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As we close out 2025, it is fair to say the mortgage default industry once again proved it is anything but static. This past year brought continued regulatory evolution, operational pressure, market consolidation, and rapid technological change. It also brought opportunity - to adapt, to lead, and to shape what comes next. USFN met this moment.
An Industry in Motion
In 2025, we navigated shifting FHA and VA guidance, increased state-level consumer protection activity, and the growing role of AI and automation in a heavily regulated space. Staffing changes at agencies and the GSEs added complexity, while servicers and firms alike faced rising expectations for speed, compliance, and transparency. Through it all, one thing remained clear: Thoughtful advocacy and informed collaboration matter more than ever. USFN delivered in 2025, and we will continue to focus our efforts where they matter most.
Advocacy with Impact
This year, USFN’s advocacy efforts were both active and effective. Guided by direct member feedback, the Advocacy Committee organized targeted workgroups to pursue priority issues and advance meaningful solutions. We strengthened relationships with governmental agencies and the GSEs, recognizing that continuity and credibility are essential.
USFN engaged substantively on VA foreclosure procedures, FHA loss mitigation updates, fee structures, and claims documentation requirements. Our comparative analyses and sustained dialogue contributed to measurable progress, including VA adjustments to default legal fee schedules. While work remains, these developments underscore the value of consistent, informed engagement. We also partnered closely with the MBA, lending our perspective and support to broader industry advocacy efforts.
Education that Meets the Moment
Education remains a cornerstone of USFN’s mission, and our membership continues to set the gold standard for depth of knowledge and leadership in this space. In 2025, USFN delivered programming addressing regulatory change, operational best practices, compliance risk, and emerging technology.
Notably, USFN was the first organization in our space to address the bidding challenges created by CWCOT policy at the Compliance & Legal Issues Seminar. We were also the first to provide practical guidance on the FinCEN Real Estate Transaction Rules through our March 2025 USFN Briefing. USFN remains at the educational forefront of our industry, and we will continue to expand these offerings in the years ahead.
The Executive Servicer Summit
The Executive Servicer Summit was a highlight of the year. ESS delivered exactly what it was designed to provide: candid conversation, thoughtful exchange, and meaningful connection among senior leaders - set against one of the most beautiful locations we have hosted to date. The success of the summit reaffirmed the importance of curated, substantive engagement and reinforced USFN’s role as trusted counsel within the industry.
A Strong and Stable Organization
Behind the scenes, USFN itself remains strong. While early 2025 presented uncertainty in attendance and outlook, the organization, through the focused efforts of USFN staff and the Board, pivoted quickly and addressed the financial impact of that uncertainty. The year closed with USFN operating from a position of financial stability, meeting budgetary goals while continuing to invest in advocacy, education, and member engagement.
Sound administration allows USFN to remain agile, responsive, and focused on delivering value to its members. In the coming months, you will hear more from our CEO, Pam Donahoo, about our goals and ongoing efforts to improve the technology that supports USFN’s operations. This work is no small undertaking, and I am excited about what increased capacity and efficiency will allow us to accomplish.
Looking Ahead
As we move into 2026, the pace of change will not slow. Regulatory scrutiny will continue. Technology will advance. Market dynamics will evolve. But USFN is well positioned for what comes next because of our engaged membership, dedicated volunteers, and shared commitment to excellence.
Thank you for your participation, your trust, and your willingness to lean into the work. USFN is strongest when our members are involved, informed, and invested. I look forward to what we will accomplish together in the year ahead.
Posted By USFN,
Friday, December 12, 2025
Updated: Wednesday, December 10, 2025
USFN, a trade organization representing America’s mortgage banking attorneys, is pleased to announce Aristocrat Process Serving, LLC as one of its newest associate members. Aristocrat Process Serving is a nationwide provider of legal support services specializing in process serving, e-filing, and document retrieval.
“We are delighted to diversify our associate member base and welcome Aristocrat Process Serving as a new associate member,” said Pamela L. Donahoo, CAE, USFN CEO. “Applying for USFN associate membership is an extensive application process. It is organizations like Aristocrat Process Serving, who have demonstrated success and ongoing support of the industry that ultimately become members of USFN - America’s Mortgage Banking Attorneys.”
Chey Vaughan, Director of Marketing at Aristocrat Process Serving, LLC, says “Joining USFN allows Aristocrat to connect with industry leaders and further our commitment to excellence, compliance, and client-focused service.”
USFN is dedicated to fostering industry collaboration, promoting best practices, and providing resources to its members and their network of service providers. USFN provides a platform for industry professionals to network, share knowledge, and stay informed in an ever-changing landscape. USFN associate members meet the highest industry standards in their fields, participate in mortgage finance industry organizations, as well as actively participate as speakers and writers for USFN events and publications. Learn more about USFN’s newest associate member Aristocrat Process Serving, LLC at servingprocess.com.
On September 16, 2025, USFN held an installment of its
briefing series focusing on various emerging topics in the REO/Eviction sphere
of the default industry. Both new and seasoned professionals gained valuable
knowledge from the panel, which focused on national and state-based themes. The
goal of the session, titled “REO/Eviction Refresher & Hot Topics Under a
New Administration,” was to touch on the fundamentals of this practice area and
enlighten attendees on current issues affecting post-sale processes nationwide.
Roy A. Diaz (Diaz | Anselmo) moderated the panel. He
was joined by panelists Joe Hawk (Walentine O’Toole, LLP), Stuart Gordon
(McCalla Raymer Leibert Pierce, LLP), and William R. Jarrell (Aldridge Pite,
LLP). All of the panelists brought an abundance of knowledge and information to
the virtual briefing space and created a plethora of opportunities for future
in-depth discussions regarding the evolving post-sale landscape.
The panel kicked off with a discussion of legislative
efforts aimed at squatters in REO properties. Legislatures across the country
have passed new laws detailing expedited procedures for removing squatters from
properties, which is welcome news when it comes to handling REO portfolios.
Many of the new laws went into effect in July of 2025. Traditionally, laws
throughout the nation have favored squatters. However, the presence of
squatters blocks vacant properties from being marketed, sold, or rented in a timely
fashion. Lawmakers have taken note of the delays that occur as a result of
squatters, with worsening housing supply shortages in a constrained market
bringing some of these issues to the forefront.
Vexatious Litigants are another area of recent
legislative concern on which the panel focused. Repeated baseless filings by
borrowers and related parties continue to delay closings and evictions in the
months after a foreclosure sale. A handful of states have recently explored
passing litigation to curb the problems brought on by such litigants, including
the unnecessary delays and great expenses of handling lawsuits and
counter-claims brought by these individuals. While only a few states have
passed legislation so far, including California, Illinois, and Nevada, other
legislatures are working through proposed legislation on this topic, which
could serve to curb the frivolous motions, delays, and abusive tactics of
vexatious litigants nationwide.
In order to effectively handle post-sale matters, the
panel turned to a refresher of the REO and Eviction processes, focusing on
post-pandemic trends and emerging compliance considerations under the new presidential
administration. This discussion was well-tailored to professionals of varying
experience levels, as the panel touched on the basics of what happens
post-foreclosure sale and the myriad of issues that could arise at each step in
the process, especially as there are lingering backlogs from pandemic and new
tenant protection statutes that have been passed in many jurisdictions. The
panel also addressed the evolving landscapes of the CFPB, HUD, Veterans
Affairs, and the USDA, opining on what lies ahead for the agencies for the
remainder of 2025 and into 2026.
Finally, the panel shed light on issues that arise
with third party vendors assisting with REO properties and recommended best
practices for their use. The panel highlighted the need for strong indemnity
provisions and to ensure that vendors understand state specific limits – as a
one-size-fits-all 50-state approach is often ineffective when it comes to
post-sale matters.
As the panel noted, “[t]he REO and
eviction space is being reshaped by policy, politics, and public sentiment.”
Proactive strategies, good legal foresight, and staying well-informed of
developments in this area of law are the keys to success in managing REO
portfolios in the months and years to come. USFN continues to
provide vital educational resources to help the industry meet these challenges.
For more on upcoming briefings, compliance events, and digital tools—including
the USFN
Source platform—visit usfnevents.org or explore
the member directory to
connect with experts in this space.
Posted By USFN,
Thursday, July 3, 2025
Updated: Wednesday, July 2, 2025
USFN will be spotlighting our 2024 Award of Excellence
recipients over the next several months. We are taking this opportunity to
recognize these recipients for their commitment to excellence and to USFN.
While all USFN Members must meet rigorous standards and selection criteria,
USFN's Award of Excellence program began in 1993 to elevate firms that
represent the highest realization of the ideals embodied by our organization,
and they symbolize USFN's commitment to quality. Click here for
a full list of USFN's 2024 recipients.
4.Why is the AOE Award important to your
firm?
Receiving the USFN Award of Excellence is important to our firm because it
shows our commitment to the industry, our clients, our community, our
outstanding staff and attorneys, and the organization as a whole. This annual
recognition from such a well-respected industry organization demonstrates that
the hard work and dedication of our entire team is acknowledged.
5.Why is USFN Membership important to your
firm?
As one of the industry’s very first organizations dedicated to default related
work, we have been fortunate to be part of the USFN since its inception. We
appreciate the educational aspects of the organization as well as the
networking opportunities and the industry advocacy that it provides.
In May, USFN held a discussion on Artificial Intelligence
(AI), and I was thrilled to serve as the moderator, which, for my part,
involves not being an expert
and asking questions when something is mentioned that I do not fully
understand. A perfect position for me that fit like a glove! Our experts included
Michael Merritt at BOK Financial, Sally Garrison with The Mortgage Law Firm,
Zack Glaser with Lawyerist, and Brian Nicholas with McCalla Raymer Leibert
Pierce, LLC. I extend my sincere thanks to them for their expertise and for leading
interactive breakout sessions on this important topic.
I learned that Artificial Intelligence, besides being
Spielberg’s worst movie (don’t @ me), is already prevalent in our industry. If
you are as I was, you may have thought that there was still time to prepare for
“the future” and that we would be able to slowly implement AI processes with
carefully prepared and tested safety measures to protect ourselves. However,
the reality is that it is already here and we may be very late to the party. So
this discussion was not only eye opening, but also crucial to understanding
what AI is, what it is not, how to use it properly in our jobs, and what its
future use may look like.
Based on the USFNgage conversations had, let us clarify what
Artificial Intelligence is and is not. AI is fundamentally technology that
enables computer software to mimic human intelligence and problem-solving
abilities. However, right now, we are mostly seeing what is called generative
AI, machine learning and natural language processing specifically designed to
create things, identify patterns, and interact with prompts. Generative AI is mostly
affecting music, art, and writing at this moment. Machine learning appears in
number crunching businesses, email filtering, medicine, and prepping that
Amazon product for shipment once you have put it in your cart because it knows
you need toilet paper and new tennis shoes just as well as you do, so why fight
it? Natural language processing are your chatbots, your Clippy in Word (man, I
miss Clippy), and your “Stephanie” with Visa who wants to understand why you’re
calling today, but you don’t want to talk to “Stephanie,” you want a
“REP-RE-SENT-ATIVE!!!”
AI is not Skynet, HAL 9000, or one of those evil robot
overlords seen in a Hollywood blockbuster. At least not yet… It is more a
highly sophisticated series of programs that piece together portions of the
hodge-podge of humanity’s existence up until this point in order to fulfill a
prompt or interaction it is given. Generative AI, for example, is solely based
on material and content we have already created. It and other programs “learn” based
on what we provide it. AI can draft a paper on ‘The Great Gatsby’ or generate a
novel reminiscent of it, but it cannot produce wholly original creations. Moreover,
it lacks true cognitive abilities – like thinking, feeling, or loving.
Having finally obtained an understanding of what AI is, I
was ready to learn how it is being deployed in our workspace. We have already
seen lawyers get in trouble for using generative AI in brief writing as the
program “hallucinated” or made-up source material, so there are definitely
misuses we need to be aware of. The consensus of the four breakout groups
seemed to point to AI being used to assist in work, but requiring constant
human oversight, interaction, and quality control of the outgoing product. For
example, using AI to help write summarizations of large amounts of material to
point an individual in the right direction for research, having AI generate a
good starting point for a policy or procedure that staff then complete, or
allowing AI to make simple decisions on situations to help downstream processes
for employees would all be suitable uses for AI in the workplace.
You can use AI to take something you have written and rewrite
the material differently, more eloquently, or more simply. I am often a
terrible writer (see this article for examples), so I probably should have used
AI to help me write this to make it easier and more enjoyable to read. You can
have AI add an authoritative tone or, if you are too authoritative, make your
writing less abrasive. AI can also be used to discover patterns or
inefficiencies and reveal strengths or flaws within your own work processes. Someone
can employ AI to help with audits, audit prep, or reporting. The options are
almost literally limitless.
However, the danger for us still looms. Any product or
procedure put in place will still be our responsibility. No one will accept the
excuse of “the computer did it,” whether that is the boss, a judge, an
investor, or an oversight body. It will still be our fault. Moreover, turning
our thoughts outside of ourselves, it opens the door for an incredible amount
of bad acting in our industry and others. Everyone has access to this
technology. Fraud attempts will improve. Pro se litigant filings may be more on
point and harder to dismiss or strike. Cybersecurity traffic will increase and
intensify, and phishing schemes may become more successful.
Lastly, we come to the future. Here is where we envision mushroom
clouds and humans living underground – a barren wasteland and bleak existences.
Right? Or do we see a Star Trek-like future of blindingly fast calculations,
space exploration, and elevated human existence? I am ever an optimist, so I at
least hope for the latter. Generative AI, machine learning, and natural
language processing programs can all be incredibly helpful, and I am not sure I
necessarily see a reason to stop using them.
We do, however, need to be very careful about their
oversight. The human quality control previously mentioned must continue and
become even more robust. Additionally, the use of AI should be limited to
non-mission-critical tasks. Money will have to be spent on staff and technology
guardrails to properly utilize this kind of software. What AI is “fed” or
trained on has to be carefully curated and monitored. And tested. Lots and lots
of testing.
We believe we will see new roles created within companies
for AI Trainers and AI Quality Control Testers, as well as some companies
employing a Mathematician or Data Scientist to help control these processes.
Regulations will also begin to include AI oversight, so we will have to be
prepared to answer those questions. We will also probably have to train some of
the regulators, as they do not always fully understand the things they
regulate. Not that we have ever experienced that, right? We will have to
incorporate AI oversight of our vendors, too. Just because you might not
utilize AI yourself does not mean your vendors do not, and we’ll have to be
aware of that as we move forward. And privacy! What to do about privacy?! An AI
model can’t exactly “unlearn” something, so what do we do about data it gets hold
of that we did not intend? How do we solve for an AI model that obtains PII for
example?
While we could not solve for all the problems presented, I
think a great job was done and the level of interest and interaction on this
topic was incredible. I look forward to continuing the discussion as we move
forward, both as individual companies and together as an industry. If you missed
this discussion, I hope this article helped catch you up. I highly recommend
being part of the next one. Be on the lookout for more USFNgage events on this and
other topics in the future. It is a fantastic opportunity to come together and
have an interactive discussion on a specific topic. And don’t worry, the
USFNgage series is not recorded, so there’s no proof that I had no idea what I
was talking about or what I was asking, which also means you too can
participate freely. Thanks and we hope to see you next time!
As one of only two U.S. cities to host a pair of its own MLB
teams, Chicago, IL, is accustomed to midsummer grand slams. In July 2023, the
USFN Compliance and Legal Issues Seminar hit another, with a speaker lineup led
by three big league keynote speakers.
First on deck was Mark McArdle, Assistant Director of Mortgage
Markets for the Consumer Financial Protection Bureau, who was introduced by
Richard Nielson of Reimer Law Co.
McArdle has been with the CFPB since 2017, serving under
five directors and acting directors. Prior to his tenure with the CFPB, he
served as the Deputy Assistant Secretary for Financial Stability at the U.S.
Department of the Treasury. In that role, McArdle led the office that managed
the Troubled Asset Relief Program (TARP). He played a key role in the
development of the HAMP Program and oversaw the creation of the Hardest Hit
Fund, which provided funding to state housing finance agencies for foreclosure
prevention efforts.
McArdle discussed the current regulatory environment and its
impacts on homeowner assistance.For
context, he recalled the record and document-driven process which governed
HAMP, where the rules were designed around the paperwork. He then confirmed
that the current goal of the CFPB is to streamline the rules so the paperwork
necessary for loss mitigation is designed around the rules.
McArdle confirmed that the CFPB is working in conjunction
with other agencies, particularly through the Financial Stability Oversight
Council to increase liquidity for non-bank mortgage originators. He noted that
six of the 10 largest mortgage originators are non-banks, and account for 60%
of mortgage originations. However, those entities have no access to emergency
liquidity funds. If those entities suddenly exit the market, who will originate
those mortgage loans?
Finally, McArdle encouraged maintaining open lines of
communication with the CFPB, specifically encouraging the use of the Regulatory
Inquiries Line for questions. He mentioned that the CFPB’s current enforcement
actions are a good measure of its priorities. Currently, eliminating junk fees
is high on that list. When asked what constitutes a “junk fee,” McArdle
stressed that the CFPB recognizes good faith and referred to the CFPB’s Request
for Information on the subject. He gave a very straightforward practical
response, “Is there a cost to the service provider that roughly relates to the
fee? Or, is it a $100 fee for an event which costs the lender/provider nothing?”
The second keynote speaker was William Collins, the Director
of the Department of Housing and Urban Development’s National Servicing Center,
in Oklahoma City, OK. Collins was presented, townhall interview style, by
Jeffrey Weisserman of Trott Law, P.C. Asked about the recovery since COVID-19,
“how has it gone?” Collins had a positive outlook. He stressed that redefault
rates remain low and that current default rates are at pre-COVID levels. The
most telling figures was that FHA had approximately 950,000 loans in
forbearance in the second quarter of 2022, versus only 150,000 in July
2023.
In a moment that would have been the bright spot at any USFN
seminar, Collins foretold of an anticipated proposed Rule which will modify how
interest debenture curtailments are assessed. Collins could have been
channeling any of the USFN member firms when he described the disconnect
between the actual harm caused by missing a first legal action deadline by one
day, and the penalty as currently assessed. Weisserman said, “I was sure that
would get an applause from this group.” Having received permission, applause
did ensue.
Of course, no conversation regarding FHA loans would be
complete without some discussion of the “face-to-face” requirement for loss
mitigation solicitations. Collins confirmed the trend toward allowing servicers
to leverage technologies to accomplish the same goals of the face-to-face
meeting.
Collins also fielded a question regarding the
“marketability” versus “insurability” standards for title to real property
acquired by the Department of Housing and Urban Development. It did not
surprise those in attendance to learn that there were no changes on the horizon
on that issue.
Finally, Collins confirmed that HUD is making efforts to
allow cash-for-keys to be offered to borrowers prior to a foreclosure sale. The
hope is to increase the volume of foreclosure sales that are acquired by
investors and to increase the utility of the claims without conveyance of title
and second chance auction programs.
The final keynote presentation was delivered by Manuel
(“Manny”) Newberger of Barron & Newburger, P.C.Newburger is recognized nationally for his
expertise in consumer and commercial law, consulting on FDCPA, FCRA, and TCPA
compliance.
Newburger discussed the upcoming U.S. Supreme Court argument
in Consumer Financial Protections Bureau v. Community Financial Services Association
of America, which is scheduled for oral arguments in October 2023. In an
almost prophetic statement quoting from the Art of War, Newburger said that
“Strategy without tactics is the slowest route to victory. Tactics without
strategy is the noise before defeat.” Newburger included necessary critiques of
the CFPB, though warning that “you don’t want the CFPB to go away.”
This final keynote presentation then hinged on three
proposed Rules. First was the CFPB’s proposed Registry to Detect Repeat
Offenders. This Rule, which was proposed without a SBREFA hearing, would
require certain nonbank financial firms to register with the CFPB when they
become subject to certain local, state, or federal consumer financial
protection agency or court orders. This Rule would require an entity to
designate a responsible executive to be the highest-ranking person responsible
for overseeing your compliance with the Rule or Order. That executive would
then be required to file an attestation each year confirming compliance. Newburger
predicts that this Rule would significantly decrease an entity’s willingness to
enter into an Agreed Order.
The second proposed Rule was the CFPBs proposed Rule to
require nonbanks that are subject to CFPB supervision, and which use form
contracts to impose terms and conditions that limit or purport to limit
consumer rights and legal protections to register with the CFPB. Newburger
considers this an end run around the CFPB’s failed rule to prevent financial
companies from using arbitration clauses. The prior Arbitration Agreements Rule
was upended on November 1, 2017, by a joint resolution passed by Congress and
signed by then President Donald Trump.
The third proposed Rule was announced in January 2023, the
day after three Consent Orders were entered involving non-compete agreements
which the CFPB asserted were excessively broad and abusive. Newburger
interprets the CFPB’s messaging on this front to be, “this is the CFPB’s
litigation strategy, whether or not the Rule is enacted.”
Newburger summed up his experience with the CFPB to remind
those in attendance that forms, processes and templates have proliferated to
comply with the Rules created by the CFPB. For example, without Regulation F,
the model validation notice (which has been adopted industrywide) would likely
run afoul of the straightforward text of the FDCPA. He has had generally fair
and positive experiences with those who work for the CFPB and implores his
audience to abide by “Manny’s Rules”:
External optics must match internal legal
positions; and
If you don’t want the government to think you
are criminals, don’t act like criminals.
These keynote presentations along with evening networking at
the House of Blues, a morning walk-run through downtown Chicago led by Doug
Oliver of McCalla Raymer Leibert Pierce, LLC, and a host of presentations by
USFN members and servicers alike, knocked the ball out of the park for a grand
slam in the summer of 2023.
USFN Member (AL,
CA, CT, FL, GA, IL, KY, MS, NV, NJ, NY, OH, OR, TX WA)
Diversity, Equity, and Inclusion (DEI) is top of mind for
most people these days.We see and hear
about the importance of DEI in the news, social media, and at conferences.
Starting a meaningful conversation about DEI for many companies may seem
daunting or the timing may seem like climbing a mountain during the greatest
pandemic in our lifetimes. Honestly, the time is past due and the pandemic, in
a way, has offered us an opportunity as many companies are having to rebuild
their teams.
A tougher question may be: Are our current standards on
Minority and Women Owned Business (MWOB) outdated?Are we acknowledging those that have moved
past the standard goal of what was originally intended with MWOB?We push our companies to a broader image of
what diversity is from an overall staffing level; should we be doing the same
for our companies’ ownership? We could start by increasing each type of
minority owner, rather than trying to achieve the goal of fitting into the
small box by simply achieving a particular status of women-owned, or veteran-owned,
or African American-owned business, for example, as set forth by the government.
While there are certifications that seek to allow for an expanded definition of
“minority-owned” to be more inclusive, rather than exclusive (for example,
Chicago’s Minority and Women-Owned Business Certification Program, which certifies
firms who have 51% ownership by a minority OR a woman), the federal
classifications do require your firm to fit into one specific area to obtain
certification.
DEI has evolved to expand inclusion and suggested staffing
models that reflect our society.We
strive to create an encompassing group of people to bring in all visions and
ideals to better our organizations.We
look to have a well-rounded team from a spectrum of all genders, races, ethnicities,
ages, religions, disabilities, and sexual orientations; yet when it comes to
our ownership, we only recognize those that are owned by at least 51% of one
diverse group.Is it time for our
acknowledgement of ownership that surpasses the standard model to be our new
goal?
Let’s review a couple of examples. An organization’s
ownership is made up of 40% women, 15% minority, 25% LGBTQ and 20% other
non-women or non-minority. This makeup is 75% diverse, yet according to our
current standards, we do not acknowledge this organization for reaching what we
hope our DEI goals aim to achieve.Another
organization’s ownership is split evenly by four owners into 25% portions.The diversity makeup of the ownership is African
American, Latinx, Women and LGBTQ, making this 100% diverse ownership.For these suggested organizations to meet the
51% current standards, the ownership would have to reduce its diversity to only
allow one diverse segment the majority ownership.So, in effect, this dilutes their ownership’s
diversity, moving us away from a true goal of any DEI ownership program.
While many still fall short of the basic 51% standard, is it
time to expand our understanding of diversity in ownership to better match our
overall DEI goals? For decades, since
its inception, the 51% rule has been the line in the sand for DEI ownership,
but government and corporations are looking to suppliers that more closely
match their overall diversity goals.
Expanding the standards to include organizations with
ownership that meet a higher level of combined women and minority threshold is
key to moving all DEI initiatives forward. This doesn’t mean removing the
current standard of 51%, but rather adding expanded options for firms that meet
a 70% or higher combined women and minority ownership.
USFN gathered at the beautiful
Drake Hotel in Chicago on July 14 and 15, to discuss the legal issues affecting
our industry at its annual Legal Issues Seminar. The event started with a
networking dinner at The Signature Room at the 95th, located in one
of Chicago’s charming historic buildings. It was wonderful to see old faces and
meet new ones as we were treated to stunning views of Chicago.
Getting down to business, USFN
offered four great sessions of CLE-worthy content, discussing both issues from
the past year and emerging items of interest.
The first
session centered on recent case law and legislative updates. One major focus of
the session was the New York legislation in response to Freedom
Mortgage Corporation v. Engel, and the efforts to limit the time in
which a foreclosure case must be completed. There is no clear answer right now
as to how servicers should proceed, other than to continue conversations with
their New York counsel. This session also touched on the CFPB’s intention to
start using their UDAAP authority to scrutinize and target discriminatory
practices.
The second
session continued the discussion on the CFPB and their recent aggressive focus
on supervision and enforcement actions. It is more critical than ever to remain
mindful of the CFPB’s requirements and regulations. Another important takeaway
from this session was regarding the HAF programs and their administrative
variances from state to state. Servicers should be cognizant of each state’s
unique portal and requirements and reach out to counsel as needed. There was
also a conversation surrounding technology and how it can support both servicers
and our members. The session wrapped with a lively discussion of hot topics
from FNMA.
In the
third session, we heard about regulation and what we can expect over the coming
year. Ancillary fees were a major point of interest. The CFPB is strongly
opposed to allowing ancillary fees where the fee is significantly higher than
the actual cost of the service. This includes a push to prohibit “convenience
fees,” which are often charged for making a monthly payment over the telephone
or online. It is likely that the CFPB may allow a pass-on fee from a vendor,
but the servicer cannot make any profit. There was also some discussion surrounding
the persistent challenge of itemization requirements for debt validation
letters that fall outside of the special rule for the FDCPA. There are still
few answers, but, as an industry, we are continuing to discuss it and seek
resolution.
In the
final session of the day, we discussed staying ethical in a remote-work world.
Some things to think about:
·How are you meeting confidentiality and security
requirements when people are working from home?
·How do you account for Siri and Alexa?
·How do you prevent “Zoom bombing?”
·How do you supervise your staff?
·How are you safeguarding personal identifying information?
Many of these
questions have been addressed by the American Bar Association in Formal
Opinion 498.
Finally, if you are living in a jurisdiction where you are
not licensed, be aware of the rules about the unauthorized practice of law in
both the state where you are living and the state where you are practicing.
Overall, it was a great day and a half together, where we enjoyed the
sights and sounds of Chicago, as well as stimulating conversations about the
issues affecting our industry. We hope you can join us next year in Chicago.
Stay tuned to USFN’s events website
for dates and details.
Thank you to our attendees for helping USFN kick off our first two IN-PERSON events in more than two years! It was so
great to see everyone in person at both the USFNdustry Forum in DFW in June and the Legal Issues Seminar, which we just
wrapped in Chicago. If you couldn’t join us, here’s a few highlights you missed from each event.
At USFNdustry Forum:
• Our members and servicers discussed a variety of topics during a full slate of education
sessions, which included high-level overviews during our five general sessions and deep-dive
discussions in our 12 breakout sessions focused on foreclosure, bankruptcy, REO/evictions,
operations, and diversity, equity and inclusion.
• Our servicers enjoyed open and honest conversations on the challenges they face in today’s environment during a Servicer-Only Roundtable and Networking session.
• Members engaged with each other during face-to-face committee meetings and received
valuable industry and organizational updates during a Member Town Hall.
• More than $1,000 in monetary donations was raised for the Boys and Girls Clubs of Collin
County, and attendees donated school supplies and incentive gift cards for the youth the
organization serves.
• Of course, there was lots of catching up and networking during the President’s Welcome
Reception (and lots of great selfies taken in front of the beautiful USFN selfie wall)!
• And to top it all off, our members and servicers enjoyed a fun offsite experience at TopGolf
for food, drinks, and a chance to perfect their golf swing!
At Legal Issues Seminar:
• During this one-day event, our members and servicers packed in a ton of learning with education sessions that targeted litigation challenges and legal ethics in
today’s environment.
• Many attendees earned their much-needed CLE credits.
• Again, servicers discussed and collectively collaborated on their most pressing legal
issues during a Servicer-Only Roundtable and Networking session.
• Members and servicers enjoyed the amazing Chicago view while networking and
dining at The Signature Room at the 95th, one of Chicago’s finest restaurants.
Stay tuned to USFN’s events site, USFNevents.org, for dates, locations, and details for each of these events in 2023.
We’ll close out our 2022 in-person gatherings with our signature Executive Servicer Summit (ESS), followed by USFN’s Member Retreat. ESS is scheduled for Sept. 29 through Oct. 1 at The Ritz-Carlton, Amelia Island, FL. A lighter version of the USFN
Member Retreat is scheduled for Dec. 1-2 at The Bellevue Hotel in Philadelphia, PA.
In the meantime, get timely and relevant updates during our complimentary monthly USFN Briefings. Visit USFNevents.org/briefings for the full schedule and to register for the next Diversity, Equity & Inclusion Briefing on Aug. 23 to join an insightful
discussion on diverse gender identity and gender expression.
Learn more about USFNextGen, an exclusive member benefit program to help elevate the next generation of firm and industry leaders, during a free Virtual Open House from 1 to 2 pm CT, Aug. 9. Register today.
Finally, if you missed our Speaker Resource Group webinars and would like to strengthen your speaking skills, you can access
the recordings at USFNevents.org, as well as sign up to join our growing roster of in-person and virtual presenters.
Posted By Kristi Payne,
Thursday, July 28, 2022
Updated: Friday, July 29, 2022
McCalla Raymer LeibertPierce, LLP(USFN Member - AL, CA,
CT, FL, GA, IL, KY, MS, NV, NJ, NY, OH, OR, TX, WA) announces the opening of
its new Oregon office at 10151 SE Sunnyside Road, Suite 490, Clackamas, Oregon
97015. The firm also announces the addition of two lawyers, CarrieMajors-Staab and Cara Richter, who will be based in the Oregon
office. Additionally, Laura Coughlin has joined the firm as Managing
Attorney of its Washington foreclosure practice, based in the Bellevue,
Washington office. Majors-Staab, Richter,
and Coughlin have many years of combined legal experience in financial services
representation.
The HAF Notice statute B24-0883 was
signed by the Mayor of the District of Columbia on 7/25/22, and enacted as
A24-0508. This triggers a five business-day period for the Mayor to generate a HAF
Notice Form to be uploaded to the DC HAF website, for use by mortgage
servicers, which period ends on 8/1/22. Investors and Servicers cannot
initiate or resume foreclosure in DC until 30 days after a compliant notice is
sent. For more information see https://lims.dccouncil.us/Legislation/B24-0883.
Once the Mayor provides the template for the HAF Notice, such notices will need
to be sent on each loan before servicers can proceed with the foreclosure process.
USFN’s Diversity, Equity, and Inclusion Section periodically spotlights professionals promoting DEI and enacting education initiatives within the industry. Janice Nakano, Director of Client Relations and Business Development for Aldridge Pite, LLP, describes how she champions diversity and draws from her personal experiences to better understand and learn from others. Learn more about Janice and her efforts and discover small ways you can support DEI in your own work/life.
How would you describe your current thinking about diversity, and how has your thinking changed over time?
As an older adult, I’m more educated about what diversity means and how differences can and should be used to create a rounded perspective and understanding of different people, cultures, and identities. Traveling to foreign countries has certainly opened my mind to the fact that even though we may be from different backgrounds and cultures, we are all striving to have the basics: a roof over our head, a job, a family, friends, and a social existence. Before my foreign travels, I was definitely more self-centric (aren’t we all when we’re teenagers and in our 20s)?
Can you share some examples of how you championed diversity?
Participation: I have always been supportive of diverse communities. Since the late 1970’s, I have supported the LGBTQIA+ community in any way that I can by participating in parades, charities, galas, and events. I have to thank my two best friends growing up for enabling me to be a part of this community.
Support: Supporting women is also something I’ve felt a natural affinity with. I have mentored several young women who have grown into incredible professionals in their careers and continue to do so. I’ve worked with organizations that help women in various manners. Dress for Success is one of those organizations that give women the power to achieve economic independence by giving them tools, aka business outfits and self-care packages. The Mom Project and Path Forward are two organizations that I am just becoming familiar with. These companies help women who want to return to the workforce by equipping them with the tools they need, job prospects, and a community to support them.
Education: Currently, I’m educating myself in racial equality and the history of racism. Two books that stand out are, “How to Be an Antiracist” by Ibram X. Kendi, and “The 1921 Tulsa Race Massacre: A Photographic History” by Karlos K. Hill.
How would you serve diverse groups or traditionally underserved communities?
I live in New York City, which is filled with cultural, racial, socio-economic, and religious diversity to say the least. I try to buy groceries, clothing, and other necessities from my local shops or go to specific neighborhoods where I can find ethnic items.
What challenges do you think you will face working with a diverse population?
I like to think that I can communicate with any community. Language can be a challenge, but having lived in France before I could speak the language has taught me patience and understanding when communicating with a non-English speaker, or someone with very little English or a strong accent.
Growing up in a Buddhist household, when all my friends came from other different religious backgrounds, helped me to understand that we may have different faiths, but on a fundamental level, we are all taught to be kind, love thy neighbor, and be honest and caring.
Describe your ideal corporate approach to diversity, equity, and inclusion. What obstacles do you see in implementing the ideal approach?
Firstly, create a group or committee, state the group’s mission, create goals, and implement a path to achieving goals. Obstacles: making sure this does not become a group that is used to solely voice complaints.
How do you measure success in diversity, equity, and inclusion?
In business, through reporting and analytics, we can look at performance, pay equity, talent recruitment, and retention. Focus on measuring influence and power (people), rather than representation (numbers).
What positive outcomes do you think you will encounter by working with a diverse population?
Different perspectives offer a well-rounded understanding of a situation/topic/task. Learning about other cultures helps me to understand about others’ choices and decisions.
How would you advocate for diversity education and diversity initiatives with individuals who don’t see its value?
The best way to convince others to see the value in DEI, is to educate through discussions, suggested readings, providing information on events, and how to participate in DEI activities.
How would you handle a situation in which someone made a sexist, racist, homophobic, or otherwise prejudiced remark in a professional setting? In a social setting?
In both professional and social settings, I would let people know immediately that the behavior/comment is not acceptable. I have absolutely no problem confronting the person in a respectful and non-aggressive way.
How has your education/work experience prepared you for working with a diverse population?
As a chef in California, many of my co-workers were Mexican. In Europe, many of the support kitchen staff were from Africa. In both cases, these groups were, at the time, considered sub-standard groups.
Being a part of a DEI group has definitely expanded my knowledge and given me more tools for working and living with a diverse population.
Has your background prepared you to be effective in an environment that values diversity?
Growing up in a traditionally Japanese American household, but in a predominantly Caucasian
neighborhood, I always thought of myself as different. My family was the only Japanese family in our neighborhood and there was only one other Asian student with me kindergarten through sixth grade. My appearance has always been mistaken for either Latin American, an Islander, or Caucasian. I’m certain the inability for people to put me into a specific category enabled me to be part of every category in a sense, but at the same time, I wanted to be like “all the other girls” and identify as Caucasian. As I’ve grown older, I’ve embraced my diversity even more. Living in New York City has also allowed me to be part of and value the many cultures that exist.
Are you actively engaged in a group or organization that promotes diversity?
Yes, I am Vice Chair on the Diversity, Equity & Inclusion Committee with USFN.
What is the most challenging situation dealing with diversity that you have faced and how did you handle it?
I remember one time when a teenage girl was slinging offensive comments to a much older man, complaining how long it took for him to unload his groceries from a shopping cart. I turned to this girl and told her that she should have more respect for the elderly, and how would she feel if someone spoke to her grandparents like that. Her response was “whatever.” I honestly don’t think she got it. I’m a firm believer that karma will handle people and their actions.
Have you ever realized that you said or did something that may have been offensive to a colleague/co-worker/friend? How did you respond to that realization, and what was the outcome?
I remember telling a joke once to a friend, only to realize later just how offensive it was. My friend didn’t say anything at the time, but later, I did bring it up and apologized for being so disrespectful and insensitive. As I’ve grown older, I realize the impact words have and how important it is to think about what you say and how you say it.
How would you ensure that you are inclusive of everyone’s viewpoints and what is your approach to understanding different cultural viewpoints?
I believe asking questions is a big part of communication and learning. I’m interested in hearing about what other people think, even when they have very different viewpoints and perspectives than I do.
How do you go about ensuring that you are removing bias from your day-to-day work/life?
I am a work in progress. Confirmation bias is something I am trying to change in myself by reading and listening to different opinions and points of views. I still find myself using gender-specific language such as ‘guys,’ ‘dudes,’ “hey man,’ and similar terms when speaking with other women, or a group that includes women. I’m working on being consciously aware of what I’m saying and who I’m saying it to.
A recent California Supreme Court ruling resolves an issue
which has divided the lower appellate divisions and federal district courts in
California for almost a decade. On March 7, 2022, in Sheen v. Wells Fargo Bank, N.A., 12 Cal. 5th 905, 2022 WL 664722 (Cal. 2022), the California
Supreme Court expressly disapproved four lower appellate court decisions to the
contrary and held that, when a borrower requests a loan modification, a lender
owes no tort duty under general negligence principles to “process, review and
respond carefully and completely to” the borrower’s application.
In Sheen, the
borrower, under a second deed of trust, sued Wells Fargo Bank, N.A. (“Wells
Fargo”) for negligence. Several years after purchasing his home (which purchase
was secured by a first trust deed), the borrower used the home as collateral
for two junior loans he took from Wells Fargo secured by second and third trust
deeds. The borrower later suffered financial setbacks and missed payments on
these junior loans. He submitted applications to Wells Fargo to modify the loans,
but Wells Fargo did not respond. Instead, it sent letters informing him of the
actions it might take because of the delinquency of his accounts. The letters
did not specifically mention foreclosure. The borrower alleged that, because Wells
Fargo did not provide him with a written determination regarding his
eligibility for modification of the loans prior to sending him the letters, he believed
the letters meant the loans had been modified such that they had become
unsecured loans and his house could never be sold at a foreclosure auction,
even if said loans were in default. Eventually, Wells Fargo sold the borrower’s
second trust deed loan. In 2014, four years later, the new owner of the second
trust deed loan foreclosed, and the borrower sued Wells Fargo.
Specifically, the borrower asserted a negligence claim
against Wells Fargo, alleging that the bank owed the borrower a duty of care to
process, review and respond carefully and completely to the loan modification
applications he submitted.The borrower alleged
that Wells Fargo breached this duty, causing him to “forgo alternatives to
foreclosure,” and hence Wells Fargo should be liable for monetary damages relating
to the loss, including the value of the home, the hotel and storage costs he incurred
when he had to vacate the property, and the damage to his credit rating. Wells
Fargo filed a demurrer in the trial court, arguing that it owed the borrower no
such duty. The court of appeal affirmed the trial court’s decision to sustain
the demurrer, concluding that the relevant authorities “decisively weigh
against extending tort duties into mortgage modification negotiations,” but
noted “the issue of whether a tort duty exists for mortgage modification has
divided California courts for years.” The
borrower appealed to the Supreme Court.
No Duty Pursuant
to Statute
Initially, the Supreme Court (“Court”) noted that the
borrower failed to identify any statute or regulation that required Wells Fargo
to treat his loan modification applications with due care.California’s Homeowner Bill of Rights
(“HOBR”) and federal law apply only to first lien mortgage modifications, and
California’s general negligence statute, Civil Code § 1714, does not impose a
general duty to avoid purely economic losses.
No Duty Under Common
Law: The Economic Loss Rule
Next, the Court found that because the borrower’s claim
arose from, and was not independent of, the mortgage contract, it was barred by
the “economic loss rule” which provides that there is no recovery in tort for
negligently inflicted “purely economic losses,” meaning financial harm
unaccompanied by physical or property damage.
“Plaintiff and Wells Fargo did not agree that should
plaintiff default and attempt to renegotiate his loan by submitting a
modification application, Wells Fargo would “process, review and respond
carefully and completely to the ... applications Plaintiff submitted,” and
could foreclose only after discharging such obligations. Sheen, 2022 WL 664722 at *7. To impose a tort duty in such
circumstances would go further than creating obligations unnegotiated or agreed
to by the parties; it would dictate terms that are contrary to the parties’
allocation of rights and responsibilities. The proposed duty would impede Wells
Fargo’s right to foreclose by permitting foreclosure only after Wells Fargo
discharges a tort duty to “process, review and respond carefully and completely
to [a borrower’s] loan modification application[s].”
The Court further noted that California generally follows the
judicially created economic loss rule within the lender-borrower context citing
the “well-established principle of state law” from Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d
1089, 1096, 283 Cal.Rptr. 53: “A financial institution owes no duty of care to
a borrower when the institution’s involvement in the loan transaction does not
exceed the scope of its conventional role as a mere lender of money.” Moreover,
citing cases from other jurisdictions, the Court noted that the application of
the economic loss rule was consistent with well-reasoned decisions from other federal
and state courts, including the views of other state supreme courts that have
addressed the issue.
The Court further concluded no duty could be imposed through
the use of the factors articulated in the Biakanja v. Irving case. See
Biakania v. Irving, 49 Cal. 2d 647, 650 (Cal. 1958). Biakanja makes clear that its multifactor test finds application
only when the plaintiff is a “third person not in privity” with the defendant.
“Biakanja does not apply when the
plaintiff and defendant are in contractual privity for purposes of the suit at
hand.”
Finally, the Court distinguished the borrower’s claim from those
in which tort recovery has been allowed despite the existence of a contract between
the parties such as “insurance contracts” and “professional services contracts.”
Legislative Role
Deferring
to the expertise of the legislature, “In sum, the Legislature is better situated
than we are to tackle the “significant policy judgments affecting social
policies and commercial relationships implicated in this case,”the Court expressly declined the borrower’s
invitation to
become
the first state high court to create a judicial rule imposing a duty on lenders
to exercise due care in processing, reviewing and responding to loan
modification applications.
Bottom Line
Sheen is not a
panacea for all loan modification application claims. The Court expressly
acknowledged and left the door open for possible causes of action against
servicers for negligent misrepresentation and promissory estoppel in the loan
modification context. However, the decision may assist to reduce defense
litigation costs for servicers of California loans where borrowers attempt to
rely solely on a theory of general negligence when they are unable to plead or
prove statutory violations of the HOBR or federal law.
Most people, myself included, when
asked to think about integrating topics of diversity, equity, and inclusion
into our workplaces immediately go to a handful of areas: race, gender, physical
disability, sexuality, and sexual orientation. In fact, until I was presented
with the opportunity to write this article, I can say that I had never given
much thought to applying diversity, equity, and inclusion efforts in the
workplace to the way people think. That
realization came as a surprise, considering that I am a neurodivergent person.
So what does it mean to be
neurodivergent? Neurodivergent is an umbrella term first coined in the
1980’s that embraces the natural range of variation in human brain function and
processing.Essentially, neurodivergent
individuals think and process information differently than the average, or neurotypical,
person. People are neurodivergent if they have certain developmental,
intellectual, learning, or mental health disabilities. Examples of well-known
neurodiverse conditions include autism spectrum disorders, dyslexia, dyspraxia,
and attention deficit hyperactivity disorder (ADHD).Some other conditions that can sometimes
cause people to be neurodivergent are Tourette syndrome, post-traumatic stress
disorder, schizophrenia, and depression.
While the vast majority of people in
corporate America and in the legal profession are neurotypical, the percentages
of neurodivergent employees have been increasing. In fact, a 2016 study from
the Hazelden Betty Ford Clinic and American Bar Association found that 28% of
lawyers suffer from depression, 19% suffer from anxiety, and 12.5% have
ADHD.Additionally, experts typically
agree that the number of professionals who are neurodivergent is vastly
underreported, as many professionals choose not to disclose their conditions
due to fear of reprisal at work or fear of being seen as “weak” or “dumb.” Legally,
the conditions that cause neurodivergence are considered disabilities, and thus,
affected employees are protected under the Americans with Disabilities Act.
While there are obviously many
conditions that fall under the umbrella of neurodiversity, I want to focus
mostly on ADHD, as is it one of the most common conditions that we are likely
to see in our neurodiverse employees and coworkers. Furthermore, it’s one of
the conditions I am most familiar with, having been diagnosed with ADHD in
2014.
Let’s talk about what it means to be
a neurodivergent person with ADHD in the workplace. First, we must dismiss the
stereotype that all people with ADHD are hyper-active and disruptive. While
that is one way for ADHD to present in people, there is a second way that ADHD
can present which is best summed up as inattentiveness. This includes symptoms
such as struggling to pay attention, difficulties with organization,
forgetfulness, and being easily distracted. At the core of both presentations of
ADHD are difficulties with executive function.
Executive
function is a term used to describe a group of skills that enable humans to
plan, focus attention, remember, execute tasks, and multitask. While all of us
struggle with these skills sometimes, people with ADHD struggle with these
issues daily. When a neurotypical person is given a newly assigned
project at work, they typically will jump right in and get to work, moving
fairly easily toward the final product. When a person with ADHD is given a new
project, they will often feel paralyzed and unsure of where to begin. They
struggle to conceptualize how long things will take, what steps are involved,
what outcomes may happen, or how to even imagine what the final product will
look like. The overwhelming uncertainties can be debilitating and can
make it impossible to even start the task at hand. As a result, people
with ADHD can be branded as lazy, procrastinators, and even incompetent.
Many professionals with ADHD try to hide their struggles and appear
"normal" to avoid such labels, even though doing so creates internal
stress, anxiety, and fears of their struggles being discovered.
What
is important for both neurodivergent people and employers to understand is that
in many ways, people who are neurodivergent actually can be some of the most
valuable employees and assets a business can have. Studies have repeatedly
shown that as a group, neurodivergent people tend to be diligent, loyal, detail-oriented,
and creative problem solvers. The fact that they think differently than most
other employees allows them to identify issues that typically go unnoticed.
Some benefits that neurodivergent employees can bring to their careers are:
·Attention to detail: Neurodiverse
people excel at zeroing in on details that often go overlooked by others. This
can mean finding additional information in documents that might otherwise be
missed, or noticing patterns in data that were previously unnoticed.
·Focus: Struggles to focus and avoid
distractions are common for employees with ADHD. However, when someone with
ADHD is working with a project or subject matter that interests them, they have
the tendency to ‘hyperfocus.’ This can translate to them having a highly
focused attention on what they’re doing for a long period of time without being
distracted by other things happening around them.
·Creativity: Studies consistently
show that neurodivergent people are more creative on average than neurotypical
people. When executive function is working at its best it is difficult to slow
down, let thoughts wander freely, and really think about the process. Since
neurodivergent people have lower executive function, they are more likely to
engage in creative problem-solving and thinking outside of the box.
·Work well under pressure:
Neurodivergent people, especially those with ADHD, are used to completing tasks
at the last minute because their executive function often doesn’t allow them to
start a task until it absolutely has to be done. While this means that these
employees won’t often be handing in projects early, it also means that when
there is a crisis or a deadline that would make most people feel frantic,
neurodivergent people often are calm and collected in those moments and have
the ability to work quickly and efficiently.
With
each of these benefits, there of course are potential downfalls. To avoid
these, employers should be proactive about communicating with neurodivergent
employees and providing accommodations to help these employees succeed. While
there is no “one size fits all” when it comes to accommodations, implementing
and allowing some simple, common things could make a big difference in the
performance of neurodivergent employees. Some examples of accommodations
include:
·Flexible working arrangements: Sometimes
an office setting is too distracting for neurodivergent people. Allowing
employees to work from home or in their optimal environment will allow them to
focus better on the work they are doing.
·Sensory friendly environments: Many
neurodivergent people also are prone to sensory overload. Things like
background noise from HVAC systems or the brightness of fluorescent lighting
can be very distracting. To accommodate this, employers should try to ensure
workplaces are sensory friendly by using neutral colors, soft lighting, and ensuring
regular maintenance of mechanical systems in the office.
·Allowing use of headphones to
minimize distractions.
·Providing blocks of uninterrupted
work time: Neurodivergent employees often have trouble getting back on track
when they are interrupted in the middle of a task. Providing set times for work
with no interruptions from coworkers or phone calls allows employees to work
more efficiently.
·Allow use of fidget devices: Using
things such as fidget spinners, stress balls, or similar tools allow
neurodivergent people to focus the hyperactive areas of their brains on the
device so that the rest of their focus can be on their work.
While
this list is far from exhaustive, it is a good place to start for employers who
want to create a work environment that is welcoming and inclusive of its
neurodivergent employees. In a society that is increasingly valuing diversity
and a workforce that is increasingly valuing individuality, right now is the
time for employers to be intentional about considering neurodiversity in their
business plans and recruitment efforts.
COVID-19 has brought many changes to the
default industry, to say the least.One
of the most notable programs to stem from the pandemic and the American Recue
Plan Act, is the U.S. Department of Treasury’s Homeowner Assistance Fund (“HAF”)
program. This program is an almost $10 billion assistance package to help
struggling homeowners who are behind on mortgages and other housing expenses
due to the impacts of COVID-19. The program is overseen by the Department of
Treasury, but will be administered specifically by states, territories, and
tribes.
As of this writing, nearly 30 states, Guam,
and Puerto Rico have fully launched HAF programs. Some states have been
administering pilot programs while they finalize full program details, and
others are still working to get their programs approved and administered. To
understand what these programs will entail, let’s look at some specific
examples to see the complexity and diversity in each program.
MARYLAND:
The Maryland Department of Housing and Community Development (“MD DHCD”)
recently launched its Maryland Homeowner Assistance Fund program (“MD HAF”).MD HAF assists homeowners in two primary ways.First, MD HAF provides grants to homeowners
experiencing COVID-related financial hardships.Second, MD HAF offers deferred payment loans to homeowners.Both programs are intended to assist homeowners
in making delinquent mortgage payments and to create feasible repayment plans
for loan reinstatement.MD HAF is
treated as a last resort for impacted homeowners who are denied for loss
mitigation options normally offered by their mortgage servicers.
In
general, for a borrower to be eligible for MD HAF assistance, they must have an
eligible COVID-19 financial hardship occurring after January 21, 2020.This requirement includes hardships that
began prior to January 21, 2020, but continued after that date. Additionally,
to receive MD HAF funds, the loan at issue must relate to a Maryland one-to-four-unit
owner-occupied property, and the owner must be the borrower. Furthermore, the
delinquent mortgage must have had a principal balance that did not exceed the
GSE conforming loan limit at the time of origination.
The main objective of
the MD HAF program is to assist Marylanders in keeping their homes.To that end, MD DHCD and the Maryland Commissioner
of Financial Regulation (the “Commissioner”) expect mortgage servicers to sign
up for the program on the MD DHCD website, and (1) inform borrowers in default who have been
denied other options of the existence of the MD HAF program, and of the fact
that borrowers can submit a MD HAF application to MD DHCD; (2) reconsider
borrowers for applicable loss mitigation options with MD HAF funds included in
any further review; and (3) delay the filing of a foreclosure action, to the
greatest extent possible, so that defaulted borrowers have sufficient time to apply
for and be considered for MD HAF assistance.According to MD DHCD and the Commissioner, the dual tracking rules set
up in the Consumer Financial Protection Bureau (“CFPB”) guidelines, codified at
12 CFR §1024.41, apply once a servicer is advised that a borrower has applied
for HAF assistance.After being notified
that a borrower is applying for MD HAF assistance from MD DHCD, servicers are
required to wait at least 14 days for completion of a MD HAF application.If MD HAF funds are approved contingent upon
additional loss mitigation offered by the servicer, a servicer must then allow
for an additional reasonable period of time for a borrower to complete a loss
mitigation application directly with the servicer.
According to guidance promulgated by MD DHCD
and the Commissioner, the following actions are deemed violations of Maryland
law and regulations: (1) Requiring a borrower to apply for MD HAF assistance
before considering the borrower for other loss mitigation alternatives; (2)
Failing to reasonably and timely cooperate in the MD HAF application process
after being notified by MD DHCD that a borrower has applied for MD HAF funds
more than 37 days prior to a scheduled foreclosure sale; (3) Failing to notify
a borrower of existence of the MD HAF program when advising the borrower of any
denial of a loss mitigation option; (4) Failing to wait 14 days after notifying
the borrower of denial of an option before proceeding with a foreclosure
action; (5) Refusing to reconsider a denial for loss mitigation options if the
borrower has subsequently been afforded assistance through MD HAF; (6) Filing a
notice of intent to foreclosure, filing an order to docket a foreclosure case,
or proceeding with a foreclosure sale if the servicer is notified that the
borrower has applied for MD HAF assistance more than 37 days prior to a
scheduled foreclosure sale; and (7) Refusing to accept MD HAF funds if the
servicer would otherwise directly accept those funds from the borrower.
DISTRICT
OF COLUMBIA: A second example is the District of Columbia’s “Pilot Program,”
administered by the District of Columbia Department of Housing and Community
Development (“DC DHCD”) with $50 million in Homeowner Assistance Funds made
available by the U.S. Treasury. To be eligible for the District’s HAF-Pilot, a
homeowner must (1) qualify for the program based on income; (2) own a
condominium in the District in the following ZIP codes: 20019, 20020, 20024 and
20032; (3) have bought the condominium using a down payment and/or closing cost
assistance directly from DC DHCD; and (4) be in arrears on their mortgage or
other real property-related payments, such as condominium fees, property taxes,
and/or homeowners’ insurance.It is
important to note that funds provided to condominium owners through the pilot
program do not have to be paid back; rather, these funds are distributed in the
form of a grant.The primary objective
of the District’s HAF pilot program is to assist eligible condominium owners to
retain their properties.
Income limits have been set for the D.C.
program.To be eligible for the pilot
program, household income may not exceed either 100% of area median income
(“AMI”) or 100% of the U.S. median income, whichever is greater.DC DHCD has set the AMI for condominiums
ranging from one-person condominiums to eight-person condominiums.
CALIFORNIA: Last
but not least, in California, the California Housing Finance Agency (“CalHFA)
through its special purpose affiliate, CalHFA Homeowner Relief Corporation
(“CalHRC”), is the state administrator of its HAF program.Funds to be received total $1.055 billion, of
which at least 10% is currently being distributed pursuant to the approved
program.Servicers interested in
participating in the program must sign an agreement with CalHFA.
The program was designed to assist lower
income and socially disadvantaged households and to aid in fully reinstating
defaulted mortgages. The goal is to provide these homeowners with a “fresh
start.”The program, in its initial
stage, is specifically designed to help those homeowners who were unable to
receive other assistance with their delinquency.Therefore, if a homeowner received a COVID
related loan modification, for example, they would not be eligible for the California
HAF program.CalHFA does reserve the
right to change its requirements going forward should funds remain available.The program is designed to not only bring a
defaulted mortgage current, but to assist the borrower with education and
counseling.
The basic eligibility requirements are as
follows:
1.The homeowner, a natural person, must own and occupy the
property as their primary residence and cannot own or occupy another property;
and
2.The homeowner must attest that they have experienced a
“Qualified Financial Hardship” after
January 21, 2020, and the attestation must describe that hardship.
a.Qualified Financial Hardship is defined as a material
reduction in income or material increase in living expenses due to the
coronavirus pandemic, which either created or increased the risk of mortgage
default, foreclosure and/or displacement; and
3.The original, unpaid principal balance of the mortgage,
at the time of origination, cannot be greater than the then GSE conforming loan
limit as defined under the Housing and Economic Recovery Act of 2008; and
4.The homeowner must meet the income eligibility
requirements which consists of the cumulative income of all household members;
and, that income cannot exceed the area median income as adjusted for household
size.
The maximum assistance available is $80,000
and is in the form of a one-time only tax-free grant.CalHFA disburses the funds directly to the
mortgage servicer to bring the account current, including escrow deficiencies.
The program is scheduled to allocate all funds on or before September 30, 2025,
and to have disbursed all funds on or before September 30, 2026.
From the above examples, it is easy to see
how difficult administration of these jurisdictionally specific plans will be
on the mortgage servicing industry as a whole. With over 50 possible programs,
and with the CFPB
closely monitoring servicer conduct, it is extremely important that servicers and law firms communicate
openly and clearly with each other regarding HAF programs and the specific
issues that arise from them. For more information on any state specific plan, please
reach out to consult with local counsel. For links to each state-specific
program, you can visit the National Council of State Housing Agencies here https://www.ncsha.org/homeowner-assistance-fund/.
Often, one of the roadblocks that faces any new change is
the retort of “If it ain’t broke, don’t fix it.”
As part of creating a more inclusive and accepting culture
in our industry, one of the pain points of a seemingly harmless and simple
adjustment is using more inclusive pronouns. While some might roll their eyes at
the prospect of having to use “new” pronouns like they/them, the unexpected
benefit of this transition is that documents and templates can actually be
easier to produce. As our industry moves toward a sense of normalcy, one of the
most common issues we have seen involves the need to process increased volume
timely and uniformly. Most firms, servicers, and vendors all now rely on fully
integrating communication, document requests, and processing of files.
The days of paralegals and attorneys having a mishmash of
legal templates are quickly joining the ranks of Dictaphones and typewriters as
being obsolete in this new reality of instant uploads and drafting of
documents. Below are some practical suggestions on how to modernize legal
documents that serve to create efficiencies, reduce errors, and establish more
inclusive language.
As legal definitions of marriage
change and evolve, along with gender identity, we have seen the loan
application process evolve in tandem. Forms are now becoming gender neutral. We
recommend that lenders who use their own proprietary application forms adopt
the Uniform Residential Loan Application that is used by GSEs. These forms
avoid fields focused on gender or marital status, such as a prefix (Mr., Ms.,
Misses, etc.) or terminology like husband and wife. Alternatively, if forms
require some type of honorific, you can use a more inclusive term, like “Mx.”
Newer systems often have updated
fields that account for gender-neutral terms. We recommend reviewing older
systems to avoid creating inefficiencies or additional guesswork by requiring fields
like “husband” or “wife” to be completed. If state laws require marital status,
these fields can be updated to say “spouse/partner.”
The biggest potential area for
improvement and time savings can be realized by removing the need to use
gender-specific terms in your templates. For example, the state of Alabama
requires the marital status to be listed on mortgages and deeds of transfer. In
the past, this may have been viewed as a very simple process – you’re either
married or single, and the legally accepted categories were just husband and
wife. Mortgages will often be written out to say “John Doe, a married man, and
Jane Doe, a married woman” or some iteration of “John Doe and Jane Doe, husband
and wife.” However, our firm has had to file title claims on mortgages where
the language was incorrect because names might have been gender neutral (i.e.
Billy Smith and Taylor Smith), and the husband and wife titles were swapped.
Or, in cases where names are based on other languages/cultures, it may not be
abundantly clear which name is meant to be for which party. Further, many
spouses may choose not to take their partner’s name or come up with a new last
name altogether. In another instance, we had a foreclosure file rejected in the
REO stage because the mortgage had listed “X and X, husband and husband.” The
closing attorney said there was a typo on our foreclosure deed; needless to
say, we had to inform them that there was no error.
To avoid these issues, we suggest modifying
pre-filled templates for pleadings, deeds, letters, etc.… with “Mr./Mrs.” or him/her,
replacing that language with pronouns such as they/them and dropping
salutations altogether. Start letters off with the name of the borrower, and
you can avoid having to guess at what greeting to use. On deeds where you must
convey to the Secretary of HUD or VA, update templates to state that “they” are
the Secretary, and that title is being conveyed to “them.” Not only does it
avoid having to switch your template from stating “him” to “her,” depending on
who the active Secretary is, using them/they can avoid any need to update. This
change in standard can also help post-foreclosure cleaning houses from having
to nitpick as to what a recorded deed’s language states.
Even in documents that must be
filed where you may have to name unknown parties, you can avoid using Jane or
John Doe by simply using “Person Doe” as a substitute. Changing the terminology
to be gender neutral can also avoid uncomfortable missteps when you address the
parties in court. For the litigators, it might require a change in terminology
to say “folks” or “jurors,” instead of saying “ladies and gentlemen of the jury.”
As juries are to be made up of members of the community, appropriate
terminology for their identity is not only the right thing to do, but it could
also help sway their opinions if you address them with respect and acceptance.
And, while it may seem uncouth in certain parts of the country to not end
sentences with “sir” or “ma’am” when attempting to show respect, this may be a
situation where the “Golden Rule” might not apply. While you personally may
want to feel respected by being addressed as “sir” or “ma’am,” this opinion may
not be the same for others in the courtroom or in the deposition room. If you genuinely
want to respect those with different backgrounds, be cautious about forcing
your viewpoint of what being respectful means onto others.
As with any
change, it will take time and repetition to overcome years of custom. But, even
if there may be disagreement over the reason why these changes are
necessary, there can be little argument that we can avert inefficiencies and
unintended grievances by avoiding the use of antiquated terminology. In this
post-COVID world where remote work, virtual closings, diverse global clientele,
and automated referrals are the new norm, having to guess at the appropriate terminology
based on voices, appearances, or names is neither effective nor respectful.
From a business perspective, countless hours of document
revisions, apologies for unintended misnomers, and potentially lost customers
can result from trying to box people into gender-specific terms. If we move
toward using gender-neutral terminology, we all can benefit from the continued
evolution of the English language.
In April 2021, the 11th
Circuit held that a debt collector violated the FDCPA by sending a consumer’s
information to a third-party vendor generating debt collection letters in Hunstein
v. Preferred Collection and Management Services, Inc. No. 19-14434, 2021 WL
1556069, at *2 (11th Cir. Apr. 21, 2021). Hunstein gave expansive
interpretation to 15 U.S.C. § 1692c(b)’s phrase, “‘in connection with the
collection of any debt,” and rejected the argument that this phrase necessarily
involves a demand for payment. The court acknowledged this rigid
interpretation may have widespread industry implications and suggested it would
be up to Congress to amend § 1692c(b), as needed.
The court reaffirmed its
decision in October 2021[i] related
to Hunstein’s standing to sue, then vacated that opinion in November 2021 and
agreed to reconsider the matter en banc (2021 WL
5353154 (11th Cir. Nov. 17, 2021)). Oral arguments were recently held in
February 2022, again related to standing and the U.S. Supreme Court’s decision
in TransUnion LLC v.
Ramirez, 141 S. Ct. 2190 (2021).[ii]
In the meantime, Hunstein has created ongoing confusion in the collection industry and
in courts across the country, including Wisconsin.In a proposed class action suit with a nearly
identical fact pattern to Hunstein, a Wisconsin consumer alleged a debt
collector violated 1692c(b) for sharing information with a third party that
mails collection letters in Nabozny v. Optio Sols.,
21-cv-297-jdp (W.D. Wis. Feb. 8, 2022).[iii]The Wisconsin District Court was not
persuaded by Hunstein however, citing the case’s more recent procedural history,
and was similarly not persuaded by decisions around the country that have
followed the reasoning of Hunstein.
Instead, the court
followed decisions holding “disclosure to a third-party provider of clerical
services differs from disclosure to the public in kind, not merely in degree.”
Nabozny, at 6, citing Shields v. Prof'l Bureau of
Collections of Md., Inc., No. 2:20-cv-02205-HLT-GEB, 2021 WL 4806383, at *8 (D.
Kan. Oct. 14, 2021); Sputz v. Alltran Fin., LP, No. 21-CV-4663
(CS), 2021 WL 5772033, at *10 (S.D.N.Y. Dec. 5, 2021).
The court also found
persuasive that the CFPB has not prevented debt collectors from using vendors
to send collection letters, despite the recent issuance of similar rules
related to communications (85 Fed. Reg. 76, 735).Concluding,“disclosure to such vendors is not the sort of harm the FDCPA was meant
to prevent,” the Court found Nabozny did not suffer any concrete injury,
lacked standing to sue, and dismissed the case. Nabozny, at 8.
On February
7, 2022, Judge Joshua D. Wolson of the U.S. District Court for the Eastern District
of Pennsylvania issued an opinion that bucked what seemed to be a positive
trend for debt collectors and letter vendors alike in the wake of the Hunstein decisions.
The opinion
came in support of the denial of a Motion to Dismiss filed by the debt
collector defendant in the case of Khimmat
v. Weltman, Weinberg and Reis, Co., E.D. Pa. No. 21-CV-02944-JDW. The facts
of the case are simple and will sound all too familiar to those following Hunstein, and the line of copycat cases
that sprung up around it. The defendant firm was hired by a creditor of the
plaintiff to collect a credit card debt, and sent a letter, through a letter
vendor, to the plaintiff. The firm provided information about the debtor and
the debt to the letter vendor in an electronic file. The plaintiff debtor sued
alleging a violation of the FDCPA, specifically section 1692c(b).
The Court drilled
down on and discussed three specific words and terms in section 1692c(b). All
throughout its analysis, the court was clear, in its view, there was no
ambiguity in the language used by Congress in 1692c(b), and the plain meaning
of the words and phrases at issue could compel only one result.
First, the court
concluded the firm undoubtedly “communicated” information about the debt to its
letter vendor, and in doing so dismissed the argument the letter vendor itself
was a “medium” through which communication could be made in a way that would not
violate the FDCPA. Instead, the court concluded the communication was made with the letter vendor through the
medium of an electronic communication.
Next, the court
decided the communication was “in connection with the collection of any debt,”
reading the phrase more broadly than the firm argued it should have been read,
and reasoning “commonsense dictates” the firm made the communication in
connection with the collection of a debt.
The court
then analyzed the phrase “with any person.” The Court rejected the argument the
letter vendor was an agent of the debt collector. On this point, the court reasoned
the section provides specific exception for certain types of agents – attorneys
– and the exclusion of other types of agents necessarily means they are not
excluded at all. The court also went on to say there was no evidence at the
stage the letter vendor was an agent of the debt collector. On this point, the court
left a small opening for the defendant firm when it noted discovery could show
the letter vendor did not read the information they were provided, and merely
processed it, which would allow the parties to “return to the issue … if
appropriate.”
The court
also dismissed the firm’s First Amendment arguments, and those centered on FTC
and CFPB guidance that seemingly blesses the use of letter vendors in debt
collection. The court was not convinced by these arguments and returned to its
conclusion that the plain language of the statute was not open to
interpretation, and any deviation from the plain language would have to come
from Congress itself.
USFN Associate
Member iMailTracking has been closely following Hunstein and the
practical effects of its litigation. USFN asked Holly Baya of iMailTracking a
few questions regarding Hunstein, its subsequent copycat cases, and its
impact on their business and the industry.
Q: What was your initial
reaction to the Hunstein case?
A: In late April 2021, I was gearing up to attend my
first NCBA Conference, excited to expand my knowledge about collections, then Hunstein
came along and ruined my day. We were about a year removed from the COVID-related
impacts on mail, and while we felt that pain along with most of our clients, we
were adjusting. This was another hit that no one needed.
Q: How did the Hunstein
case initially affect your business?
A: We saw clients in the 11th Circuit
reluctantly bringing mail back in house with others outside the circuit
following suit in an abundance of caution. We looked to Obduskey, and other decisions like
it, taking the position that non-judicial foreclosures do not fall under the
FDCPA. Further, that judicial foreclosures do not fall under the FDCPA if the
law firm is not seeking a deficiency judgment. Additionally, it was our stance
that any other mail that is not a “communication in connection with the attempt
to collect a debt,” such as bankruptcy and litigation mail, most association mail,
and even debt collector mail that does NOT ask the debtor to pay, could still
be processed through a mail vendor.
That
said, we are in the business of mail, not legal advice, and every firm had to
take a hard look at the way they did business and determine what was best for
them. We respected those decisions and learned from every conversation we had
on the matter.
Q: How have you adapted?
A: We have taken the intervening time to try to come
up with creative solutions to counter the arguments that were the basis of the
case. This was especially important considering the surge of copycat cases that
began popping up across the country, though most, thankfully, failed to gain
traction. These included considerations of modified contractual language and agency
arrangements. There is no one-size-fits-all solution, at least not to date, but
we remain open to all ideas.
Q: How have you seen the
mortgage default servicing industry react and adapt?
A:As we dug in, it
became apparent this case had implications far beyond mail vendors. Any firm
communication to a third-party service provider could potentially be considered
an FDCPA violation. We were heartened when the appeal was filed, and more so seeing
all the amicus briefs filed in support by heavy hitters across varied industries,
including banking and healthcare.
Q: As you mentioned there
have been several copycat cases with varied outcomes and rulings (we feature
two examples in this edition). What are your solutions and ideas for moving
forward?
A: The recent case out of the Eastern District of
Pennsylvania highlights the need for the modernization of the FDCPA, to account
for the advances in technology and best practices that have been established
since its inception that serve to benefit the law firms, servicers, and
ultimately the consumer. We realize it could be years before the Supreme Court
would take this up, if ever, and the same goes for a congressional amendment. If
the language is left open to interpretation, as it is, the ripples of the Hunstein
case could be felt long after it has reached its specific resolution.
At
the outset of a foreclosure case, one of the most important first steps is to
ensure that the lender has standing to file the complaint.However, in foreclosure cases, lenders often
do not have all the documents relating to the subject property properly
recorded at the time it is necessary to file suit.Accordingly, it is crucial to examine how a lender
can establish standing, while also complying with first legal filing
deadlines.One of the most effective
strategies for achieving standing, without sacrificing compliance with first
legal deadlines, is the demonstration of an equitable assignment of mortgage.
Generally,
in order to have standing to file a lawsuit in a court of common pleas, the
plaintiff must have a personal interest in the outcome of the dispute, and have
suffered an injury that is capable of resolution by the court.[1]Notably, if a lender lacks standing at the
commencement of a foreclosure action, the complaint must be dismissed.[2]In fact, the Ohio Supreme Court has
specifically held that a lender does not have standing when it fails to
establish an interest in the note or mortgage at the time it files suit.[3]Ideally, lenders should cause the note to be
properly endorsed and negotiated, and obtain a valid, recorded, assignment of
mortgage before initiating a foreclosure action.However, this is not always possible before
the expiration of first legal deadlines.In this case, one of the lender’s best strategies, if available, is to establish
standing by asserting that there is an equitable assignment of mortgage.
The
law in Ohio is clear that, when a promissory note is secured by a mortgage, the
promissory note constitutes the evidence of the debt and the mortgage is a mere
incident to the obligation.[4] Therefore, the negotiation of a promissory
note operates as an equitable assignment of the mortgage, even when the
mortgage itself is not assigned or delivered.[5]Further, “the physical transfer of the note
endorsed in blank, which the mortgage secures, constitutes an equitable
assignment of the mortgage, regardless of whether the mortgage is actually (or
validly) assigned or delivered.”[6]In sum, the lender can assert that, because
it is in possession of the original promissory note, and the mortgage follows
the note as an incident to the borrower’s obligation under the promissory note,
a valid assignment of mortgage is not necessary in order to proceed. Rather, courts in Ohio have held that a
lender has standing to foreclose by virtue of being the holder of the promissory
note.
In
order to raise the issue of an equitable assignment of mortgage effectively, the
lender must be in possession of the original note which has been properly
endorsed (either specifically or in blank) and negotiated prior to filing the
complaint.The lender must also set
forth the argument in its complaint, as well as any additional required
pleadings.Specifically, the complaint,
as well as any affidavit in support of judgment and motion for summary
judgment, must clearly establish that the lender was in possession of the
original note, which had been properly endorsed and negotiated, at the time
the complaint was filed.This is the
only way to establish standing through an equitable assignment of mortgage.Notably, this argument, as with any legal
argument, is not without risk.There are
certain appellate districts in Ohio that tend to rule frequently in favor of
borrowers, and may not be as receptive to the assertion that the lender is a
real party in interest to a suit where the recorded assignment of mortgage is
not obtained prior to the commencement of the lawsuit.However, these risks should not discourage
lenders from asserting an equitable assignment of mortgage in order to meet
first legal deadlines where the opportunity properly presents itself.
In
sum, it is not always possible for lenders to possess both the promissory note,
as well as a valid, recorded assignment of mortgage, at the time they are
filing a complaint in foreclosure.However, because the law in Ohio is clear that the mortgage follows the
promissory note and is incidental to the obligation under the promissory note,
lenders have a strong argument that they have standing to pursue a claim based
on an equitable assignment of mortgage.Accordingly, when set forth properly, the assertion of an equitable
assignment of mortgage is one of the most effective strategies for establishing
standing, meeting first legal filing deadlines, and potentially avoiding
dismissal of the case.
[1]Federal Home Loan Mortgage Corp. v. Schwartzwald, 134 Ohio St.3d
13, ¶ 37-40, 979 N.E.2d 1214 (2012).
The Connecticut Supreme Court in JP Morgan Chase v.
Virgulak (341 Conn 750 (2022)) further clarified Connecticut’s stance on
the reformation of mortgages when attempting to foreclose.
The subject mortgage was given by Theresa Virgulak, securing
a note given by Robert Virgulak. The
note was not signed by Theresa, and the mortgage was not signed by Robert.Robert obtained a Chapter 7 discharge of the
debt through bankruptcy, and therefore, was no longer obligated on the
note.Plaintiff brought the action
which contained three counts: 1) it sought reformation of the mortgage to order
that the mortgage secured Robert’s indebtedness; 2) it sought to have the court
order that Theresa was unjustly enriched in that she benefited from the loan,
and; 3) it sought foreclosure of the mortgage, as reformed.After a one-day trial, the trial court
entered judgment in favor of Theresa holding that plaintiff failed to sustain
its burden of proof that it was entitled to have the mortgage reformed to
include Robert, and that it failed to prove that Theresa was unjustly enriched
by the loan, and therefore, the claim of foreclosure necessarily failed.
The trial court found that Robert signed the note, but the
note was not signed by Theresa. The
court also found that Theresa signed the mortgage which recited that it was
given to secure the $533,000 note. The
court further found that Theresa never signed a guarantee of the debt.Although the court held that many of the
documents were signed by Theresa, including the HUD-1 settlement statement, the
Truth in Lending Statement, and the Notice of Right to Cancel, the note was not
signed by her.The trial court also held
that even though Theresa testified that the mortgage was used to pay a prior
mortgage, she did not receive any of the funds, a portion of which were also used
to pay off Robert’s unsecured debt and a portion of which were used to renovate
the subject property in which she lived.The record was silent as to any understanding that plaintiff may have
had regarding Theresa’s responsibility under the loan. On that basis, the court
found that plaintiff was not entitled to the remedy of reformation of the
mortgage.Notably, the plaintiff
conceded that there was no evidence that required the trial court to find that Theresa
intended that the mortgage secure Robert’s debt.
The Supreme Court held there was no sufficient evidence
presented and that plaintiff fell short of meeting the very high burden required
to prove that there was a mutual mistake of the parties, which would require
reformation of the mortgage to conform with the understanding of the parties.
In making its holding, the Court reiterated its stance that reforming written
instruments is something that should be done cautiously. Because there was a
discharge of the debt secured by the mortgage, Theresa did not guarantee the
debt, and there was insufficient evidence that she intended to, the court ruled
that the documents should not be reformed.Accordingly, given that there was no debt secured by the mortgage due to
the bankruptcy discharge, plaintiff could not foreclose on Theresa’s interest
in the property.
This case reveals the high burden that must be met in Connecticut
for those that seek to foreclose on mortgage documents where the foreclosing
plaintiff is seeking to “fix” defects in the mortgage documents by adding
parties or additional obligations.
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First on deck was Mark McArdle, Assistant Director of Mortgage
Markets for the Consumer Financial Protection Bureau, who was introduced by
Richard Nielson of Reimer Law Co.
USFN’s Diversity, Equity, and Inclusion Section periodically spotlights professionals promoting DEI and enacting education initiatives within the industry. 
litigation. USFN asked Holly Baya of iMailTracking a
few questions regarding Hunstein, its subsequent copycat cases, and its
impact on their business and the industry.