applies to the first subsequent transferee after the property has been acquired by foreclosure or deed in lieu. That extra time is helpful, but it is not a safe harbor against liability. 

Just as important, HB 315 does not let a foreclosure purchaser start with a clean slate. The law requires a vacant-property ordinance to provide that subsequent good-faith purchasers, parties who foreclose, and parties who acquire title by deed in lieu of foreclosure assume the obligations of the prior owner. That means the act of taking title may also mean inheriting existing compliance problems, unresolved registration issues, or conditions already likely to trigger enforcement. 

The registration process itself can also be more burdensome than it first appears. The ordinance may require the owner to provide contact information, the property address, the date the property became vacant, the expected length of vacancy, and the names and addresses of known lienholders or servicing representatives. If the owner is not an Alabama resident, the ordinance may require designation of an in-state agent authorized to receive notices and service of process, or submission to Alabama jurisdiction in a form satisfactory to the program administrator. That is especially significant for out-of-state investors, lenders, and institutional buyers managing Birmingham properties from elsewhere. 

Legal and Practical Risks for Foreclosure Purchasers

One of the biggest legal risks created by HB 315 is successor liability at the property level. Because the bill requires foreclosure buyers and other good-faith subsequent purchasers to assume the obligations of prior owners, a new owner may inherit a troubled asset that is already on the city’s radar. If the prior owner let the property sit vacant and deteriorate, the foreclosure purchaser may have to solve that problem immediately, even though they did not create it.

A second major risk is missing the vacant-property registration deadline. Although foreclosure purchasers receive a longer 90-day period, many acquired properties will already satisfy the statute’s vacancy standard because the 90-day vacancy period can run before the foreclosure sale ever occurs. A buyer that waits too long to inspect, evaluate, and triage the property may lose valuable time and fall behind on registration obligations almost as soon as title transfers.

HB 315 also creates a direct carrying cost risk through registration fees. The statute authorizes an initial annual registration fee of up to $250, with subsequent annual fees allowed to increase by as much as 150% of the previous year’s fee, capped at $1,000. The penalties may be even more serious than the fees. The law allows municipal fines of up to $1,000 per violation for failing to comply with ordinance requirements. Unpaid registration fees and fines may become liens on the property once a notice of lien is recorded in probate. In addition, if the owner does not secure or maintain the property after notice, the municipality may take corrective action and charge the owner its reasonable costs, and those costs may also become liens if properly recorded. That creates a compounding risk: registration fees, violation fines, municipal abatement costs, and title complications can all stack on top of each other.

Out-of-state purchasers face an added compliance challenge. If ownership is held through a remote investment vehicle, loan servicer, or special-purpose entity, the owner will need reliable systems for receiving certified mail, monitoring local conditions, and responding quickly to notices. Otherwise, a missed notice can become a missed deadline, then a fine, and, eventually, a lien. For larger foreclosure operators, HB 315 turns local asset management into a legal compliance function, not just a property-preservation issue.

The statute does contain a modest protection for new buyers. Any lien created under the act is subordinate to prior mortgages, mechanic’s and materialman’s liens, and certain tax-related liens, and the municipality may release liens or waive accrued fees or fines when a vacant property is transferred to a good-faith purchaser. Even so, a foreclosure purchaser should not assume that relief is automatic. Due diligence will still matter, including checking recorded liens and engaging the city early if the property is already distressed. 

Exemptions and Opportunities to Reduce Exposure

For non-government foreclosure purchasers, one useful exemption will likely be the one available when the owner files a statement of plans for restoring the property to productive use and occupancy during the 12 months after initial registration would otherwise be due. If the owner fails to begin restoration or occupancy by the end of that period, the waived fee may come due, but the administrator may extend the waiver for one more year if conditions outside the owner’s control significantly impeded progress. 

That means the law rewards active repositioning and punishes drift. A foreclosure buyer with a real rehab plan, listing strategy, or leasing effort may be able to reduce exposure. A buyer who acquires title but delays action may end up paying recurring fees and defending against enforcement without ever improving the property’s value.

Notice, Appeals, and Enforcement

HB 315 requires the ordinance to provide owners with prior notice and appeal rights. Before an adverse decision, certified-mail notice must be sent to the registered owner at least 10 days in advance using the address maintained in probate office records or tax records, if different. Appeals of violations or fines go to the applicable division of the municipal court, and a further appeal may be taken to circuit court within 30 days. The law also allows inspections of the interior and exterior upon at least 10 days’ prior notice after registration is effective or required, and at yearly intervals thereafter while the property remains in the registration database.

For foreclosure purchasers, those procedural rights are important, but they only help if the owner has systems in place to use them. Someone must be monitoring title records, receiving notices, documenting the condition of the property, preserving evidence of repairs or marketing efforts, and responding within deadlines. Without that operational discipline, the statutory right to appeal may arrive too late to prevent a costly enforcement problem. 

Practical Takeaways

The safest approach under HB 315 is to treat every newly acquired Birmingham foreclosure as a potential regulated vacant property from the moment title is obtained. If Birmingham adopts a vacant property registration program, buyers should quickly determine whether the building has been unoccupied for 90 consecutive days, whether there is visible evidence of neglect, whether prior obligations may already exist, and whether an exemption based on marketing, renovation, or restoration planning is available.

They should also move quickly to secure and maintain the property, register it on time if required, appoint an Alabama-based agent if ownership is out of state, and create a documented plan for restoration, sale, or occupancy. The central practical lesson of the bill is that Birmingham has the ability to make vacancy expensive and inactivity costly. Foreclosure purchasers can still invest in distressed property, but the law strongly favors owners who act quickly and visibly to return those assets to productive use.

By James AR Pocklington, Esq
McCalla Raymer Leibert Pierce, LLP*

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

In one of its first opinions discussing so-called Zombie Mortgages, Aspen Properties Group, LLC v. Roberts-Joachim, the Connecticut Appellate Court has ruled in favor of the foreclosing lender on a defense of abandonment brought by the borrower.

Plaintiff, Aspen, brought suit seeking foreclosure of a 2006 second mortgage stemming from a 2012 default, with the action not commenced until 2020. At the time, Connecticut did not have a Statute of Limitations for mortgage foreclosure actions[1]  and defendants in the state have attempted various defenses in efforts to prevent what they see to be inequitable or improper foreclosures.

In Roberts-Joachim, the borrower, through her counsel from the Connecticut Fair Housing Center, attempted to raise a defense of abandonment. She alleged that, as she had been the subject of a prior foreclosure action brought by her first mortgage holder, and as the second had not participated, it had abandoned its mortgage. That action, brought in 2013, went to judgment but was eventually resolved through a loan modification and the action was withdrawn. One of Aspen’s predecessors in interest was properly named in that action, but did not appear or participate.

Aspen eventually accelerated and brought its action, which proceeded to a trial on the sole contested issue of whether Aspen’s predecessor had abandoned the second mortgage by not participating in the first mortgage’s prior foreclosure. The trial court rendered judgment for the lender as it determined that simply not appearing did not evidence an intent to abandon the second mortgage as there was no equity at the time, and that the abandonment claim was not carried. No evidence was provided as to the predecessor lender at trial and the trial court declined to infer an intent to abandon.

Much of the following appeal turned on the specific facts as found by the trial court, with the appellate court finding no reason to disagree with any of the rulings of the trial court.  Most importantly, the appellate court adopted the trial court analysis of the distinction between the debt and the lien, which provides some insight as to available arguments in similar situations.

First, the court reasoned that the sporadic mailing of demand letters … did not necessarily constitute an intent to abandon the mortgage because PNC had decided to ‘‘charge off’’ the home equity line of credit on its books as an accounting measure. … Of course, PNC’s determination that the loan should be classified as a bad debt does not necessarily mean that it also abandoned the mortgage, which realistically was perhaps the only remaining means to recover the sums it had loaned to the defendant. In other words, the court concluded that there was a reasonable explanation for the dearth of demand letters other than an intent to abandon the mortgage altogether.

While certainly not controlling (abandonment being a very fact-based defense in Connecticut), the argument that acknowledging a bad debt does not necessarily mean abandoning a lien is a potentially compelling argument, and one that lenders encountering challenges to second mortgages may do well to heed. This is potentially useful in any judicial state where a foreclosing senior is required to name the junior, and the junior took no action because, at the time, there was no equity in the property to justify same.

While the appellate court did not create a blanket rule against abandonment defenses to zombie mortgage foreclosures, Aspen provides a solid roadmap for how to address such claims at the trial court level and have the decision survive appellate review. 

By Blair Gisi, Esq.
SouthLaw, PC *
USFN Member (IA, KS, MO, NE)

In Wilmington Sav. Fund Soc'y v. Campbell, 2021 Kan. App. Unpub. LEXIS 330, the Kansas Court of Appeals issued a ruling that provides a bright line rule under K.S.A. §60-241. 

60-241. Dismissal of actions. (a) Voluntary dismissal.

(1) By the plaintiff. 

(A) Without a court order. Subject to subsection (e) of K.S.A. §60-223, K.S.A. §60-223a and K.S.A. §60-223b, the plaintiff may dismiss an action without a court order by filing:

(i) A notice of dismissal before the opposing party serves either an answer or a motion for summary judgment; or

(ii) a stipulation of dismissal signed by all parties who have appeared. When the dismissal is by stipulation, the clerk of the court must enter an order of dismissal as a matter of course.

(B) Effect. Unless the notice or stipulation states otherwise, the dismissal is without prejudice. But if the plaintiff previously dismissed any federal- or state-court action based on or including the same claim, a notice of dismissal operates as an adjudication on the merits.

That bright line or “two-dismissal” rule is: “[I]f a plaintiff has once dismissed an action, a dismissal by notice of a second action based on or including the same claim, amounts to an adjudication on the merits.  As such, the second dismissal effectively creates a res judicata bar to a third action.”  Campbell at 6.

In this case, the Appellate Court stated that the district court relied upon “judicial magic” in concluding the second foreclosure case, which was dismissed by a Court Order, was legally equivalent to a notice of dismissal. Given this false equivalency relied upon by the district court and given the procedural disposition of the case at dismissal which would prevent dismissal by notice, “the dismissal of that [second] action must have been by court order, obviating the application of the two-dismissal rule.”  Campbell at 11.

While it may be arguable that certain circumstances leading to the dismissal of a pending foreclosure action, e.g., reinstatement or a loan modification, may create a new cause of action with new or distinguishable grounds for foreclosure, the mere act of filing a second Notice of Dismissal on the same loan against the same borrowers may create grounds for those borrowers to argue that any subsequent foreclosure is precluded under the statute cited above.

To avoid the risk of protracted litigation associated with this issue, the best practice for dismissing subsequent foreclosure cases against the same loan and borrower(s) is to seek leave to dismiss via a Motion and Order to Dismiss, ultimately reviewed and approved by the presiding judge. Obtaining an Order of Dismissal significantly reduces the risk of a res judicata bar to foreclosing, as the Campbell case makes clear, “. . . the [dismissal by notice] rule comes into play only if the second dismissal is by notice.”  At 8 (emphasis in original). Seeking an Order of Dismissal may include additional filing and attorney fees; however, those fees will be significantly less than litigating this issue and potentially losing the right to foreclose.

Copyright © 2024 USFN
USFNews - May 15, 2024

* Denotes firm is a 2023 USFN Award of Excellence recipient

By Timothy Ziegler, Esq.

Frenkel Lambert Weiss Weisman & Gordon, LLP*

USFN Member (NY, FL, NJ)

Governor Phil Murphy signed into law New Jersey Assembly Bill 5664, the “Community Wealth Preservation Program,” on January 12, 2024. The bill, which became effective immediately, amends and supplements N.J.S.A. 2A:50-64 and N.J.S.A. 22A:4-8 and affects most aspects of sheriff’s sales. The main gist of the statute is that it provides specific parties with certain advantages over other potential bidders. Foreclosed upon defendants, next of kin of the foreclosed upon defendants, tenants, or nonprofit community development corporations (hereinafter collectively referred to as “Preferred Purchasers”) are given a first and second right of refusal to purchase the property for an “upset price.” Preferred Purchasers, plus any individuals who intend to occupy the property, are also given advantages, including reduced deposit requirements and extended time to complete the sale.      

Foreclosing plaintiffs are now required to provide an upset price, which is defined as “the minimum amount that a foreclosed upon property shall be sold for in a sheriff’s sale as determined by the foreclosing plaintiff.” The upset price must first be provided at least four weeks prior to the scheduled sale date and then again on the day of the sale. The upset price may change between the initial notice and the day of sale, but it shall not increase by more than three percent absent certain defined circumstances. 

             The upset price is now a key component of the sheriff’s sale process, as the Preferred Purchasers, if certain requirements are met, have the opportunity to purchase the subject property at the upset price prior to the sheriff opening the bidding. If that right is exercised, the Preferred Purchaser is only required to provide a 3.5 percent deposit and will be given 90 business days to pay the balance of the upset price to the sheriff. 

            If a Preferred Purchaser does not exercise their right to purchase, the sheriff will conduct an auction for the property. If the successful bidder at the auction is an individual who intends to occupy the property for 84 months, they will also enjoy the benefit of only having to pay a 3.5 percent deposit and will likewise have 90 business days to pay the balance of their bid to the sheriff. If the property is purchased in this matter, the bidder will be required to occupy the property for at least 84 months. 

For any bidder who is not a Preferred Purchaser or does not intend to occupy the property for 84 months, they will be required to pay a 20 percent deposit with the balance due pursuant to the sheriff’s conditions of sale, which is generally 30 calendar days.

            The upset price and revised bidding rules are not the only changes to the sale process. The law also adds new requirements and responsibilities for foreclosing plaintiffs and their counsel. Foreclosing plaintiffs are now required to send the notice of sale to the defendant as well as to the subject property, and the notice must be mailed in an envelope which “plainly states on its exterior that the envelope is a notice for the sale of the foreclosed upon residential property.” The plaintiff is also required to disclose the occupancy of the property, and if vacant, provide access to the property to the successful bidder.

            These sweeping changes leave many questions unanswered.   

Who is responsible for the property during the 90 business days that a purchaser has to complete the sale? Not only will this extended timeframe increase foreclosure timelines, but tax, utility, and insurance bills will continue to come due, and the property will continue to need maintenance. If the foreclosing plaintiff continues to pay these amounts, there is no mechanism in the statute for recoupment if the purchase is completed. On the other hand, if the purchase is not completed, an election to not pay the reoccurring costs would leave the plaintiff open to potential tax sales, maintenance violations. and possible damage to a now uninsured property.  These potential costs and risks are new factors that must be considered by lenders.      

Is the requirement to add additional language to the outside of the envelope compatible with the Fair Debt Collection Practices Act (“FDCPA”)? The FDCPA not only prohibits communication with unauthorized third parties, 15 U.S.C.§ 1692(c)(b), but also prohibits using language on the outside of the envelope when communicating with the consumer, 15 U.S.C.§ 1692f (8). If the laws do conflict, federal preemption will require compliance with the FDCPA over that of the state law.

What happens to junior mortgages if a Preferred Purchaser exercises their right to purchase at the upset price? The law is silent as to junior liens and how they may be affected. If no sale was held, it would follow that the junior mortgages would remain as valid liens on the property. Additionally, pursuant to 28 U.S.C. §2140, the United States requires a judicial sale in actions where it is named as a defendant. Therefore, liens held by the United States, which include mortgages held by the Secretary of Housing and Urban Development, would remain attached to the property. Thus, junior mortgage holders will need to be vigilant in monitoring how senior foreclosure matters are resolved as their liens may survive the action.

Inquiries have been made to members of the New Jersey legislature and there has been indication that further amendments may be forthcoming to address some of the aforementioned concerns. However, no new legislation has been introduced as of the date of this article and any clarification may first come through the courtroom. 

Copyright © USFN 2024

USFNews - March 20

* Denotes firm is a 2023 USFN Award of Excellence recipient.

By Melanie J. Thompson, Esq. and Michele M.Bradford, Esq.

Orlans PC *

USFN Member (DE, MA, MI, DC, FL, MD, NH, PA, RI, VA)

Delaware Superior Court Judge Danielle Brennan issued a decision on June 1, 2023, that has important implications for junior lienholders. Previously, lenders foreclosing in second position were entitled to the proceeds of Sheriff sales. The new decision, REO Trust 2017-RPL1 v. Short Sale, LLC, provides that sale proceeds must be distributed to the senior lienholder first, and then any remaining proceeds will be distributed to the foreclosing junior lienholder.

The June ruling originally stated that if the sale proceeds were insufficient to satisfy both the senior lien as well as the foreclosing junior mortgagee’s lien, the property would remain encumbered by its mortgage. Subsequently, a motion for reargument was filed, and the Court issued an amended ruling on August 1, 2023, deleting the sentence regarding retaining the mortgage lien. Accordingly, whether sale proceeds are sufficient to satisfy the debt owed to a foreclosing junior mortgagee, the junior mortgage will be divested by the sale.

This represents a major change in Delaware foreclosure law. Junior lienholders may elect not to foreclose unless there is sufficient equity in the property to pay off the superior liens as well as the foreclosing lien.  Mortgagors may be more likely to default on junior mortgages, knowing that lenders are unlikely to foreclose. Real estate purchasers may be less likely to bid on properties, given the uncertainty surrounding junior mortgage foreclosure sales.

The foreclosing junior mortgagee filed an appeal on August 28, 2023, which could take six to 12 months before the Delaware Supreme Court issues a final decision. The Superior Court’s ruling may likely be overturned.

In response to the Court’s ruling, the Sheriff of New Castle County announced new rules for Sheriff sales, retroactive to June 1, 2023. The Sheriff now requires a 40-year title search when scheduling all foreclosure sales. If the foreclosing lender is in a junior position, they are not permitted to credit bid. Foreclosing lenders in a junior position who are the winning bidder will be required to post 20% of the high bid amount at the time of sale. The remaining 80% of the bid must be paid by the listed due date in the form of an attorney check or cashier’s check. Sale proceeds will only be distributed by the Sheriff to foreclosing lienholders in first position.  Where the foreclosing lienholder is in a junior position, the Sheriff will turn over the sale proceeds to the Court clerk, and the foreclosing lienholder must petition the Court for the proceeds. It is unknown how the Court would rule on such a petition or whether the Court will distribute funds. The Court may wait for the Supreme Court’s decision on appeal before disbursing funds.

The Sheriff of Kent County will hold sale proceeds for junior lienholders until the appeal is decided. The Sheriff of Sussex County has not issued a statement on how he will proceed in response to the Court’s decision.

The Superior Court’s ruling is very harsh for junior mortgagees. Since the outcome of the appeal is unknown, the distribution of proceeds from junior mortgagee sales is in limbo, which also affects senior mortgagees. The requirement to provide the Sheriff with a 40-year title search will increase costs for all lienholders proceeding to sale in New Castle County.

We do not recommend proceeding to sale on junior liens at this time due to the uncertainty as to whether the debt will be satisfied.

Copyright © USFN 2023

USFNews - Oct. 18

* Denotes firm is a 2022 Award of Excellence recipient

by L. Graham Arceneaux, Esq.

Graham Arceneaux & Allen, LLC

USFN Member (LA)

Louisiana is currently in a crisis when it comes to property insurance. In the wake of several hurricanes going back to 2020, more than a dozen insurance providers doing business in Louisiana have become financially insolvent. Other insurance companies pulled out of the state due to the number of claims and payouts. As a result of these natural catastrophe losses, homeowners have seen their insurance premiums increase as much as 60% to 100% in one year.

Property insurance issues are not limited to Louisiana. State Farm and Allstate have pulled back from California’s home insurance marketplace, stating increasing wildfire risk and soaring construction costs have prompted them to stop writing policies in the nation’s most populous state.

In Colorado, devastating wildfires have seen homeowner’s premiums rising significantly. Colorado state lawmakers commissioned a study which found 76% of the states’ insurance carriers decreased their exposure in Colorado in 2022 leaving the five largest insurance companies to dominate the market.

Florida, like Louisiana, has struggled to keep their insurance market healthy due to the unfortunate frequency of hurricanes impacting the state.

Insurance companies agree that the cycle of natural disasters, and their increased intensity in recent years, along with the higher costs to repair homes and the higher costs for reinsurance premiums have led to the homeowner bearing the burden of substantially increased insurance premiums.

The increase in insurance premiums in Louisiana (as previously stated) can be as much as 60% to 100% for calendar year 2023. Borrowers across the country are still dealing with persistent inflation as is evident by the Federal Reserve’s latest rate increase on July 26, 2023.

Borrowers are now watching their monthly mortgage payments increase dramatically due to the escrow shortage caused by increasing insurance premiums. Borrowers are calling their servicers and seeking some sort of relief, but finding little relief as escrow charges are not subject to modification. Insurance costs in Louisiana and other states vulnerable to natural disasters are pushing some borrowers to their financial limits.

In summary, an increase in property insurance for borrowers will necessarily increase mortgage defaults and, by extension, foreclosures. Until property insurance rates moderate, expect to see this trend in states with heightened natural disaster vulnerabilities.

Copyright @2023 USFN

USFN e-Update - August

By Nicole Murray, Esq.

Wilson & Associates, PLLC*

USFN Member (AR, MS, TN)

               In May of this year, the Arkansas Court of Appeals reversed a decision from the Pulaski County Circuit Court, Third Division, holding that the appellant’s foreclosure complaint was not barred by the statute of limitations because its prior maturities of the debt that occurred when it exercised the option to accelerate were later extinguished by filing notices of cancellation (Wilmington Savings Fund Soc’y v. Smith, 2023 Ark. App. 326 (2023)). 

               Milton Smith purchased the subject property and executed a promissory note and mortgage in favor of Bank of America on October 16, 2007. The mortgage provided that, in the event of a default, the lender had the option to declare the entire unpaid balance of the debt, including interest, immediately due and payable, and both the note and mortgage were payable in monthly installments. 

               Smith defaulted on payments on the note in December of 2009, and Bank of America filed a Notice of Default and Intention to Sell which stated that a default had occurred in the payment of the indebtedness and that the unpaid balance of the debt was now wholly due. It also set a foreclosure sale date of July 8, 2010. The sale was later canceled, and a notice of cancellation was recorded in the county records on July 8, 2010. On December 16, 2010, Bank of America recorded another Notice of Default and Intention to Sell with a foreclosure sale scheduled for February 17, 2011, which was later canceled by a recorded notice of cancellation on February 14, 2011.

               The note and mortgage were later assigned to Wilmington Savings Fund Society (“Wilmington”), and Wilmington filed a third Notice of Default and Intention to Sell on February 4, 2016, with a foreclosure sale scheduled for April 5, 2016. In response, Smith filed a complaint to quiet title alleging that the promissory note could not be enforced because no payment had been made since 2009, and thus the statute of limitations for enforcing it had expired. Meanwhile, the hazard insurance on the subject property had expired, and Wilmington sent Smith a letter notifying him that it had obtained the required hazard insurance, as permitted under the terms of the mortgage, and that the premium had been billed to an escrow account created for the loan. Wilmington also later counterclaimed alleging that it was entitled to foreclose because it was still owed the remaining principal sum, plus accrued interest and costs, and the indebtedness under the note had never been accelerated, but even if it had been, the statute of limitations had been tolled by Wilmington’s and/or its predecessors’ abandonment of acceleration as shown by the filing of the notices of cancellation.

               Smith responded with a motion for summary judgment and dismissal arguing that Wilmington’s foreclosure cause of action was barred by the five-year statute of limitation because the limitation period had run many years ago in May 2015 due to Bank of America’s original acceleration of the indebtedness on the note in May of 2010. Wilmington responded by citing Mitchell v. Federal Land Bank, 206 Ark. 253, 174 S.W.2d 671 (1943), arguing the acceleration had been waived through the unilateral actions of the mortgagee when Bank of America waived the May 2010 and December 2010 accelerations by filing notices canceling the foreclosure sales. Wilmington also cited Dunnington v. Taylor, 198 Ark. 770, 131 S.W.2d 62 (1939), arguing that even if the statute of limitation has begun to run when the debt was first accelerated in May 2010, the insurance payments made by Wilmington either tolled the statute of limitation or created a new date from which the limitations would run as each payment was made.

Smith responded by arguing that Mitchell and Dunnington were no longer binding legal precedents because Ark. Code Ann. § 16-56-111 had been amended in 1989, and prior to that date, all exceptions to the five-year limitation period had been judicially created. Smith alleged the statute of limitations had undergone a major change after the amendment because the General Assembly had only codified a part of the judicially created exceptions to the statute, but not all of them, and thus the exceptions not expressly included in the statute, such as those from Dunnington and Mitchell, were no longer binding precedent. Wilmington responded by arguing that Dunnington and Mitchell were still binding because the amendment did not include unmistakable language displaying a legislative intent to overrule them.

The circuit court ruled on the motions and entered an order on February 21, 2020, finding that the five-year statute of limitations had run, barring Wilmington from foreclosing on the subject property. In another order on April 6, 2020, the circuit court denied Wilmington’s motion for a new trial, stating that the limitation period had run and the 1989 amendment controlled. Wilmington appealed.

On appeal, the Arkansas Court of Appeals ruled that Mitchell and Dunnington remained good law and that the legislature had not intended to overrule the prior cases when it amended the statute of limitations in 1989 as shown by the lack of unmistakable language showing such intent. Applying Mitchell to the facts of the present case, the court of appeals found that Wilmington’s foreclosure action was not barred by the statute of limitations because the accelerations of the debt that occurred in May and December 2010 were later extinguished and waived as shown by the filing of the notices of cancellation in July 2010 and February 2011. The note did not mature again until Wilmington later chose to accelerate in 2016, and thus Wilmington’s foreclosure complaint filed in June of 2019 was within the five-year period and not barred by the statute of limitations.

This holding comes as good news to lenders and investors who have chosen to previously accelerate their notes and filed Notices of Default and Intention to Sell, only to later cancel the scheduled foreclosure date. The holding is good news for borrowers too because the parties can now afford to be more generous in canceling prior foreclosures to work with the borrower while no longer battling a looming statute of limitations deadline. While deceleration has long been an option to toll the statute of limitations, this holding provides a clear, concrete example of what deceleration looks like. Lenders and investors can rest assured that their interests are protected by canceling a foreclosure sale after acceleration has occurred as long as a notice of cancellation is filed to toll the statute of limitations.

Copyright @2023 USFN
USFN e-Update - August

By ReggieCorley, Esq.

Scott& Corley, PA

USFN Member (SC)

On May 11, 2023, the South Carolina Court of Appeals reversed the lower court’s findings in Buffalo Creek Investments, Inc. v. Stephen H. Pettus (complete case link below). This case involved a foreclosure action where the lower court judge erred by granting the mortgagors’ motion to vacate and set aside the judicial foreclosure case and sale.

Following the foreclosure order and judicial foreclosure sale of the subject property to third-party purchasers, the mortgagors filed a motion to vacate and set aside the judicial foreclosure sale. Following that hearing, the lower court judge granted the mortgagors’ motion. The successful purchasers of the subject property at the judicial foreclosure sale appealed the lower court’s order.

The issues raised by the mortgagors on appeal were: (1) Did the lower court abuse its discretion in setting aside a valid judicial foreclosure sale when it failed to recognize that the purchasers were “bona fide purchasers for value without notice;” and (2) Did the lower court abuse its discretion in setting aside a valid judicial foreclosure sale when it focused on alleged irregularities in the underlying foreclosure action and the “equities,” rather than the absence of any evidence of irregularity in the conduct of the judicial foreclosure sale?

Based on the record before it, the Court of Appeals was compelled to presume the proceedings leading to the judicial foreclosure sale were sufficient, and therefore, “that the lower court erred in not affording the successful purchasers at the foreclosure sale their proper protections under Section 15-39-870, as bona fide purchasers for value without notice.” The Court determined that the buyers at the foreclosure sale were, “. . . bona fide purchasers for value without notice because they satisfied their bid in full and received the deed pursuant to an order from the special referee,” and that the purchasers acted in good faith. Moreover, the Court found that the lower court erred by not determining that res judicata barred the mortgagors' claims (i.e., the lower court’s determination in the foreclosure order that South Carolina Supreme Court Administrative Order 2011-05-02-01 did not apply because the subject property was not “owner-occupied” since “the mortgage granted to allow the mortgagors to invest in a business”), and thus, the issues raised by the mortgagors were not properly preserved for appeal.

Finally, the Court ruled that the lower court abused its discretion in finding the purchasers’ sale price at the judicial foreclosure sale was so low as to shock the court’s conscience (i.e., the purchasers’ final bid amount was greater than 10%  of the subject property’s actual value and there were no other circumstances from with the court could infer fraud had been committed).

A link to the full opinion of the above cited case (Buffalo Creek Investments, Inc. v. Stephen H. Pettus) can be found on page 12 at the following link: https://www.sccourts.org/opinions/advSheets/no182023.pdf

South Carolina Code of Laws Section 15-39-870 can be found at the following link: https://www.scstatehouse.gov/code/t15c039.php

USFN Copyright @2023

June 2023 USFN e-Update

By Steven A. Jacobs, Esq. and Laura M. Hawley, Esq.
Schneiderman & Sherman, P.C.
USFN Member (MI)

On January 12, 2023, the Michigan Court of Appeals issued a published opinion in the case of Kessler v. Longview Agricultural Asset Management, LLC, No. 360375, concerning the recording of a sheriff’s deed outside of the statutory 20-day period listed in MCL 600.3232. The court ruled that the redemption period after a mortgage foreclosure by advertisement runs from the date of the sheriff’s sale, regardless of when the sheriff’s deed is recorded.  This is true even if the sheriff’s deed is not recorded until more than 20 days after the date of the sale. The statute at issue provided in part:

“[S]uch deed or deeds shall, as soon as practicable, and within 20 days after such sale, be deposited with the register of deeds of the county in which the land therein described is situated, and the register shall endorse thereon the time the same was received, ..[.]”

In Kessler, plaintiffs’ farm was foreclosed by advertisement and sold at sheriff’s sale on August 21, 2020. The sheriff’s deed was not recorded until September 24, 2020, 34 days after the sale. The Kesslers argued that since the purchaser failed to record the sheriff’s deed within 20 days of the date of the sale, the statutory redemption period did not begin to run until the date of recording the sheriff’s deed.

The trial court rejected plaintiffs’ argument and granted summary disposition in favor of the defendant. The Court of Appeals affirmed the ruling and held the statute requiring recording of the deed within 20 days after the sale merely “delineates the procedural obligations on the sheriff and the clerk” at the Register of Deeds and that “there are no penalties for noncompliance contained within the statute.”

Prior to the ruling, it was implied that the recording of a sheriff’s deed beyond the 20-day period meant the redemption period started to run from the date of recording, not the date of the sale. This would result in redemption periods being extended longer than the specific period set forth under statute because of deeds being rejected or not recorded by the county Register of Deeds within the 20-day time frame. The Court, however, arrived at a different conclusion by analyzing the specific language found in the redemption statute, MCL 600.3240, and contrasting it with the language referenced above under MCL 600.3232. The Court held that failure to timely record a deed from a sheriff’s sale does not extend the date to redeem the property. The Court went on to declare that “only MCL 600.3240 delineates the commencement for the [redemption] period and states that it runs ‘from the date of the sale.’” Therefore, the date the deed is recorded is irrelevant to the calculation of the redemption period and does not extend the deadline.

The ruling in Kessler v. Longview Agricultural Asset Management, LLC provides clarification that a delay in recording the sheriff’s deed beyond the 20 days following a sale will not extend the redemption period.

Copyright @2023

USFN April e-Update

by Michael J. McKeefery, Esq.

Cohn, Goldberg & Deutsch, LLC *

USFN Member (DC, MD)

            For years now, all mortgage holders in the District of Columbia (“D.C.”) have had to simply accept that a Condominium Association (“COA”) could swoop in and sever a mortgage holder’s interests in a property. Under D.C. law, if a COA forecloses on a “super priority” lien, then a priority mortgage holder’s interest in the property would be wiped out in its entirety. Despite this bleak backdrop, a case has finally emerged from the United States District Court for the District of Columbia that offers some solace to a certain group of mortgage holders. 

            Before this case, the landscape for all mortgage holders in D.C. had been a treacherous one. In 2014, the Court of Appeals for the District of Columbia issued its decision in Chase Plaza Condominium Ass’n v. JP Morgan Chase Bank, N.A., 98 A.3d 166 (D.C. 2014), finding that a COA is permitted to foreclose on a six-month condominium assessment lien, and that such a foreclosure wipes out any and all other liens on the property, including any previously recorded first mortgage lien. In Liu v. U.S. Bank, N.A., 179 A.3d 871 (D.C. 2018), the D.C. Court of Appeals found that a COA foreclosure sale wiped out all other liens, even when there was explicit notice to all potential buyers that the sale was to be conducted “subject to the first mortgage or deed of trust.” In 4700 Conn 305 Trust v. Capital One, N.A., 193 A.3d 762 (D.C. 2018), the Court found that, even in the context of a COA lien that amounted to more than just the six-month super-priority lien, all liens were wiped out including previously recorded first mortgage liens.

            However, now, hope shines brightly for a particular group of first priority mortgage holders, thanks to the United States District Court for the District of Columbia’s recent decision in M&T Bank v. Delphina N. Brown, 2022 WL 7003740. The facts of this case are reasonably straightforward. In 2006, Ms. Brown took out a loan to finance the purchase of a condominium unit commonly known as 512 Ridge Road, SE, #206, Washington, DC (the “Property”). Freddie Mac purchased this loan in 2007, and M&T Bank (“M&T”) became the servicing agent for Freddie Mac. In 2016, the Ridgecrest Condominium Owners Association (“RCOA”) executed and recorded a lien concerning the Property. Thereafter, RCOA foreclosed on its lien and sold the Property via public sale to a third-party purchaser. It is uncontested that, at the time of RCOA’s foreclosure sale, Freddie Mac was the owner of the 2006 loan, and neither Freddie Mac nor the Federal Housing Finance Agency (“FHFA”) consented to the sale. In 2017, M&T filed a Complaint for Judicial Foreclosure regarding the Property and amended that complaint in 2019 to add Freddie Mac as a plaintiff in the action. M&T and Freddie Mac then removed their case to the United States District Court for the District of Columbia and filed a Motion for Partial Summary Judgement with the Court, requesting that the Court find that the COA foreclosure did not extinguish Freddie Mac’s interest in the Property. 

            Primarily, in its analysis, the Court focused upon the interplay between the Federal Foreclosure Bar and the D.C. Condominium Act (DC Code § 42-1903.13). The Federal Foreclosure Bar provides that “[n]o property of [an FHFA conservatorship] shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the Agency.” 12 U.S.C. § 4617 (j) (3) (emphasis added). The D.C. Condominium Act grants eligible COA liens a “super-priority” status, permitting a COA with such a lien to foreclose on a property and extinguish all other liens. The Court found that the D.C. Condominium Act is preempted by the Federal Foreclosure Bar. Essentially, the Court found that it was impossible to reconcile the Federal Foreclosure Bar’s explicit provision that no property of an FHFA conservatorship shall be subject to foreclosure without consent of the Agency with a local law that authorizes the foreclosure of FHFA property without its consent. Therefore, the Court found that, from the text of the federal provision alone, it was clear that Congress intended for the Federal Foreclosure Bar to displace state laws such as the D.C. Condominium Act.

The Court then considered the purposes and objectives of the Federal Foreclosure Bar. The Federal Foreclosure Bar was enacted as part of the Housing and Economic Recovery Act of 2008 (“HERA”).  HERA “authorized the Director of FHFA to appoint FHFA as either conservator or receiver for Fannie Mae and Freddie Mac;” and, thus, the Federal Foreclosure Bar prevents entities from extinguishing Freddie Mac’s property through foreclosure. Perry Cap. LLC v. Mnuchin, 864 F,3d 591, 599-600 (citing 12 U.S.C. § 4617 (a) (1)).

HERA was enacted after the 2008 mortgage crisis, and Congress chose to “authorize extraordinary measures to resuscitate” Fannie Mae and Freddie Mac, including granting the FHFA authority to appoint itself as their conservator. Id. at 599-600. Congress made it clear that it provided this power to FHFA to “preserve and conserve the assets and property” of Fannie Mae and Freddie Mac.” Id. at 600 (citing 12 U.S.C. § 4617 (b) (2) (B) (iv)). Since the D.C. Condominium Act works against preserving and conserving such assets and property, the Court found that the D.C. Condominium Act was preempted by the Federal Foreclosure Bar and could not extinguish Freddie Mac’s lien in this case. 

Thus, Brown stands for the principle that, in D.C., the foreclosure of a COA lien does not extinguish a priority lien held by an FHFA conservatorship, such as Fannie Mae or Freddie Mac. However, it is important to note that this decision does not alter the fact that a private entity’s priority lien would still be wiped out by the foreclosure of a COA’s super-priority lien in D.C.

Copyright @2022 USFN

USFNews - Nov. 16

* Denotes firm is a 2021 Award of Excellence recipient.

By Kayo Manson-Tompkins, Esq.

The Wolf Firm, A Law Corporation *
USFN Member (CA, ID, OR, WA)

               For decades, non-judicial foreclosures have been processed pursuant to California Civil Code Section 2924, et seq. Basically, the trustee records a substitution of trustee and notice of default and then waits 90 days, or what is referred to as the pre-publication period. After the pre-publication period expires, the trustee schedules a sale date, records a notice of sale, mails out the notice of sale, publishes the notice of sale, posts the notice of sale, and then conducts the sale. 

Of course, this process, which used to take approximately 120 days to complete, has already been elongated by the passage of AB 1837, which created California Civil Code Section 2924m. This statute allows qualified bidders to submit a notice of intent to bid up to 15 days after the foreclosure sale, and then submit funds that exceed the original bid up to 45 days after the foreclosure sale. 

On February 18, 2022, Senator Bob Archuleta introduced a bizarre bill, SB 1323, that created a major stir in the industry and came incredibly close to passage. Under SB 1323, the foreclosure trustee was required to take steps to market the subject property prior to conducting a foreclosure sale if there was “equity” in the property. 

This approach was subject to a number of significant problems. First, the standard deed of trust does not provide the trustee with the power to market property prior to foreclosure sale. The trustee does not own the property and has no right to sell it except by foreclosure sale. Nonetheless, the proposed Bill required that the trustee list the property with a real estate agent and offer the subject property for sale. Again, the bill was silent as to what role the owner had in this process (e.g., could the owner refuse to allow the property to be shown), and whether the trustee and/or real estate agent could be held liable for trespassing on the owner’s property or for selling the property at a price less than what the owner claimed the true value to be.

               The determination of equity was also problematic. The only real way to obtain an accurate appraisal is with an interior inspection. The bill was silent as to what role the trustor (owner of the property) had in this process, and whether the trustee had the power to force the homeowner to allow an interior inspection. Also, there was concern that the trustee might have liability for an inaccurate appraisal.

               The good news is that the United Trustee’s Association, in association with other industry trade groups, killed SB 1323 - it is dead!!! Had this bill passed, at the very least, it would have caused major delays in the foreclosure process, opened up new litigation challenges to the foreclosure, and in the end, may have even caused most lenders to seek judicial (which was not subject to the legislation) as opposed to non-judicial foreclosure.

               The bad news is that the “equity sale” concept may arise from the dead. A new bill is being written to create a different procedure that would protect homeowners from losing the equity in their homes due to foreclosure. The industry organizations are working through their lobbyists to ensure that this Bill is carefully tracked once introduced and that it is refined so that it falls within the standard foreclosure process.

               We are ever watchful of what the California legislature is doing that might impact the foreclosure process and ultimately our clients’ portfolios. 

               Should you have any questions, please do not hesitate to contact Kayo Manson-Tompkins, kayo.manson-tompkins@wolffirm.com or Caren Castle, caren.castle@wolffirm.com.

* Denotes Law Firm is a 2021 Award of Excellence Recipient

Copyright @2022

USFNews