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WHETHER TO REINSTATE, DEFEND OR GIVE-UP OFFENSIVE STRATEGY - VENUE 3 3 4 4 5 8 12 17 18 22 23 24 24 24 26 26 27 27 29 29 30 30 30 31 32 32 34 34 35 37
DEFENDING NONJUDICIAL DEED OF TRUST FORECLOSURES A. INTRODUCTION B. PROCEDURE FOR RESTRAINING TRUSTEE'S SALES C. DEFENSES BASED ON TRUSTEE MISCONDUCT D. POST-SALE REMEDIES – WAIVER PROBLEMS E. SETTING ASIDE THE TRUSTEE'S SALE F. ADDITIONAL STATUTORY REMEDIES G. RAISING DEFENSES IN THE UNLAWFUL DETAINER (EVICTION) ACTION H. DAMAGES FOR WRONGFUL FORECLOSURE DEFENDING JUDICIAL FORECLOSURES A. INTRODUCTION B. HOMESTEAD RIGHTS C. UPSET PRICE D. DEFICIENCY JUDGMENTS E. REDEMPTION RIGHTS F. POSSESSION AFTER SALE G. POST FORECLOSURE RELIEF MISCELLANEOUS ISSUES A. BANKRUPTCY B. WORKOUTS (DEED IN LIEU) C. LENDER LIABILITY D. MOBILE HOME FORECLOSURES E. TAX CONSEQUENCES OF FORECLOSURE THE GOVERNMENT AS INSURER, GUARANTOR OR LENDER A. INTRODUCTION B. HUD WORKOUT OPTIONS C. THE VA HOME LOAN PROGRAM
RURAL HOUSING LOANS
RESOURCES I. GENERAL CONSIDERATIONS A. WHETHER TO REINSTATE, DEFEND OR GIVE-UP
By far the most important decision that must be initially made is whether the property is worth saving. This is often ignored and wasted effort is expended when there is no "equity" (realistic fair market value minus all debt, liens, property taxes, anticipated foreclosure costs, late fees, and selling costs) in the property. The options are as follows: 1. Reinstatement. Pay the costs and late charges and stop the process. In most non-
judicial foreclosures this is permitted up until the date of sale. In Washington the lender must allow reinstatement 10 days prior to the sale date. See RCW 61.24. Often a lender or relative will loan necessary funds and take a subordinate lien on the property to do so. The makes sense only if the new payments are within the means of the debtor. 2. Sell the Property. If there is equity, but no ability to reinstate, then immediately list
and sell the property to recoup equity. 3. Obtain Foreclosure Relief. Most government insured loans (if, VA, FHA) as well as
lenders in receivership and bankruptcy or receiving bail out money following the near collapse of the U.S. economy in 2008 , have programs allowing (or requiring) lenders to assist defaulting borrowers. See discussion under §V infra. Check into these options immediately. 4. Give Up. This is actually an option as most state laws permit the debtor to remain in
possession during the foreclosure process and redemption period rent-free. Most laws, especially in
non-judicial foreclosure states - do not allow (or at least limit) deficiencies. Debtors contemplating bankruptcy should take advantage of homestead rights and redemption rights. If there is no equity or negative equity and no ability to make payments, there is no economic reason to try to avoid foreclosure. 5. Defend the Foreclosure. After all of the above have been considered, defense of the
foreclosure may be warranted. This outline discusses some defenses that may result in reinstatement of the mortgage or recovery of equity. B. OFFENSIVE STRATEGY
In addition to defenses that may be raised, there may be affirmative claims that can be brought against the lender which should be immediately determined and raised in a counterclaim or set-off or, in the case of non-judicial foreclosure, brought by separate suit and coupled with an injunction against continuing the non-judicial foreclosure. These claims can also be brought in bankruptcy. See, e.g. In re Perkins, 106 BR 863 (1989) state court and sometimes in federal court.. A few examples of affirmative claims: 1. Truth-in-Lending Act Violations. Often lenders will hand the debtor a claim, which
can turn a debt into an asset. If the Truth-in-Lending disclosure statement is less than one year old, there may be damage claims for improper disclosure. See, 15 U.S.C. 1635. More importantly, there may be a right of rescission, which can be exercised up to three years after the closing resulting in a tremendous advantage to the borrower. See, e.g., Beach v. Ocwen Fed Bank, 118 S. Ct. 1408 (1998). 2. Usury. If a state usury law applies (usually on seller financed real estate), this can
parlay a debt into an asset. Federal pre-emption generally prevents this, but there are exceptions.
predatory loans. The deed of trust may be typically foreclosed either judicially as a mortgage or non-judicially. Mortgage America. See. 26 Wn. See 15 U. 3. DEFENDING NONJUDICIAL DEED OF TRUST FORECLOSURES A. 2d 842 (1990).86 giving rise to treble damages and recovery of fees and costs. Mortgage Broker Liability.g.C. See e. 4 Wn. App. 114 Wn. Under a relatively new federal statute to regulate high interest.146 . violations are usually per se violations of the Consumer Protection Act.S. Theis v. Intentional breach of contract gives rise to emotional stress damages. Numerous claims that arise in the mortgage financing context give rise to set-offs that can allow negotiation out of the foreclosure. This amendment to the Truth-In-Lending Act requires greater disclosures in loans where a number of factors exist such as.C. Lender Liability. Van Natter. the Consumer Loan Act. Penalties include enhanced damages and rescission. 1602(u) and 15 U. points exceeding 8% and other excessive costs.146. RCW 19. RCW 31. 1640(a). Congress enacted in 1994 the Home Ownership and Equity Protection Act (effective on loans after October 1.See.. Set forth below are the jurisdictional variations in Page 5 . II. 91 (1980).52. INTRODUCTION The deed of trust is currently one of the most common devices for securing conventional and government insured or guaranteed real estate loans.S. 1995). App. 146 (1971). Unfair or Deceptive Acts or Practices. RCW 19.04 and the Consumer Protection Act also have enhanced damages provisions and attorney fees. Brokers generally have a fiduciary duty to clients. The Mortgage Broker Practices Act. Mason v.0201 (Washington Mortgage Broker Practices Act). RCW 19. Federal Finance Co. Cooperstein v. See. RCW 19.
security agreements and the most common foreclosure procedures 1 . Mortgage Mortgage Mortgage Mortgage Mortgage Mortgage Deed of Trust Mortgage Mortgage Mortgage Deed of Trust Deed of Trust Instlmnt. Nonjudicial foreclosure is 1 Jurisdiction Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Dis. & D.T. Contract Deed of Trust Mortgage Deed of Trust Mortgage Mortgage Mortgage Mortgage Deed of Trust Mortgage Mortgage Mortgage Deed of Trust Mortgage Mortgage Mortgage Mortgage Mortgage Deed of Trust Deed of Trust Deed of Trust Mortgage Customary Foreclosure Procedure Nonjudicial Nonjudicial Nonjudicial Judicial Nonjudicial Public Trustee’s Sale Judicial-Strict Foreclosure Judicial Nonjudicial Judicial Nonjudicial Judicial Judicial & Nonjudicial Judicial Judicial Judicial Judicial Judicial Judicial Judicial (Nonjudicial for Corporate Borrower) Nonjudicial Nonjudicial Nonjudicial Nonjudicial Nonjudicial Nonjudicial Nonjudicial Judicial & Nonjudicial Nonjudicial Nonjudicial Judicial Judicial Judicial Judicial Judicial Judicial Judicial Nonjudicial Judicial Judicial Nonjudicial Judicial Judicial & Nonjudicial Nonjudicial Nonjudicial Nonjudicial Strict Foreclosure Page 6 . Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Customary Security Agreement Mortgage Deed of Trust Deed of Trust Mortgage Deed of Trust Deed of Trust (Semi-judicial) Mortgage Mortgage Deed of Trust Mortgage Security Deed Mortgage Mortgage Mtg. of Col.
Nebraska: Neb.010 to 61. 51. Stat.020. Ann.090 to 34. §§40 to 49 (West 1992).100. California: Cal. 51. 582. §§107. Laws §§34-11-22. Rev.20.050. Ann.allowed in approximately one-half of the states. §§11-5-111. Arizona: Ariz. Page 7 .7 (Michie 1991). Laws Ann.I. 71-1-223 to 232. Massachusetts: Mass. Code §35-22-01 (1992).. Ann. Wyoming: Wyo. §654. §§25-13-802. ch. Code Ann. Stat. Prop. 871 (1978). §§35-5-101 to 35-5-112 (1991). §§34. 89-1-55 (1972).290to 443. Alaska: Alaska Stat. 107. it is not necessary to utilize the court for the foreclosure sale unless a deficiency judgment is sought.025. Rhode Island: R. Georgia: Ga. §§9-13-141. 107. §§57-1-23 to 57-1-34 (1986). 44-14-162.003. Real Prop. §§45-715 to 45-718 (1991). New York: N. Rev. New Hampshire: N. Stat. Stat.005 (West 1992). Stat. Oklahoma: Okla. Ann. tit. §§4531a to 4533 (1991). 34-23-3. §§51-002. Code Ann. Missouri: Mo. North Dakota: N.H. 104. Civ. 40. Tennessee: Tenn. Stat. Rev. §§33-807 to 33-814 (West 1991). Codified Laws Ann. Oregon: Or. 244. §§7-105. 7-202 (1988).C.C. 46. Gen. Rev. Ann. §§451-401 et seq. Gen. Code §§38-1-3 to 38-1-12 (1991). See. With nonjudicial foreclosure. §§442. Acts §§1401 to 1461 (McKinney 1992). Power of Sale Foreclosures in Tennessee.Y. 15-1-23. Code §§2924 to 2924(h) West 1992). Ann. 44-14-48. §§18-50-108. 18-50-116 (1987). Code Ann. 55-61 to 55-66.453 (Michie 1991). §§479:22 to 479:27 (1991). §§76-1001 to 1018 (1981).18 (West 1992). (West 1992). §§11-15 (West 1992). Code Ann. Cent. Comp.795 (1989). 40. ch.130 (West 1992). §§61. Texas: Tex.20. Iowa: Iowa Code Ann. 21-48A-1 to 21-48A-5 (1992). Stat.325 (Vernon 1992).1 to 55-59. 600. Laws Ann. U. Michigan: Mich. §§21-48-1 to 21-48-26. Vermont: Vt.100 (1991). CODE §§35-10-1 TO 35-10-10. 71-1-311 to 317 (1991). South Dakota: S. tit. 12.: D. Nonjudicial foreclosure is often Virgin Islands Virginia Washington West Virginia Wisconsin Wyoming Mortgage Deed of Trust Deed of Trust Deed of Trust Mortgage Mtg.D. tit.D. & Installment Contracts Judicial Nonjudicial Nonjudicial Nonjudicial Judicial Judicial 2 ALABAMA: ALA. West Virginia: W. 34-27-1 (1984). Rev. §§55-59. Stat. Utah: Utah Code Ann. Arkansas: Ark. [FORECLOSURE AFTER 12/1988 §§35-10-11 TO 35-10-16] (1991).L. Maine: Me. 21.01 to 580. Ann. Montana: Mont. 8 Mem. Also listed are the states that permit nonjudicial foreclosure and their relevant statutes2 .4. 71-1-111. Note.2431. §§580.3170 (West 1992). Code Ann. D. Rev.705 to 86. Idaho: Idaho Code §§6-101. Stat.3201 et seq. 600. Stat. Code Ann. Rev.4.24. 44-14-180 to 187 (Harrison 1991). Va. 45-1502 to 45-1506 (1991). 34-20-4.080 to 107. 14. Code Ann.. §§19. St.30. 600.24. Mississippi: Miss.01 et seq. Minnesota: Minn. Washington: Wash. Nevada: Nev. §§34-4-101 to 34-4-113 (1991). Rev. §§86. 183. Stat. Code Ann. Virginia: Va. Code Ann.
Kennebec Inc. 230 Cal.App. Page 8 . Whitney. U. e. 125. 527 F. Merchants & Farmers Bank. (2) the deed of trust has been reinstated.2d 926 (1958). v. 227 Ga. Property Law Reporter. 88 Wash. Proper grounds for enjoining a trustee's sale include: (1) there is no default on the obligation. amended by 956 F. See. Jack. Peoples National Bank v. Wershow. Blackburn. 565 P. 475. 59 Wash. note.the preferred method of foreclosure because it is more efficient than judicial foreclosure and quicker. 104 S.Rptr.2d 116 (1983). Derwinski. 627 F. 181 S. 117. 4 & 5). 48 Wash.App. v.2d 718.Supp. June 1987 (Vol.. Security Building & Investment Corp.1974). Dennison v. Cady. 1985). (3) the notice of default. v. Ltd.1988)..Strange Bedfellows. 607 A.Cal.D. Bryant v.2d 646 (Tex. certiorari denied 464 U.Rev.1978). 147.1991).g. 481 So.S.2d 455 (Utah 1983).3d 218 (4th Cir.E.N. PROCEDURE FOR RESTRAINING TRUSTEE'S SALE Anyone having an interest in the real property security.2d 589 (8th Cir. 1975). Ballman. Due Process and Deeds of Trust . 10 F. 256 Cal. Brown.E. 509 F. Leininger v. Inc. N.App. La Mansion Hotels & Resorts. Northrip v. 172 W. v.2d 812 (1977). Bekins Bar V Ranch v. 763 (1973). 491 P. Court Actions Contesting The Nonjudicial Foreclosure of Deeds of Trust in Washington.2d 76 (1992). Supp.Ed. 4 Island Financial. Salot v.1975).2d 1166 (5th Cir. Associates Financial Services Co. Lawson v. 59 Or. of Oregon. Federal National Mortgage Association. 1250 (W. 28. 664 P.2d 511 (D. but there is a serious question as to whether the government can direct a lender to use a nonjudicial procedure 4 .1974). 281 Cal. 1986). 651 P. 946 F.W.2d 382 (1971). Ostrander.1993) which held that the VA's control over the foreclosure process in VA guaranteed loan foreclosures constitutes sufficient governmental action to trigger due process protections.1986). 834. 208 Cal.1992) and Boley v. 40 CR 826 (1964).D.2d 264. 230 CA. Huth.D. Supp. Vail v. Turner v. 3 Nos.Va.2d 812 (8th Cir. Harris. 304 S. B. 1379 (N.3d 1082. Inc. Galbraith & Gant. Foothill Thrift and Loan.Supp. Bank of the West. notice of sale. 157 CA. Ind.D. Smith.App.3d 424. Crummer v. Wright v. 320 P. v.D.Ga.2d 945 (1983).Y.L. 402 F. Jefferson Federal Savings & Loan Association.2d 300 (1983). Inc.1975). 722 (W.L.2d 352. generally. 762 S. 5 See. See Also Leen.C.. v. macon. Inc. Restraining Orders in Non-Judicial Deed of Trust Foreclosures. 602 F.App. Accord. 851 (N.Ct.1975).2d 694 (9th Cir. or proposed conduct of the sale is defective. Reiserer v. 272 (N. Homestead Savings v.2d 1058 (1971).Supp. 6 Wn. Metropolitan Life Insurance Company v.688. v.Rptr. U. 376 F. 389 F.C.. Murdoch.S.2d 23 (6th Cir. 572 F. National Life Insurance Co. Darmiento. 323 (1984). including the borrower. 92 Md. Deaner.App. 508 (1989) (unpublished opinion). 519 F. (5) a workout/settlement has been 3 See Charmicor. Global Industries. Cir.2d 1086 (Miss.S. The nonjudicial foreclosure procedure has been found constitutional between private parties on the basis that there is no state action 3 . Barrera v. 78 L. may restrain the non-judicial foreclosure of a deed of trust on any proper ground5 . Whitehead.Rev. (4) the lender has waived the right to foreclose. 367 (1991).
where and before whom the application for the restraining order or injunction will be made. (7) to enforce government relief programs. 36 Ohio App.2d 1378 (1987). Time for Filing Action The action can presumably be filed any time before the scheduled trustee's sale. v. supra.24. purchasers at the sale acquire the property subject to the pending litigation 7 . there may be defenses to the debt (i.24. fifteen days are required for noticing a motion for a preliminary injunction. Note. Effect of Lis Pendens Filing a lis pendens at the time the lawsuit is commenced constitutes constructive notice to purchasers and others dealing with the property of the claims and defenses asserted by the plaintiff 6 . 3. Even if the plaintiff does not seek an order restraining the trustee's sale or a restraining order is denied. See the Revised Code of Washington (hereinafter "RCW") 61. 1. etc. Page 9 . See CCP section 1005. breach of warranty by the seller. Under Washington law. 92 CR 636 (1971). truth in lending violations. 14 CA3d 722. footnote 4.agreed to. usury. Finally. and trustee misconduct. 7 Avco Financial Services Loan. Inc. a person seeking to restrain a trustee's sale must give five days notice to the trustee setting forth when.130(2). (6) equitable reasons that would entitle a debtor to close a sale of the property or complete a refinance. if one seeks to restrain the sale. misrepresentation of the seller. Notice of Application for Restraining Order In Washington. v.130(2).3d 65.E. A trustor in California has at least one hundred and ten days (after the recording of the notice of default) to seek to enjoin the sale. 520 N. which substantially reduce the debt.) or set-offs. See also Civil Rules 6 and 81 of the Civil Rules 6 Putnam Sand & Gravel Co. Hale.e. five days notice must be given to the trustee and the beneficiary. 2. See RCW 61. In California. Albers. but the sooner the better. Land Associates.
2d 1004 (1985). Houston National Bank.596. Franklin Savings Association v.. Real Property. If the property secured by the deed of trust is an owner occupied single family dwelling.1982). most courts will require the borrower to tender at least what he/she acknowledges is due 10 . 498 (1919).r. Page 10 .App. 133 Cal. 1939) for a list of cases. 308.W.W. Inc. See RCW 61. the statute requires that payment of the amount of the monthly interest at the new default rate shall be made to the court clerk every thirty days.App.W.1986).24. 213 S. 703 P. 464 A.App.App. error refused n. Payment Obligation When a preliminary injunction is sought. Some courts require the party seeking the injunctive relief to pay to the court the amount due on the obligation 9 .Super. Under Washington law.Rptr.App.W. Strangis v. See RCW 61. 647 S. Theo R. Locust-Broad Realty Co. 600 S. Metropolitan Bank. 183 Cal.130 (1)(b).. Berry. interest and reserves. the court requires such sum to be paid into the court every thirty days. 108 (1988).W. appeal after remand 74 Or. 51 Wn. Inc. 756 S..App. 4. 38.24. 318 Pa.2d 14 (Tex. see also Tiffany. If the amount due on the obligation is in dispute. 444.for Superior Court regarding computation of time. 1980).1988). Prudential Mutual Savings. Broad & Locust Associates v. 201 Mo. Real Property § 5179 (1957). Then the creditor loses nothing during the pendency of the suit. In the case of default on a balloon payment. then the court must require the party seeking to restrain the trustee's sale to make the monthly payment of principal interest and reserves to the clerk of the court every 30 days. Reese. 8 See Hummell v.App.2d 856 (Tex. Koegal v.3d 49. if the default is in making the monthly payment of principal.2d 927 (1982). See RCW 61. Appel Realty Co. it would advantageous to offer to make ongoing payments.Civ.130(1).1982). 9 See Ginther-Davis Center.130(1)(a). 10 See Glines v.. Limited v.2d 47 (Minn. 708 (4th Dist. Grella v. Becker. Thompson. 385 N.24.2d 506 (1983). many states require the petitioner to post an injunction bond to protect the lender from injury because of the injunction8 . Republic Federal Savings & Loan. 294 Or. § 1549 (3d Ed.e. v. 656 P.2d 15 (Tex. Cf. A practice tip: even if local law does not require this.App.
Prudential Mutual Savings.130(1)(b) provides: In the case of default in making payments of an obligation then fully payment by its terms. such sum shall be the amount of interest accruing monthly on said obligation at the non-default rate. App. 509. paid to the clerk of the court every thirty days.24. Page 11 . RCW 61. This is consistent with the intent to preserve the status quo while the lawsuit is pending and provide security only for prospective harm. An appraisal showing equity should persuade a court that the lender is protected while the underlying dispute is resolved in court.24. Steward v. Failure to seek a restraint may constitute a waiver of all rights to challenge a sale for defects whenever the party who received notice of the right to enjoin the trustees sale. This would significantly help a borrower avoid a costly bond. RCW 61. the 11 Koegel v. had actual or constructive knowledge of a defense to foreclosure prior to the sale. Good. 51 Wn. Inc.130(1)(a). App. RCW 61. 515 (1988). The doctrine of waiver would thus preclude an action by a party to set aside a completed trustee’s sale 11 .Although the amount that the party seeking to restrain the trustee's sale must pay as a condition of continuing the restraining order would ordinarily be the regular monthly payment on the obligation. Finally.24. and failed to bring an action to enjoin the sale. causing damage to the defendant. 114 (1988). When a party knew or should have known that they might have a cause of action to set aside the sale but unreasonably delayed commencing the action. 108. when there is a balloon payment past due. 51 Wn..130 allows the court to consider the grantor's equity in determining the amount of security.
App. 13 Baxter & Dunaway. 585 P. Ltd. or special requirements when the government is the lender. In most states. 388. November 1990). App. 1. DEFENSES BASED ON TRUSTEE MISCONDUCT Most defenses that are available in judicial foreclosures are also available in nonjudicial foreclosures of deeds of trust. "a trustee is treated as a fiduciary for both the borrower and the lender. or guarantor.. 693 P. Helenius.2d 372 (Mo. C. 513 S. See Spires v. The Law of Distressed Real Estate (Clark Boardman Company. Gibraltar Savings. The court went on to illuminate four duties of the trustee: 12 Carlson v. Page 12 . 21 Wn.2d 383." 13 In McPherson v. 424.1974). 429 (1988). usury statutes. 450. In Cox v. infra. Defenses may include violation of Truth-in-Lending. the Washington Supreme Court adopted the following view: Because the deed of trust foreclosure process is conducted without review or confrontation by a court. insurer.doctrine of laches may bar the action 12 . the fiduciary duty imposed upon the trustee is "exceedingly high". Purdue.2d 683 (1985).W.2d 830 (1978). the court approved the following statement describing the duties of a trustee from California law: Among those duties is that of bringing "the property to the hammer under every possible advantage to his cestui que trusts. Other defenses are unique to nonjudicial foreclosure of deeds of trust because they relate to the particular obligations imposed upon trustees who conduct the sale of the real property. 50 Wn." using all reasonable diligence to obtain the best price. 103 Wn. Breach of Fiduciary Duties A trustee selling property at a nonjudicial foreclosure sale has strict obligations imposed by law. 452-3. Edgar. other consumer protection legislation.
Page 13 . Martsch. the attorney should withdraw from one position. 214 (Alaska 1978). As one leading decision has stated. . 14 See also McHugh v. and (4) When an actual conflict of interest arises between the roles of attorney for the beneficiary and trustee. 3d Ed. (3) Once a course of conduct is undertaken that is reasonably calculated to instill a sense of reliance thereon by the grantor. thus preventing a breach of fiduciary duty.21: . and he is bound to use not only good faith but also every requisite degree of diligence in conducting the sale and to attend equally to the interest of debtor and creditor alike. 590 P. (2) The trustee must take reasonable and appropriate steps to avoid sacrifice of the debtor’s property and his interest. §7. a trustee in a deed of trust is a fiduciary for both the mortgagor and mortgagee and must act impartially between them. it is a duty to treat the trustor fairly and in accordance with a high punctilio of honor.. In Blodgett v. it was stated that "the duty of the trustee under a trust deed is greater than the mere obligation to sell the pledged property." The Supreme Court in Blodgett went even further and found that the breach of this confidential duty may be regarded as constructive fraud 14 . Church. that course of conduct can not be abandoned without notice to the grantor.2d 298 (UT 1978). (West Publishing Co. . "the trustee for sale is bound by his office to bring the estate to a sale under every possible advantage to the debtor as well as to the creditor. The general rule is summarized in Nelson & Whitman. 1994). Real Estate Finance Law.(1) The trustee is bound by his office to use diligence in presenting the sale under every possible advantage to the debtor as well as the creditor. . . 583 P.2d 210. .
. 462. 669.C. Whitlow v. 664. The California Supreme Court has stated. See. that each may take the means to procure an advantageous sale. 'Just as a panda is not a true bear. at p.010(3) and (4). 6 S. In most jurisdictions.apprising both of the intention of selling. Cir. 261 Cal. 915 (D. 405.E. 207 S. 554 (1940).. This variation led the Washington Legislature to codify the trustee’s duty in 2008 to that of impartiality and not a true fiduciary. this "fiduciary" characterization of a trustee is not accepted in all jurisdictions.3d 454. Helenius.P. purchase at the sale that he conducts 16 . However. The fiduciary duty of a trustee to obtain the best possible price for trust property that it sells has been discussed in nonjudicial and other contexts 15 . RCW 61. "The similarities between a trustee of an express trust and a trustee under a deed of trust end with the name.2d 549. 1971). without the express consent of the trustor.100.E. 49 Cal. Bangham.C." Monterey S.24.L. and control over. Silverman. 149. superseded by RCW 11. Lexis 156. 362 S.2d 837 (1974). Credico Industrial Loan Company. 389. 773 P. in which the court stated that the same good faith is required of trustees under a deed of trust of real estate as is required of other fiduciaries.2d 394. supra. Page 14 .E. 234 Va. 215 Va. Mutual Building & Loan Association. Pacific National Bank.140 as stated in Conran v. A court may impose additional affirmative duties (beyond the statutory requirements) upon the trustee in certain circumstances. 587.2d 735 (1987). the trust property.592 (1989). 663 P. 2d 394. Mountain Trust Bank. Inc.2d 104 (1983). Seafirst Bank.App. Nor is it bound by the fiduciary duties that characterize a true trustee. 16 See Smith v. 1998 Wn. supra. 454 F. See also National Life Insurance Company v.' *** [T]he trustee under a deed of trust does not have a true trustee's interest in. a trustee of a deed of trust is not a true trustee.2d 145 (1989). Partnership v. One can still argue the duties established in the Cox case. W. 99 Wn. 216 N. 514." Mills v. modified by 99 Wn.2d 899. because lack of impartiality of what the court was really talking about. a trustee cannot.Rptr. Allard v. This could include a requirement that a 15 See Cox v.
a statement that it is unlikely that the sale will be held because the debtor intends to reinstate 17 . West v. 17 S.2d 328 (1929). Trustees are not permitted to "chill the bidding" by making statements which would discourage bidding. in which the trustee knew that the right to foreclose was disputed and that the attorney for the trustor had failed to restrain the sale. Helenius. Page 15 . 21 Wn. 182 Md. the sale was held void. the trustee only undertakes an affirmative duty of full and accurate disclosure if s/he has made any representations or answered any questions concerning the title.2d 830 (1978).2d 847. Purdue. supra. despite this general rule. Section 7. The Washington courts have held that even when a trustee is aware of defects in title. Morrell v. McPherson v. 21 Wn.*." However.040(6) authorizes a trustee to continue a trustee's sale for a period or periods totaling 120 days for "any cause he deems advantageous. 401. Ivrey v. 584 P. 322 Mo. 453.2d 983 (1978). 261. Further.693 P. Mortgages-Redemption After Foreclosure Sale in Missouri. Arctic Trading Co. 585 P. App. Dingus.2d 383. 463. 852 (1943).24. the court held that the trustee should have either informed the attorney for the trustor that she had failed to properly restrain the sale or delayed foreclosure. the sale is subject to 17 See. As a result of the trustee's failure to do so. Axtell. 25 Mo. 450. 103 Wn. for example. the general rule is that a trustee is not obligated to disclose liens or other interests which the purchaser could or should have discovered through his or her own investigation.trustee's sale be continued. If a trustee does engage in "chilled bidding".. there is authority behind the proposition that a trustee has a fiduciary duty to restrain the sale due to defects known to the trustee. 302. Karr. However. 284 (1960). if necessary. to prevent a total loss of the debtor's equity.21. RCW 61.REV. App. Nelson & Whitman.2d 683 (1985). In Cox v. 34 A. the Washington Court of Appeals has ruled that the trustee need not exercise "due diligence" in notifying interested parties of an impending sale.W.L.
743 P. statutes allowing foreclosure under a power of sale contained within the trust deed or mortgage are usually strictly construed.E. Federal Farm Mortgage Corp. In another case.2d 503 (1988). v.App. 210 Va. inconsequential defects often involve minor discrepancies regarding the notice of sale. Pioneer Federal Savings and Loan Association. Recent decisions have moved away from the strict construction ruling. An example of a non-prejudicial and correctable error is noncompliance with the requirement that the trustee record the notice of sale 90-days prior to the actual sale when actual notice of the sale was given to the debtors 90-days prior to the sale and the lack of recording caused no harm. Co. 8 S. at 509. holding that some technical violations of statutes governing nonjudicial foreclosures will not serve as grounds for setting aside sale when the error was non-prejudicial and correctable. 172 S. First Security Realty Services. Inc.W. Concepts.Civ.2d 1158 (Utah 1987).1974). Griffin Federal Savings Bank. supra at 515. 62 Ga.. Strict Construction of the Deed of Trust Statute The nonjudicial foreclosure process is intended to be inexpensive and efficient while providing an adequate opportunity for preventing wrongful foreclosures and promoting the stability of land titles 19 .App.402. National Old Line Ins. 111 Wn. 415 S. Inc.E... the court held that since there was "substantial compliance" with the requirements specified by the deed of trust and since the parties were not affected in a "material way. where the first of four published notices omitted the place of the sale.being set aside 18 . 20 See also Tarleton v.App. 19 Queen City Savings v. However.r. error refused n. Page 16 . 513 S.2d 4 (1992). Further.e.E. 2. See Koegal. supra at 113. 454. In Bailey v.. Id. Manhalt. Sullivan v.2d 135 (Tex. 202 Ga. 558. where the notice of sale was sent by regular rather than by statutorily required certified or registered mail 18 Biddle v.2d 126 (1940).2d 730 (1970)." the sale was valid20 . Steward.
604 (Mo. modified 21 Macon-Atlanta State Bank v. They also don't apply to a dispute between the grantor and grantee.21 ff. Municipal Authority. Statutory Presumptions The Washington Deed of Trust Act contains statutory presumptions in connection with a trustee's sale that are similar to those found in most other states. For a complete list of defects considered "insubstantial". see Graham v. 22 See also Cal. there is extensive case law setting forth the basis for rebutting these presumptions. 86. such as title insurance. §3839-115. which recital shall be prima facie evidence of such compliance and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value. 666 S.W. the recital will be conclusive proof of the facts. (2d ed.Stat.040(7) provides.1983). 111 Wn. Civ. 25 Wn. Nelson & Whitman. POST-SALE REMEDIES 1. Real Estate Finance Law. Yet another means of stabilizing titles is to include a provision in the deed of trust that in the event of a trustee's sale. 57-1-28. Gall. Code § 2924 (West 1981). 2d 341 (1988). generally. the [trustee's] deed shall recite the facts showing that the sale was conducted in compliance with all of the requirements of this chapter and of the deed of trust. in part: . 1985) § 7. Ann.780. .Rev.2d 601.App. Page 17 . Johnson v. 659 S. So.1984).Rev.W. Or.Stat. Some states employ other means of stabilizing titles. D. Oliver. See. the sale was deemed valid 21 . See. However. 22 RCW 61.App. Clearly a grantor must show some prejudice. Johnson.and the mortgagor had actual notice of the sale for more than the statutory period prior to the sale.Compiled Laws 21-48-23. 2d 797 (1946). Such provisions are designed to protect bona fide purchasers and to assure that the title passed through a trustee's sale will be readily insurable. Glidden v. West's Colo. Utah Code Ann.1953.Dak. although the required recitals are described as "conclusive" in favor of bona fide purchasers and encumbrancers for value.24. .2d 934 (Mo.
A purchaser will not then constitute a bona fide purchaser able to utilize the presumptions of regularity in recitals of the trustee's deed. The Bona Fide Purchaser The law is well settled that a bona fide purchaser.040(7). Rptr. if a lis pendens has been recorded. 24 (Tex. Crummer v. supra. 2d 264. The general rule is set forth in Phillips v. 313 P.43 was grossly inadequate. SETTING ASIDE THE TRUSTEE'S SALE Setting aside a trustee's sale is largely a matter for the trial court's discretion. Whitehead. 523 S. . 40 Cal. must have purchased the property "for value. 151 (1988). App. The beneficiary of a deed of trust is not a bona fide purchaser. 230 Cal. Whitehead." See RCW 61. 2. 1975): [The purchaser] cannot claim to be a good-faith purchaser for value because the jury found . "Court Actions Contesting The Nonjudicial Foreclosure of Deeds of Trust In Washington. 826 (1964). 152 Ca. a purchaser who pays a grossly inadequate price cannot be considered a good-faith purchaser for value. Brown v. Latham. E. Rptr. See Johnson. it "will cause the purchaser to take subject to the plaintiff's claims. These findings are not attacked for lack of evidence. After a trustee's sale has taken place.By Glidden v. 2d 200. Rev. .Rev. 40 Cal. 23 Attempting to Set Aside Deed of Trust Foreclosure Because of Trustee's Fiduciary Breach." 59 Wash.W. See CC § 2924." Bernhardt. See Crummer v. Municipal Authority. California Mortgage & Deed of Trust Practice (2d Edition 1990). Although good faith does not necessarily require payment of the full value of the property. a trustor or junior lienor may bring an action in equity to set aside the sale. 230 Cal. that the sale price of $691. App. see also Note. Further. in order to achieve that status. Busch. 53 Missouri L.L.24.2d 19. 826 (1964).2d 19 (1957). Page 18 . 2d 264.2d 647 (1988). App. 764 P. 323 (1984) 23 .
2d 908 (1968). Section 6. courts sometimes say that inadequacy of the sale price is an insufficient ground unless it is so gross as to shock the conscience of the court.L. unfairness. In Cox v. even if not restrained. Helenius. or other irregularity.Redemption After Foreclosure Sale in Missouri. Melani. Inadequate Sale Price The general rule on using inadequate sale price to set aside a deed of trust sale is stated in Nelson & Whitman. supra. Although it is preferable to raise any defenses to the obligations secured by the deed of trust or other defects in the nonjudicial foreclosure process prior to the trustee's sale.2d 475. § 7. 24 See also Dingus. In those circumstances where the defect in the trustee's sale procedure does not render the trustee's sale void. 1.2d 36 (1973) and Arnold v. 513 P. Page 19 . at p. Stating the rule in a slightly different manner. supra. the court will probably apply equitable principles in deciding what relief. A general discussion of equitable principles in contexts other than trustee's sale can be found in Eastlake Community Council v. Helenius. Possible reasons could include those described below. if any.2d 143. 262 (1960). 388. 693 P. would have resulted in a void sale.60 (University of California 1979).REV. warranting an inference of fraud or imposition 24 . a trustee's sale can presumably be set aside if there was a good reason for not restraining it. Mortgages . Cox v. Roanoake Associates.21: All jurisdictions adhere to the recognized rule that mere inadequacy of the foreclosure sale price will not invalidate a sale.2d 383. 25 Mo. 437 P.An action may be brought to set aside a trustee's sale under circumstances where the trustee’s sale is void. absent fraud. 82 Wn. 103 Wn. 261. the court indicated that the inadequate sale price coupled with the trustee's actions. Breach of the Trustee's Duty a.2d 683 (1985). is available to the parties. 75 Wn. California Mortgage and Deed of Trust Practice.
it is stated: In an action to set aside a foreclosure sale under a deed of trust. at p. Davis.24. National Old Line Insurance Co. Page 20 . However. at pp. see also Biddle v. supra. Real Estate Finance Law. Section 7. supra.Generally. Helenius. Actions by the trustee which lull the debtor into inaction may also give rise to grounds for avoiding the sale 26 .2d 135 (Tex. unless the sale price is grossly inadequate. at 289.390 in which trustees who serve a dual role as trustee and attorney for the beneficiary are directed to transfer one role to another person where an actual conflict of interest arises. 2. 1923). c. evidence showing that the trustee was hostile and wholly indifferent to any right of the mortgagor warrants setting aside the sale.030 sets forth the requisites to non-judicial foreclosure. supra. 878 (Mo. b. 26 Dingus. coupled with an inadequate sale price. 1974). Nelson & Whitman. 513 S. Cox v. Cox v.Civ. supra. at p.W. Absence of Other Foreclosure Requisites RCW 61. Helenius. 274. supra. other irregularities or unfairness must exist. at p. Dingus.App. supra.. supra. Other Trustee Misconduct Other trustee misconduct that would give rise to grounds for setting aside a trustees sale could include "chilled bidding" where the trustee acts in a manner that discourages other parties from bidding on the property 25 . Helenius. Failure to meet these 25 Nelson & Whitman. 272-73.W.21. In Dingus. Hostility or Indifference to Rights of Debtor. considerable authority exists to support setting aside a sale when. Particular note should also be made of the discussion in Cox v. 254 S. supra. Lunsford v. there is any other reason warranting equitable relief. CF. 389.
Law of 1985..010(2).2d 683 (1985). Only pending actions commenced by the beneficiary to seek satisfaction of the obligation secured by the deed of trust operate as a bar to nonjudicial foreclosure. conduct and place of sale. Reg.24. The trustee must be properly appointed and be appointed before the trustee has authority to act. 693 P. The decision in Cox was based on language in the Deed of Trust Act that made it a requisite to foreclosure that "no action is pending on an obligation secured by the deed of trust. F. As a result of the amendment.requisites may render the trustee's sale void. See. In Cox v. Another frequent problem arises when the trustee assumes responsibility prior to recording the trustee’s appointment.2d 383. ADDITIONAL STATUTORY REMEDIES Page 21 . RCW 61. Sess. Clearly the steps outlined in the Deed of Trust Act must be followed or the sale is void.030(4) to read as follows: That no action commenced by the beneficiary of the deed of trust is now pending to seek satisfaction of an obligation secured by the deed of trust in any court by reason of the grantor's default on the obligation secured. 103 Wn. The trustee has no power until the appointment is recorded." That part of the Cox decision was legislative overruled by Chapter 193. The action was filed after service of the notice of default but before service of the notice of foreclosure and trustee's sale. pendency of an action on the obligation brought by the grantor does not render a subsequent trustee's sale void. This would include proper notices. which amended RCW 61.24. the court concluded that a trustee's sale was void under circumstances where the borrower had filed an action contesting the obligation and that action was pending at the time of the trustee's sale. When an eager trustee "jumps the gun" the actions are equally void. Helenius. adherence to the time requirements for notices.
48 Calif. Stat. 1989).1. the grantor can remain in possession during the redemption period.J. 12. Fair market value statutes are usually used to limit deficiency judgments to the difference between the fair market value and the debt. 1990). Code Ann. Stat.D. Risenfeld. Stelling. Ann. Civ. Kirkpatrick v. although not Washington. Rev.6 (Purdon 1967). §57-1-32 (1989). §61.S. §§44-14-161. 2. Laws Ann.3280 (1989). Rev. G. Stat. tit. Rev. California Legislation Curbing Deficiency Judgments. Below is listed the states that have adopted fair market value statutes 27 . Nevada: Nev. Page 22 . Some states allow redemption after a nonjudicial sale. Idaho: Idaho Code §§6-108. Acts Law §1371 (McKinney 1979 and Supp. §40. Stat.165 (1988). California jurisdictional summary in Part 1. Oklahoma: Okla. New York: N. RAISING DEFENSES IN THE UNLAWFUL DETAINER (EVICTION) ACTION 27 Arizona: Ariz. §33-814(A) (1989). §§600. Many states (but not Washington) require confirmation that the nonjudicial sale resulted in a fair value to the debtor.3170.457 (1988). 45-1512 (1988). Approximately one-half of the states allow for redemption after foreclosure. Confirmation of Sale Price. L. For example. Generally. -162 (1989). Rev. 311 U. §§21-47-16.C. Stat.12. Laws Ann. South Dakota: S.2d 658. Code Ann. Ann. Code §32-19-06 (Supp. Pennsylvania: Pa. appeal dismissed. tit. Stat. . See infra. See Minnesota Statutes Annotated § 580 et seq. Stat. §686 (1990). §726 (1989).2d 566. §76-1013 (1989).060 (1989).D. Failure to confirm the sale within the statutory period is usually a bar to a deficiency. App. Nebraska: Neb. in Georgia the court must be petitioned for a confirmation of the sale if a deficiency judgment is sought. Wisconsin: Wis. -48-14 (1989). Stat. rev. Cent. 705 (1960). Gen. Id. 98 P. California: Cal.Y. Washington: Wash. . Comp. §846. North Dakota: N. 607 (1940). 36 Cal.36 (1988). Michigan: Mich. 12 §§2621. Redemption in Nonjudicial Foreclosures. Utah: Utah Code Ann. Georgia: Ga. Ann. Real Prop. §45-21. Comp.1. §2A:50-3 (1989). North Carolina: N. New Jersey: N. rent the property (retaining the rents) and/or sell the property (or sell the redemption rights). Code §580a (1989).
App. Despite these early cases restricting defenses in unlawful detainer. contra declined to follow by Eardley v. 160 Az. 1 1989) But in a bankruptcy proceeding.App. the Court recognized two bases for post sale relief: defects in the foreclosure process itself. a more recent case. Ostrander.518. If the grantor or person claiming through the grantor refuses to vacate the property. infliction of emotional distress. 3d 170 (1972).. slander. In Cox. defenses may be raised after the sale if the debtor is in possession. 774 P. Ordinarily. parties in possession will not be allowed to raise some defenses in the unlawful detainer action that could have been raised prior to the trustee's sale 28 . e. 6 Wn.060 specifies that the purchaser at a trustee's sale is entitled to possession of the property on the 20th day following the sale. 2d 208 (1985). 160 Az. 28. Crummer v. RCW 61.) were not properly assertable in an unlawful detainer action but ruled that: However. 28 (1971). 49 Wn. Cox v. 27 Cal. Whitehead. App. Div. supra. Universal Diversified Enterprises Corp. Page 23 . In most states defenses in an eviction action are severely limited. See.In Washington. App. 204 (1987). 6 Wn.e. App. 774 P. Mink.2d 822 (Az.2d 1058 (1970). failure to observe the statutory prescriptions and the existence of an actual conflict of interest on the part of the trustee… 28 People's National Bank v. allowed defenses to be raised that the sale was void because of defects in the foreclosure process itself. however. 1 1989). App. 103 Wash. Division One of the Court of Appeals. etc. v.12. Inc.. Helenius was initially a unlawful detainer action in the King County Superior Court. in Cox v. Helenius. Cox v. 2d 264 (1964) contra declined to follow by Eardley v. the Supreme Court recognized that there may be circumstances surrounding the foreclosure process that will void the sale and thus destroy any right to possession in the purchaser at the sale. i.. held that a number of defenses raised by the appellant (Truth-in-Lending violations. MCA.518. defamation.g. 230 Cal. Helenius. RCW 59. Peoples National Bank v. In Savings Bank of Puget Sound v. App. Div. Ostander. Greenberg.2d 822 (Az. the purchaser is entitled to bring an action to recover possession of the property pursuant to the unlawful detainer statute. Greenberg. 491 P.24. In fact.
Theis v. Finally. there are several cases that hold that defenses known by the debtor prior to the foreclosure will be waived unless the sale is enjoined. Queen City Savings and Loan v. The Deed of Trust Act must be construed strictly against lenders and in favor of borrowers. McMillan appeared at the sale and said nothing. Helenius.It is always advisable to file a companion civil action to join other defenses when attempting to raise a defense to the foreclosure at the eviction stage. As stated in . Prudential. and likely Consumer Protection Act damages. H. 108 (1988): Appellant had a spectrum of potential legal remedies available to forestall the sale ranging from declaring bankruptcy. supra. App. In fact. appellant's attorney and Mr. Mannhalt.. reasonable attorney fees and costs. 51 Wm. 146 (1971).2d___(2009) . B. filing suit with a lis pendens. treble damage penalty. See. Cox v. Brown v. appellant waived his right to contest the sale. Household Realty. Appellant was aware of his right to restrain the sale and of his defenses to the sale. 4 Wn. Therefore. being non-judicial in nature and without the scrutiny by courts until the unlawful detainer stage. Washington law is similarly clear that the Deed of Trust Act. is strictly construed against lenders and in favor of borrowers. See. or appearing at the sale and notifying the trustee and any buyers of the defects in the foreclosure process. curing the default. seeking an injunction in conjunction with a motion to shorten time.App. The claim may also exist as a breach of contract claim. yet did not act. ___Wn. DAMAGES FOR WRONGFUL FORECLOSURE There is a damage claim for the tort of wrongful foreclosure. Generally emotional damages may be sought. 111 In order to avoid the jurisdictional and other problems that arise when trying to litigate claims in the unlawful detainer action. it is recommended that a separate action be filed to set aside the trustee's sale and that the two actions be consolidated. Page 24 . Federal Finance Co. Koegel v.
Stat.45. Rev.C. §§38-38-101 to 38-38-111 (West 1991). Connecticut: Conn.18 (West 1992). §§9-13-140. Ann. 2631 (West 1992). para.190. Arizona: Ariz. 187. 15-1501 to 15-1512 (Smith-Hurd 1987). Page 25 . §§71-1-222. Maryland: Md. however. Code Ann. Alaska: Alaska Stat.3101 to 600. or failure to comply with applicable regulations when the government is the lender. Ann. §45-716 (1981). Colorado: Colo. 29 Alabama: Ala. INTRODUCTION The same range of defenses is generally available to the borrower in both nonjudicial and judicial foreclosures. §1 (West 1992). Laws Ann. Proc. §§25-2137 to 25-2147 (1991).190 (Vernon 1992). Stat. 35-10-2 to 35-10-12. §654. tit. Missouri: Mo. Stat. §§443. Rev. Ann. 232. §60-2410 (1990). The judicial foreclosure statutes are set forth below 29 . Rev. 426. (1977). Michigan: Mich. Ann. Code Ann. Code Ann. tit. Stat. 25-13-802 (1991). §§33-721 to 33-728 (1991). Montana: Mont.III. Ann.430. Real Prop. Louisiana: La. Stat. Maine: Me. D. violations of other consumer protection acts. §7-202 (1988). insurer. 44-14-184. ch. Rev. 189 (1991). 15-1404. 244. §§600. §§18-49-103 to 106 (1987). Stat. Other defenses. Ann. Stat. Rev. 10 §§5061 to 5067 (1991). Hawaii: Haw. Code Ann. §§581. 10. 45-1502 to 45-1503 (1991).220 (1991). Ann. 311. Ann. Indiana: Ind. 89-1-55 (1972).170 to .C. Defenses may include fraud or misrepresentation. Delaware: Del. §§667-1 to 667-7 (1991) Idaho: Idaho Code §§6-101 to 6-103. Stat. Code Ann. Gen. art. Stat. Nebraska: Neb. §§89-1-53. Code Ann. Gen. §§90. Nevada: Nev. Massachusetts: Mass. Minnesota: Minn. Laws Ann. Civ. Ann. violations of Truth-inLending. Mississippi: Miss. Ann. Comp. proc. Most rights are set forth in statutes and they must be asserted in compliance with the particular requirements of the law. §§49-24 to 49-31 (West 1991). are unique to judicial foreclosures and must be raised affirmatively. §§381. §§40. Rev. 14. Kentucky: Ky. Stat. Ann. Ann. 164. §§6321 to 6325 (West 1991). Arkansas: Ark. §702. Georgia: Ga.01 to 581. Illinois: Ill. Ch. §32-8-11-3 (Burns 1980) Iowa: Iowa Code Ann. 40.01 (West 1992). Kansas: Kan. 44-14-48 to 44-14-49.5 (West 1991). §§725a to 730. Code Ann. Code Ann. or guarantor. DEFENDING JUDICIAL FORECLOSURES A.3130 (West 1992).525 (Michie 1991). violations of usury statutes. Stat. Florida: Fla. Code Civ.: D. Stat. Code §§6-9-140 to 150. Stat. Rev.12 (1992). California: Cal.435 (Michie 1991).
Stat. tit.17. then the homeowner should plead the existence of homestead rights in the answer so as not to waive them. White v.I. 21.D. §§78-37-1 to 78-37-9 (1986). Tennessee: Tenn.2d 356. North Dakota: N. Ohio: Ohio Rev. 1325 to 1355 (McKinney 1992). 6 Wn.010 et seq. West Virginia: W.12. to take judicial notice of economic conditions and. UPSET PRICE Some states authorize the court to establish an upset price (or minimum bid amount) in a foreclosure sale. tit. 45-21. New York: N.16.25 (West 1991 (Repealed). Stat. Code §32-19-01 to 32-19-40 (1992). Ann. Gen. 3232. §§88. §§479:19 to 479:27 (1991).2d 593 (1940). South Carolina: S.2d 117 (1933).I. 173 Wash.060 authorizes the court where a deficiency is sought. §§1-18-101 to 1-18-112 (199). Wisconsin: Wis. Pa. after a proper hearing. 48-7-7 (1991). §2A:50-2 (West 1991). 679. Superior Court. Code Ann.4. Virginia: Va. New Jersey: N. Ann. Stat. Code Ann. Oregon: Or. in ordering a sheriff's sale. RCW 61. Stat.C. Real Prop. Ann. Wyoming: Wyo.005 (West 1992). Virgin Islands: V. 55-61 (Michie 1981). Ann. Washington: Wash. §§45-21. Code Ann. Code Ann. Gen. ex rel. 12. Page 26 . §§51-002.07 (Anderson 1984). Ann. Rev. Laws §34-27-1 (1984). §§846.12. 21-48A-4 (1991). 12. 3244. 45-38 (1991). 28.H. §§15-7-10. The declaration should be recorded. §§55-59. Stat.D. C. §§39-5-1 to 39-5-23. Stat. 107 P. §686 (West 1992). §4528 (1991). Rules 1141 to 1150. Prop.060 (West 1992). tit. North Carolina: N. New Mexico: N. Proc. fix a minimum or upset price for which the mortgaged premises must be sold before the sale will be New Hampshire: N. Rev. §2323. tit.C. Stat. (1989). Ann. Rules Civ. Code §§55-12-1 to 55-12-8 (1991). 29-3-650 (Law Co-op 1990).. In Washington..M. 24 P. 715. Acts Law §§1321. Douglas. State. Rev. Ann.040.B. Code Ann. HOMESTEAD RIGHTS If the plaintiff's complaint seeks possession of the property at the sheriff's sale and the homeowner wishes to remain on the premises during the redemption period. Stat. Stat. Oklahoma: Okla. 61. Codified Laws Ann. South Dakota: S. Pennsylvania: Pa.01 to 846. Cent. ex rel. Code Ann. 51. Vermont: Vt. 3257. 3256.12. §21-1-803 (1991). Rhode Island: R. 51.Y. Va. §§21-47-1 to 25. §§61. 3180 to 3183. Utah: Utah Code Ann. State. O'Brien v. §531 to 535 (1991).004. §§274. Stat.J. Texas: Tex. Code Ann.
1984) (three months). Maryland Rules. 404 (1989). v. an action must be brought within a statutorily set amount of time following the foreclosure sale. 252 N. N. See e. 361 (1990). Many states also have time limits for the completion of the execution of a deficiency. 12. Rule W75 (b)(3) (1984) (three years). Stat. DEFICIENCY JUDGMENTS A deficiency judgment results when the amount for which the property is sold at the sheriff's sale is less than the amount of the judgment entered in the foreclosure action. California Civ. In Thompson v. There is always the danger that in the absence of statutory standards. App. Kan. See. §600. If a depressed real estate market justifies seeking an upset price. D. Comp. 265 Mich.confirmed. Mich. Smith. Code Ann. 58 Wn. Code § 726 (Supp.070. tit.24. then the mortgagor should request in the answer that one be set. Acts.3155 (1919). McClure v. A deficiency judgment in connection with a foreclosure is enforceable like any other money judgment. held the acceptance of a deed in lieu of foreclosure triggers the antideficiency provisions of the Deed of Trust Act. Laws Ann.W. Some states give this power to the courts with any sale without reference to any other valuation method. Law § 1371 (2) (McKinney 1979) (ninety days).12.g. The procedural requirements for obtaining a deficiency judgment vary. Page 27 . For example. 61. In general. App. See RCW 61. Delguzzi. Division I. section 2621. If the mortgage or other instrument contains an express agreement for the payment of money. § 30 See Michigan Trust Co. The court has great discretion in arriving at and setting an upset price if the statute fails to specify the method to be used in calculating the price. but must be strictly adhered to or the right will be lost.100. and Ohio Rev. §60-2415(b) (1988). Proc.Y. Ann. 651. Real Prop. 478 (1933). and Pennsylvania Stat. the power to set the upset price will be abused 30 . then the lender may seek a deficiency judgment. Dutmers.7 (1967) (six months). 53 Wn.
Strict compliance with the statutory requirements is mandatory. See RCW 61. if the lender seeks a deficiency judgment or if the mortgage does not contain a clause that the property is not for agricultural purposes. RCW 61. Wisconsin (6-12 months). If the lender does not seek a deficiency judgment and the mortgage contains a clause that the property is not being used for agricultural purposes.12. RCW 6.095. Id. The time period for redemption varies from thirty days to three years after the foreclosure sale. The purchaser at the sheriff's sale.020. Under Washington law.08 (Anderson 1981) (two years on land with dwelling for two families or less or used as a farm dwelling). This section is not applicable to property that is used primarily for agricultural purposes. Washington (8-12 months). must send notice to the judgment debtor every two months that the redemption period is expiring. There is no statutory redemption period if there is a structure on the land and the court finds that the property has been abandoned for six months prior to the decree of foreclosure.080. or the purchaser's assignee. See RCW 6. E. This right has specific statutory time limits. Failure to give any of the notices in the manner and containing the information required by statute will operate to extend the redemption period.2329. Any party seeking to redeem must give the sheriff at least five days written notice of the Page 28 . than the redemption period is eight months.12.g.093. Some states have longer redemption periods when a deficiency is sought. e. then the redemption period is one year from the date of the sheriff's sale.23. REDEMPTION RIGHTS Approximately one-half of the states have statutes that give a borrower the right to redeem the property after the foreclosure sale.23.
F. There. The amount necessary to redeem is the amount of the bid at the sheriff's sale. 596 P. The purchaser at the Page 29 . interest thereon at the rate provided in the judgment to the time of redemption.080(1). Inc. RCW 6. POSSESSION AFTER SALE If the homeowner exercises his redemption rights and there is a purchaser in possession.23. lenders routinely advise debtors to move out at the beginning of the period. any assessment or taxes which the purchaser has paid after circumstances. If the homeowner has no right to claim a homestead or is not occupying the property as a homestead during redemption period. which they do not legally have to do. 23 Wn. other sums that were paid on prior liens or obligations. Jones.B. then the lender can apply for a writ of assistance at the time of the foreclosure decree to obtain possession of the property. then the homeowner can apply for a writ of assistance to secure possession of the property anytime before the expiration of the redemption period. Great Northwest Federal Savings and Loan Association v. in VA loans the sale price is very low because the VA deducts its anticipated costs of holding and resale.intention to apply to the sheriff for that purpose. Therefore.2d 1059 (1979). For example. 55. RCW 6. the property can be redeemed for that amount. Redemption rights are freely alienable and a property owner can sell the homestead during the redemption period free of judgment liens.. App.020.23. T. and R. This is an important right and is often overlooked. A writ of assistance is similar to a writ of restitution and is executed by the sheriff. F. The debtor can sometimes rent the property and the rents retained during the redemption period.
IV. See 11 U.D. § 362 (b)(8). 34 Clev.St. within 90 days or within one year if an "insider" 31 Norlin v.C.2d 884. 93-04719 (W.C. BANKRUPTCY Bankruptcy has a significant impact on real estate foreclosures and is beyond the scope of this outline. In re Campos.S. § 362 (a)(4). New York State Bar Journal (May 1993).sheriff's sale normally has no right to possession until after receipt of a sheriff's deed 31 . Under What Circumstances Can a Foreclosure Sale be Set Aside Under New York Law.A. G. POST FORECLOSURE RELIEF A foreclosure can be vacated under rules allowing vacating judgments. A stay has been held to apply to a possessory interest after foreclosure to allow a challenge to the validity of the foreclosure in an adversary action in bankruptcy court. Murphy. Page 30 . Order of July 9. F.L. See II U.S. §547 and §548. Edgren. Howard v. filing any of the three types of bankruptcy stays all foreclosure proceedings.g. 597 (1986).A. Montgomery.Rev. The mortgagee's right to possession of the property is not lost through default or abandonment.2d 268.S.Civ. 1993).2d 621 (1961). See 11 U.Ct. The stay applies to both judicial and nonjudicial foreclosures and it also applies whether or not the foreclosure was begun before the bankruptcy.R. e.2d 41 (1963). A trustee in a bankruptcy may also undo a foreclosure as a fraudulent transfer if a creditor gets a windfall.C.C. Under section 362 (a) of the Bankruptcy Code. See 11 U.S. WN-B. See also Godsden & Farba. 62 Wn. The only notable exception to the automatic stay is for foreclosures brought by the Secretary of HUD on federally insured mortgages for real estate involving five or more units.A. No. 59 Wn.P 60(b). 357 P. overruled on other grounds. 385 P. § 362 (a). The Automatic Stay in Bankruptcy. MISCELLANEOUS ISSUES A.
A deed in lieu should contain a comprehensive agreement regarding any deficiency claims. cf. 312. Washington National Ins.D.L.. WORKOUTS (DEED IN LIEU) A deed is sometimes given by a mortgagor in lieu of foreclosure and in satisfaction of a mortgage debt. 24 L. In re Madrid. See also.1981) (insufficient threshold evidence of oppression or unfairness to trigger mortgagee's burden of proof). Ellingson. 1984).App. Peugh v. Davis. B.Ed. etc.2d 409 (Mo.2d 1197 (9th Cir. When a mortgagee takes a deed in lieu there is the possibility that the conveyance will be avoided under bankruptcy laws. unfairness or unconscientious advantage. 301 N. Courts also tend to find the deed in lieu of foreclosure to be another mortgage transaction in the form of an absolute deed. oppression.40. Wehmeyer. Compare state fraudulent conveyances statutes.2d 201 (5th Cir. Noelker v. the deed in lieu will not cut off those liens. or an avoidance of foreclosure. 392 S.1965). 314 (1966).W." Robar v. Such a workout "is subject to close scrutiny in an effort to determine whether it was voluntarily entered into on the part of the mortgagor under conditions free of undue influence.Rev. 775 (1877). LENDER LIABILITY It is possible to use theories of lender liability to assist in successfully negotiating a workout. It should be noted that if other liens have been created against a property after the time of the original mortgage.031. RCW 19. 96 U. 657-658 (N. although not from secured creditors. C.W.forecloses 32 .2d 653. Further the burden of proving the fairness rests with the mortgagee.S. (6 Otto) 332. A portion of the equity under state or federal law may be protected from creditors.g. 1980). See Note. 725 F. e. Page 31 . This principally occurs in commercial foreclosures but there are 32 See Durrett v. 621 F. 31 Mo.
and negligent loan management. KMC v. there are tax consequences when property is foreclosed. N.8. Further. 1988). Some of the common law defenses for a borrower are fraud. Douglas-Hamilton. a borrower should also explore statutory violations. There are many abuses in the sales of mobile homes and the various consumer protection laws (and usury laws) provide a fertile source of potential defenses. 855 F. Creditor Libilities Resulting From Improper Interference with Financially Troubled Debtor. paragraph 5. see Dunaway. Rep. 1.2d 756 (Md. First National. Supp. Unfair and Deceptive Practices. Page 32 . Penthouse International v. MOBILE HOME FORECLOSURES Generally. failure to renew term note/wrongful termination.). 1987. 665 F. 343 (1975).2d 963 (2nd Cir. E. Some of the useful theories of lender liability are breach of agreement to lend. 31 Bus. 515 A. See generally. Irving Trust. 1976). absolving the borrower from liability on the loan and/or granting an affirmative judgment against the lender. TAX CONSEQUENCES OF FORECLOSURE Although beyond the scope of this outline. because banks are so closely regulated.Y. Chapter 4B) 33 . supra. Law J.D. breach of loan agreement. lender interference. National Consumer Law Center (2nd ed.2d 752 (6th Cir. First. Joques v. S&L. mobile homes are repossessed under Article 9-503 of the Uniform Commercial Code. and are beyond the scope of this outline. particularly in commercial transactions. Many states limit deficiencies in purchase money security agreements and/or allow reinstatement.4. (Vol. promissory estoppel. D. Treas. duress. rev. 757 F. usury and negligence. Dominion Fed. 301 (S. a foreclosure or deed in lieu of foreclosure is treated as a sale or exchange.some strategies that apply to the residential setting. For a detailed treatment of workouts. 33 See also. 1985). This may involve persuading the lender that failing to reach a workout agreement may result in a claim against the lender.
IRS Code §61(a). 186 F. the best bet for people who had obtained debt forgiveness from their mortgage lender was to claim the insolvency exception to paying tax on the debt forgiveness income. Rev. a gain may be generated. the IRS’s insolvency test is very stringent (for example. permanent loan mod. Finally.2d 455 (1st Cir. unless it falls into one of the tax code’s exemptions. However. When debt is cancelled (such as by an anti-deficiency statute). etc) still counts as income and therefore lenders are required to issue Form 1099-C to the homeowners or former Page 33 . deed-in-lieu. Second. when home equity debt plus purchase debts exceeds the value of the property. The amount realized (gained) is the greater of the sales proceeds or the debt satisfied. if the debtor is "insolvent" when the foreclosure occurs. Thus. Ruling 73-36.1-001-2. 1973-1 CB 372. Dunaway. Ordinarily. Previously. debt forgiveness (short sale. 1950). §108(a)(1)(A) of the IRS Code excludes income (gain) to the extent the debtor is insolvent. for a detailed analysis of the tax consequences of foreclosure. Delaney. See generally. a taxable gain can be generated. Key facts: (1) The burden is on the taxpayer to assert the exception. This is complicated and a tax expert should be consulted to analyze any potential tax bite upon foreclosure. 2007. In other words. Parker v. supra. it takes retirement funds into account) and many people did not know about this exception even if they did qualify. debt forgiveness counts as taxable income. In late December. there is now an exception specifically targeted for home mortgage debt forgiveness. Congress passed legislation changing the tax code as relates to mortgage debt forgiveness.
$15.html.000 and the lender agrees to forgive the remaining $20. and 2009 tax years only. Only $5. More information. The income exempted from taxation is only debt forgiveness for home acquisition or improvement costs – not cash out to pay other bills. In other words. Form 982 is likely to be too complicated for many people to fill out themselves.000 loan. which can only be used with the long-form 1040 as opposed to the 1040A or 1040EZ. To do so. Most people in this situation will need to pay a private tax preparer. (4) This exception applies for the 2007. Plus. which is defined to exclude any cashout in a refinancing.id=179073. imagine a homeowner who refinanced their home with a $120. (2) The exception is only for “qualified” debt.00. they need to fill out a special form (Form 982). Now the homeowner sells short for $100. Even worse.irs. The taxpayer will need to pay income tax on the remaining $15.gov/irs/article/0. Page 34 .000 of this amount will qualify for the new exception.000.homeowners whose debt was forgiven. (3) Lower-income taxpayers claiming this exception cannot use VITA clinics or the IRS tax clinics. It is then the taxpayer’s burden to tell the IRS that they qualify for an exception to paying tax on this income. including a useful Q&A and links to the relevant forms. because those clinics cannot help taxpayers who need to fill out the longform 1040.000 of which was cash out to pay debts unrelated to home improvement.000 of forgiven debt. 2008.. are available on the IRS website at http://www. the cash-out amount is subtracted off the top of any debt forgiveness amount before the exception kicks in.
Also. 1985).S. 10 F.D.3d 218 (4th Cir. Brown. HUD WORKOUT OPTIONS 1. U. Boley v. 734 F. at best. United States v.V. Johnson v. GUARANTOR OR LENDER A. The programs range from home loans insured by the Department of Housing and Urban Development (HUD) or guaranteed by the Veteran's Administration (VA) to programs such as the Farmer's Home Administration (FmHA) home ownership program where the government acts as a direct lender. Dept. Brown. Murdoch. INTRODUCTION There are a variety of federal home ownership programs that may provide special protections for homeowners who are faced with the prospect of foreclosure. B. Applicability Homeowners who have a HUD insured mortgage or deed of trust may be eligible for relief 34 See Vail v.2d 589 (8th Cir. Ind. Fannie Mae published in 1997 a Foreclosure Manual for loan services. THE GOVERNMENT AS INSURER. 272 (N. When the government controls the loan (or the lender) its actions are subject to the protection of the due process provision of the Fifth Amendment to the U. 1984). 1991). These protections generally apply regardless of whether the security divide used is a mortgage or deed of trust. This calls into question the use of nonjudicial foreclosure as there is no opportunity to be heard and notice is usually deficient or.2d 774 (11th Cir. 1993). Page 35 . minimal. Constitution 34 . Supp. 946 F. 627 F.S. of Agriculture. which outlines various workouts and other loss mitigation procedures. The procedures which must be followed by loan servicers and applicable governmental agencies are described below.
Procedure when the Homeowner is in Default a. Regulations for loss mitigation are found at 24 C. Suspension or reduction or payments shall not exceed 18 months under these special Page 36 . including costs and attorney fees. Increase. HUD regulations also require that lenders meet certain servicing responsibilities before proceeding with foreclosure.F. ii. Sec.F. 24 C.R. 24 C.R. The servicer must allow reinstatement even after foreclosure has been started if the homeowner tenders all amounts to bring the account current. Resumption of regular payments after expiration of the forbearance period. Sec. 203. or suspension of regular payments for a specified period. reduction. 2. Delinquency Required for Foreclosure. Arrangements for payment of the delinquent amount before the maturity date of the mortgage or at a subsequent date. b. iii.through the HUD foreclosure prevention program. 203.F. The homeowner may be eligible for special forbearance relief if it is found that the default was due to circumstances beyond the homeowners’ control. Forbearance Relief. The servicer is required to send a HUD brochure on avoiding foreclosure to the borrower informing them of their right to seek various alternatives to foreclosure.R. The homeowner and the lender are authorized to enter into a forbearance agreement providing for: i. Sec. The servicer shall not turn the action over for foreclosure until at least three full monthly payments are unpaid after application of any partial payments.F. 203. 203.605. Sec.R. 24 C.
2d 356 (5th Page 37 . FNMA. In Brown v.2d 203 (1983). FNMA v. 359 So. Ricks. et seq.E. an abuse of discretion. and VA servicing handbooks establish a policy of 35 See..S.D. Sec. Wash. 445 (W. 595 F. 714 F. Kemp.4300. Supp. contra. Supp. GNMA v. Failure to follow servicing requirements or comply with the HUD assignment regulations or handbook provisions may also constitute an equitable defense to foreclosure 35 . Rathgens. Supp. Ferrell v. 595 F. 556 F.S. Recasting of Mortgage.R. HUD has the authority to approve a recasting agreement to extend the term of the mortgage and reduce the monthly payments.2d 327 (1976). See.D. generally.Y.F. Sec. Screen. 36.Y. Butler v. Ill.R. THE VA HOME LOAN PROGRAM 1. Bankers Life Company v. HUD's actions may be declared unlawful and set aside if the court finds it to be arbitrary. Pierce. 1983). C. 986 (N. Lynn. 1989) the court found HUD's decision for an assignment program application to be informal agency action and thus reviewable under the "arbitrary" and "capricious" standard. Denton. 203. 1041 (E. Supp. or otherwise not in accordance with law. 560 F.forbearance relief provisions. 372 N. App. Cross v. 458 N.2d 464 (1978). 379 N. Applicability Homeowners who have a VA guaranteed mortgage or deed of trust may be eligible for relief through a VA recommended forbearance program or "refunding" of the loan.. 3d 676.D. Pa. capricious. Brown v. 385 F. See Federal National Mortgage Association v. Robert v. Regulations promulgated at 38 C.D. 1984). 120 Ill.2d 485 (1975).F. 1974). Cameron Brown Co. Supp. Ohio 1984).D. 552 (S. Secretary of Housing and Urban Development. 24 C. c. Ill. 1344 (N.
Rank v.4318 authorize refunding. Nimmo. Lender's Handbook. 4.2d 343 (3rd Cir. and is not reviewable. 3.2d 241 (1st Cir. 567 Cir. VA Pamphlet No. Nimmo. The VA is reluctant to enforce these regulations against lenders.F.C.forbearance when a loan is in default. 26-7 (Revised) and VA Manual 26-3. Prudential Mortgage Corporation. Sec. 640 F. Simpson v. 5 U. Cobbs. These rights should be pursued with the lender immediately. 1982). Refunding the loan is when the VA pays the lender in full and takes an assignment of the loan and security in cases where the loan is in default. 36. Forbearance Relief Lenders are officially encouraged to grant forbearance relief for mortgagors who default on their loans due to circumstances beyond their control. Page 38 . which VA or lenders might have under VA publications with respect to forbearance assistance. See. the regulations are much more vague than those promulgated in connection with the HUD assignment program. 2.S. 1977). 672 P. Rank v. But. Sec. 701(a)(2). 1982).2d 1354 (D. Refunding Loans The Veteran's Administration is authorized to "refund" loans when borrowers meet certain criteria. Although 38 C. Nimmo. Clelend. Hernandez v. Judicial Review The VA decision to deny assignment of a VA loan is committed to agency discretion within the meaning of the federal Administrative Procedures Act. see.C.R. Gatter v. 677 F. Union National Bank v. 1977). The VA then owns the loan and the veteran makes payments to the VA directly. The courts have ruled that a borrower has no express or implied right of action in federal court to enforce duties. Cir. 1981). supra.2d 692 (9th Cir. 553 F.
3732(c). Vol.965(a)(3).C. Deficiency Judgments and VA Loans It is the policy of VA to order an appraisal prior to a judicial or nonjudicial foreclosure sale and to instruct the lender to bid the amount of the appraisal at the sale. 5.S. may be an equitable defense to foreclosure under state law. This occurs when the VA would have released the veterans when the property was sold to a qualifying purchaser who assumes the debt. Travelstead v.R.F. Secondly. when equity and good conscience require it.C.S.2d 719 (1989) (failure to follow VA Handbook an equitable defense). 1992). The Court of Veterans Appeals (CVA) reverses over 50% of denial of waivers . See. VA will not waive Page 39 . 38 U. Ordinarily. after a foreclosure. No. the VA can determine that the claimed debt is invalid.A. 6. Waiver of Debt/Release of Liability Federal statutes. P. Failure to follow VA publications. such as when the veteran is eligible for a retroactive release of liability.S. Derwinski. 38 U. Simpson v. This “appraisal” is always below fair market value and includes the VA's anticipated costs of holding and liquidating the property. 38 C. supra. §1. 28 U. The VA urged its regional offices to avoid CVA rulings until forced to retract this directive. The VA also ignores the six-year statute of limitations when demanding payment. The VA has the burden to determine whether the veteran should be released. 3713(b). on pre-1989 laws. Cir.F. 10. 38 C. 5. The VA is reluctant to follow its own regulations and must be pressed. 93 (June 1994).2d 1244 (Fed. VA regulations and guidelines require the VA to waive a deficiency (or indemnity) debt. 2415. supra. however.an astonishing measure of the VA's failure to follow clear federal law! See The Veterans Advocate.C. Cleland.R. 978 F. See The Veterans Advocate.4320. §36.
715 (1979). even in the case of a nonjudicial foreclosure of a deed of trust. Supp. 1983). wherein the VA has been permanently enjoined from collecting $63 million in claims and ordered to repay millions in illegally collected deficiencies. Derwinski. 341 (1966). 987 F.24. 541 F. 382 U. Page 40 . seems to make United States v. This ruling was subsequently followed in a class action. including the anti-deficiency provisions of the Deed of Trust Act as the "federal common law". Derwinski. Shimer.. Yazell. 904 F. Whitehead v. deficiencies are not sought. Shimer. United States v. 1976).100. is still good law 36 . 367 U. the court held that the VA must follow Washington foreclosure law. Ellis. if the lender is instructed by the VA to preserve the right to seek a deficiency against the borrower. the Washington non-judicial deed of trust foreclosure procedure which retains judicial foreclosure and preservation of the right to seek a deficiency judgment as an option. Subsequent decisions still create doubt as to whether United States v..2d 1362 (9th Cir. Kimbell Foods. United States v. On loans made after 1989 changes in the VA program. At the very least.en banc .1993). Inc. 660 F. United States v. In United States v. This issue of the application of various state laws as to federally insured loans is not clear. Vallejo. as the Ninth Circuit overruled Whitehead in Carter v. 535 (1987). United States v. distinguishable. 374 (1960) appears to authorize this VA deficiency policy. United States v. 714 F.S. 36 See. Haddon Haciendas Co. 1990).S. notwithstanding the anti-deficiency language of RCW 61. 440 U.2d 777 (9th Cir. .S. Although. supra. then the lender should be required to foreclose the deed of trust judicially as a mortgage. Shimer.2d 953 (9th Cir.its right to seek a deficiency judgment in a judicial foreclosure and will reserve its right to seek a deficiency against a borrower.2d 611 (9th Cir.
then it will begin foreclosure proceedings. RHS may suspend payments or reduce payments for six months. the Farmer's Home Administration. 42 U. 21 (E. Newborne. 453 F.F. Wn. 3550 et seq and must be complied with prior to foreclosure. Rodriguez. 2. Agricultural Law: FmHA Farm Foreclosures. it rarely does. Applicability The Rural Housing Service (RHS) formerly. is authorized to grant interest credit and provide moratorium relief for homeowners who fall behind on their loan payments due to circumstances beyond their control.R. Louis.D. Interest Credit If a homeowner falls behind on his RHS loan because of circumstances beyond his or her control. Moratorium Relief If a homeowner falls behind in loan payments because of circumstances beyond his or her control. Supp. Once a homeowner has been granted moratorium relief. Moratorium relief may be extended for additional six-month segments up to a total of three years 37 . Regulations for moratorium relief and interest credit are found at 7 C. §1472.C. All servicing of RHS loans is handled at the Centralized Servicing Center in St. MO (phone: 1-800-793-8861). RURAL HOUSING SECTION 502 LOANS 1. Sec. 3. Although RHS is supposed to use this remedy before considering moratorium relief. An Analysis of Deferral Relief. RHS cannot grant it again for five years. 287 (Winter 1984). Note.J. If a homeowner cannot resume payments in three years from when moratorium relief began. See. 37 See generally. then RHS has the authority to accept principal only and waive the interest payments. 1978).S.D. 313 (1987). Page 41 . 15 NYU Review of Law and Social Change. 23 Washburn L. United States v. Defenses to a FmHA Foreclosure.
541 F. Fuchs.. VI. 4. 1975). 7 U. Repossessions and Foreclosures (4th ed. den. (1970). Page 42 . the homeowner can make additional partial payments to catch up the delinquent amount or.. Lease/Buy-Back See.S. Real Estate Finance Law (West 3rd Ed. United States v.. MacKenzie. Defending NonJudicial Residential Foreclosures. United States v. Homestead Protection See. 13 Wn. 7 U.2d 39 (9th Cir. 125 P. 2001.C. Nelson & Whitman. 715 (1979).. It is questionable whether such a waiver is enforceable 38 .2d 777 (9th Cir. (3rd ed.C. 425 F. United States v. Dunaway. Inc. 1994 and suppls. RHS will restructure the loan. Blaser. 1985 (e).C.2d 439. Stadium Apts.). 187 (1970). 2000 University of Calif.S. 400 U. 2000. 6. See also. 440 U.After moratorium relief has been extended.). Phillips v. Texas Bar J (November 1984). Haddon Haciendas. 1994). cert. the loan can be reamortized.2d 291 (1942). Bernhardt.2d 358 (9th Cir. United States v. California Mortgages and Deed of Trust Practice. The Law of Distressed Property (4 volumes .S. 2000) National Consumer Law Center. 510 F. Waiver of Redemption and Homestead Rights Form mortgages used by RHS purported to waive the homeowner’s redemption rights and homestead rights in the event of foreclosure. 7 U. 1976). 926.S. RESOURCES The following treatises are excellent sources of basic information about all aspects of the foreclosure process. 38 See. 91 S. Ct.S. 5.Clark Boardman Co. Kimbell Foods. Inc.
MO 63105 314-422-6006 SAMPLE Application No: Check box if applicable: Date Prepared: 05/28/2001 ANNUAL PERCENTAGE RATE The cost of your credit as a yearly rate FINANCE CHARGE The dollar amount the credit will cost you Amount Financed The amount of credit provided to you or on your behalf Total of Payments The amount you will have paid after making all payments as scheduled $ 239. FILING FEES: $ LATE CHARGE: If a payment is more than days late. MO 63111 Clayton . See your contract documents for any additional information about nonpayment. CALYX Til. subject to conditions may not assume the remainder of your loan on the original terms. you will be charged % of the payment PREPAYMENT: If you pay off early.170 % $ 141.110.FEDERAL TRUTH-IN-LENDING DISCLOSURE STATEMENT (THIS IS NEITHER A CONTRACT NOR A COMMITMENT TO LEND) Applicants: Sample Client Prepared By: Gateway Capital Management. Inc. CREDIT LIFE/CREDIT DISABILIY: Credit life insurance and credit disability insurance are not required to obtain credit. THE UNDERSIGNED ACKNOWLEDGE RECEIVING A COMPLETED COPY OF THIS DISCLOSURE. SECURITY: You are giving a security interest in: The goods or property being purchased Real property you already own. ASSUMPTION: Someone buying your property may may. you may will not have to pay a penalty. X X X INSURANCE: The following insurance is required to obtain credit: Credit life insurance Credit disability Property insurance Flood insurance You may obtain the insurance from anyone you want that is acceptable to creditor If you purchase property flood insurance from creditor you will pay $ for a one year term. I want credit life and disability insurance.510. may will not be entitled to a refund of part of the finance charge. VARIABLE RATE FEATURE: This loan contains a variable rate feature.30 668. and will not be provided unless you sign and agree to pay the additional cost. I want credit disability insurance. A variable rate disclosure has been provided earlier.hp 2/95 .22 REQUIRED DEPOSIT: PAYMENTS: Number of Payments 359 1 The annual percentage rate does not take into account your required deposit Your payment schedule will be: When Payments Are Due Monthly Beginning: Amount of Payments ** 665. default.28 Number of Payments Amount of Payments ** When Payments Are Due Monthly Beginning: Number of Payments Amount of Payments ** When Payments Are Due Monthly Beginning: 08/01/2001 07/01/2031 DEMAND FEATURE: This obligation has a demand feature.98 7. 20 S.76 $ 98. Suite 106 Property Address: 9944 Chamberlin Ave Saint Louis. any required repayment in full before the scheduled date and prepayment refunds and penalties * means an estimate all dates and numerical disclosures except the late payment disclosures are estimates. Sample Client (Applicant) (Date) (Applicant) (Date) (Applicant) (Date) (Applicant) (Date) (Lender) (Date) * * NOTE: PAYMENTS SHOWN ABOVE DO INCLUDE RESERVE DEPOSITS FOR MORTGAGE INSURANCE (IF APPLICABLE) BUT NOT PROPERTY TAXES OR INSURANCE.400. Type Premium Signature Credit Life Credit Disability Credit Life and Disability I want credit life insurance. Central Avenue.
broker price opinion fees.The debtors believe that CitiFinancial may be charging improper interest and misapplying their payments. property preservation fees. The amount of any funds deposited in any post-petition suspense accounts or corporate advance accounts or any other similar accounts (including the amount and date of each transaction. A copy of all of your loss mitigation rules. 8. based on the pending dispute in their Chapter 13 case. or sub-servicing agreement that the creditor has with any party. The current amount needed to pay-off the loan in full in the form of an itemized printed payoff report.C. 4. professional or otherwise. primary servicing agreement. A copy of any master pooling and servicing agreement. I am requesting the following information: 1. or other similar fees or expenses added to the principal debt or charged against the account or tracked for any purpose post-petition or associated with any account related to this loan. The amount of any legal fees added to the principal debt in this case or charged against the account or tracked for any purpose in any account for any post-filing legal services. The amount of any property inspection fees. paralegal services. including all entries of any nature in the form of a debit. the date and amount of all account payment postings post-petition. and a description of the deposit account) and a description of all payments from any such accounts including the date of the payment. and the amount of each such payment. or for any other similar service. 2. the source of funds. etc). This request is made on behalf of my clients. law firm or third-party for any form of legal services rendered post-petition with respect to this mortgage loan. A copy of statements or bills for services submitted and paid by you to any attorney. 7. claim preparation services. A complete copy of all transaction codes associated with this loan and the plain English definitions for each such code. 5. master servicing agreement. case review services. Also. regulations. Specifically. a transfer or otherwise. 9. . 3. accounting services. the aggregate late charges imposed for all such payments. bankruptcy monitoring fees. A copy of the most recent audit of your Bankruptcy or Default Mortgage Servicing Department by any rating agency such as Fitch or any internal unit. the purpose or nature of the payment. 10. LSAMS. The total amount of any post-petition arrears including a complete explanation of the months in which payments were allegedly missed. 2605(e). please identify the mortgage servicing software you use in connection with this loan (MSP. 6. and the basis for the imposition of each late charge fee. A complete post-petition payment and transaction history for this loan. and protocols as the same apply to this loan and a description of your efforts to implement the same in connection with the servicing of this loan. which is a part of the Real Estate Settlement Procedures Act. a credit. default servicing agreement. 12 U. Please treat this letter as a “qualified written request” under the Federal Servicer Act. plan review services.S. the above-named debtors.
property inspection/preservation fees. broker price opinion fees. legal fees.To the extent that the servicer of this mortgage loan has charged the debtor’s mortgage loan account. I remain Very truly yours. the debtor(s) dispute(s) any such fees and costs and specifically requests that the mortgage loan account be corrected to remove any such fees that have not been approved by the Bankruptcy Court after the filing of a proper application for the same with notice and hearing and an order of approval. recoverable corporate advances and other fees or costs that were not disclosed to the debtor(s) and approved by the bankruptcy court. bankruptcy/Proof of Claim fees. subsequent to the filing of their bankruptcy case. David . any appraisal fees. With best regards.
You: "You" or "your" refers to the defendant (either an individual or corporate entity) and its attorney. Identify: "Identify" means: a. "Person" is meant to include any individual or any business entity 4. etc. if that is unavailable. (ii) The identity and address or addresses of the person or persons to whom copies were sent and known telephone number(s). (iii) The present or last known location of the possessor of the original of the document (or. With reference to "documents". letter.g. please attach supplemental pages for your answers. such as its date. the most legible copy). the name and the address or addresses. To the extent additional space is required. These interrogatories are deemed to be continuing to the date of trial and should be supplemented accordingly.PLAINTIFF’S INTERROGATORIES AND REQUESTS FOR PRODUCTION TO DEFENDANT <> TO: <> AND TO: <>. Defendant: "Defendant" is meant to include the defendant to whom these interrogatories are addressed. a description of the method of preparation and disposition of all copies. the title or heading of the document and its appropriate number of pages. or any other agent or representative acting on behalf of defendants. Attorney for <> INTERROGATORIES COMES NOW the plaintiff and pursuant to Rule 33 of the Civil Rules for Superior Court propound the following interrogatories and requests for production to defendants to be answered separately and fully in writing under oath with a copy thereof to the undersigned counsel for plaintiff within thirty (30) days after service of these interrogatories or within 40 days if the service of these requests is with the complaint. 2. interoffice memoranda. . the name of the signer or signers. DEFINITIONS As used in these interrogatories. the following words and phrases shall have the following meanings: 1. specifically state the type of documents (e. Person: whatsoever. Form documents may be identified by title of the form. 3..) and state the following: (i) Information sufficient to enable plaintiff to identify the document.
in lieu of specifically identifying documents as requested above. then with respect to each such document: 1. State the name and address of each person having knowledge of the factual basis. upon which the privilege or other objection is asserted. in your possession. 98122. memorandum. etc. If you contend that any document encompassed by any request is privileged in whole or in part.(iv) If any document was. (b) state the nature of the privilege(s) asserted. custody or control. and (c) state in detail the factual basis for the claim or privilege. . documents responsive to each interrogatory may be generally described (with enough particularity to inform plaintiff which documents are responsive to the interrogatory) and produced for plaintiff's inspection and copying. 520 East Denny Way. (b) the nature of the document (i. you must (a) identify each such document with sufficient particularity as to author(s). and 3. state what disposition was made of it and the reason for such disposition. or otherwise object to its production. or recipient(s) and content(s) to allow plaintiffs to bring the matter before the court. (e) the name and address of each person from whom the document has been obtained by you.. (d) the name and address of each individual to whom the document. within a reasonable time following such acquisition or discovery. With reference to "documents". address(es). through supplemental responses. whether letter. Washington. Seattle. Provided further. These requests are intended to be continuing in nature and any documents requested which may be discovered or obtained subsequent to the service and filing of your responses hereto must be brought to the attention of the undersigned attorney for plaintiff. These requests for production are intended to encompass all documents of any nature which are now or have at any time been within the care.).e. the name and address of each person or entity known or believed to have a copy or copies thereof). State with specificity the reason or reasons for your objection and/or the nature of any privilege asserted. if the whereabouts of the original is unknown. (c) the name and address of each individual who prepared the document. but is no longer. telegram. Specify (a) the date of the document. Your responses are to be signed by defendants. if any document is withheld or not identified under a claim or privilege. within 30 days after service of these requests upon you. 2. or a copy thereof. b. has been at any time provided. custody or control of defendants. (f) the name and address of the individual or entity having possession of the original of the document (or. please respond separately and fully to each of the following requests for production of documents in writing and under oath. if any. REQUESTS FOR PRODUCTION In accordance with Rule 34 of the Civil Rules for Superior Court. We ask that the requested documents be provided for inspection and copying at the office of Leen & O’Sullivan PLLC.
custody or control. survey . agreement. correspondence. verbal statement. or meeting. contract. report. chart. voucher. log. and every other means by which a transaction or event may be or has been recorded or evidenced. tangible thing. rough draft. or other visual or sound record (however produced or reproduced) of any conversation. action. chart. financial statement. electronic or graphic matter. change order. email. statistical record. and the date upon which it was so disposed. memorandum. account book. map. brochure. plan. visual representation. custody. draft. intra-office communication. computer printout. magnetic tape. computer program. book. magnetic disc. purchase order. ledger. bid. photograph. receipt. appointment book. RESPONSE: Produce all documents that relate to your . index. doodle. including but not limited to every paper. but is no longer. tax return. working paper. check. pleading. deposition. calendar. 1: answer to the preceding interrogatory. license. minutes. telegram. study. or control.(g) all other information necessary to identify the document with sufficient particularity to meet the requirements for its inclusion in a motion for production pursuant to the Civil Rules for Superior Court. drawing. timesheet. ANSWER: REQUEST FOR PRODUCTION NO. invoice. journal. confirmation. state what disposition was made of it. of every kind and description in your actual or constructive possession. model. and (h) if such document was. DEFINITIONS Documents: The terms "document" or "documents" as used herein refer to all written. communication. INTERROGATORY NO. care. however produced or reproduced. note. 1: Identify all persons providing information to these responses. quotation. letter. punch card. slip. object. notation. memory recording device. inter-office communication. within your care. acknowledgement. the reason for such disposition. graph. diary.
INTERROGATORY NO. 2: Describe in detail all communications (either written, oral, email, or otherwise) between the Plaintiff and your agents regarding the loan(s) that is the subject of this litigation including date, substance and parties involved. ANSWER:
REQUEST FOR PRODUCTION NO. 2: Produce all documents that relate to your answer to the preceding interrogatory. RESPONSE:
INTERROGATORY NO. 3: Describe in detail what information was initially supplied to the Plaintiff about the estimated terms of the loan(s) which they applied for and specify how this was transmitted. ANSWER:
REQUEST FOR PRODUCTION NO. 3: Produce all documents that relate to your answer to the preceding interrogatory. RESPONSE:
INTERROGATORY NO. 4: Describe the conditions of approval submitted to the broker (sometimes called the “prior to docs” letter) by any lender that acquired the loan(s) or servicing right(s). ANSWER:
INTERROGATORY NO. 5: Describe the initial verbal representations made to the Plaintiff about what your company could do for Plaintiff. ANSWER:
REQUEST FOR PRODUCTION NO. 4: Produce all documents that relate to your answer to the preceding interrogatory. RESPONSE:
REQUEST FOR PRODUCTION NO. 5:
Produce all communications between any
defendant and the Washington Department of Financial Institutions regarding the loan(s) that are the subject of this litigation.
REQUEST FOR PRODUCTION NO. 6:
Produce all communications between any
defendant and the Washington Department of Financial Institutions regarding all consumer complaints made during the past 4 years.
REQUEST FOR PRODUCTION NO. 7: Produce the rate sheet(s) from the acquiring lender
that applied to the loan(s) you brokered or made to Plaintiff.
REQUEST FOR PRODUCTION NO. 8: Identify and produce the personnel files of any
loan broker employees who communicated with Plaintiff regarding the subject loan(s).
REQUEST FOR PRODUCTION NO. 9: Produce the “Prior to Docs” conditions letter from
the acquiring lender of Plaintiff’s loan(s) that summarizes the loan program, fees involved, type of documentation, etc.
INTERROGATORY NO. 6: State the names, addresses and telephone numbers of all experts whom you intend to call as witnesses regarding any aspect of the case. ANSWER:
INTERROGATORY NO. 7: With reference to each expert, state as follows: (a) (b) Name and address; Whether any written reports have been furnished to defendants and if so, the dates thereof; The subject matter on which the expert is expected to testify; The substance of the facts and opinions to which he is expected to testify; and A summary of the grounds for each opinion.
INTERROGATORY NO. 8: Describe any insurance or bonds that might provide a defense or coverage of Plaintiff’s claims, including company, inclusive dates of coverage, limits, and whether this case has been tendered. ANSWER:
10: Produce the declaration page for any insurance listed above. as a result of transferring this loan(s) to an acquiring lender and as a result of the loan fees and other charges made to Plaintiffs. ANSWER: INTERROGATORY NO. direct or indirect. RESPONSE: INTERROGATORY NO. 11: Produce all documents that relate to your answer to the preceding interrogatory. ANSWER: . 12: Identify and summarize the contents of any training materials used to train employees on how to obtain customers. Include all funds received by you outside of closing. 11: Has any responsive information or responsive documents been lost or destroyed since the loan(s) were made? If so. or lost their license (or were denied a license by DFI) during the past 4 years for misconduct? ANSWER: REQUEST FOR PRODUCTION NO. etc. 10: Itemize all compensation. explain the full details.REQUEST FOR PRODUCTION NO. sell loan products. received by your company and any of your employees. 9: Identify any person in your employ who has been terminated. ANSWER: INTERROGATORY NO. RESPONSE: INTERROGATORY NO.
REQUEST FOR PRODUCTION NO. income. RESPONSE: INTERROGATORY NO. the number of minutes or hours the task took. 15: If you charged for separate services listed in the 800 section of the HUD-1(s) (such as processing. 14: Does your company attempt to obtain the best priced loan for your customers. ANSWER: . and specifically what was done. 13: Describe in detail how your company determines the total compensation that will be charged to its customers. ANSWER: REQUEST FOR PRODUCTION NO. 12: Produce all documents that relate to your answer to the preceding interrogatory. 14: Produce your loan file for each loan made to Plaintiffs that is the subject of this litigation. based upon their credit scores. 13: Produce all documents that relate to your answer to the preceding interrogatory. and value of the collateral? Set forth all such policies that relate to determining the loan cost to customers.) identify each person doing such service(s). RESPONSE: INTERROGATORY NO. administration. documents-prep-etc. ANSWER: REQUEST FOR PRODUCTION NO. RESPONSE: INTERROGATORY NO.
INTERROGATORY NO. Leen/<>Sheila M. PLLC By _______________________ <>David A. 15: Produce copies of all advertising that you initiated through any form of media that occurred during your contact with Plaintiffs. certify under penalty of perjury under the laws of the State of Washington that the foregoing Answers are true and correct. 16: If you sent mailed solicitations to Plaintiff or group mailings that could have reached the Plaintiff. RESPONSE: DISCOVERY REQUESTS propounded this _____ day of _______. 200<> and signed pursuant to Washington Court Rules. O’Sullivan WSBA#<> Attorney for <>Plaintiff/<>Defendant I. <>. RESPONSE: REQUEST FOR PRODUCTION NO. 16: Produce all scripts or training aids used by persons soliciting business by telephone. ANSWER: REQUEST FOR PRODUCTION NO. describe in detail the nature of such solicitations. CR 26(g). LEEN & O’SULLIVAN. <>plaintiff/<>defendant in the subject case. (Date and Place) (Signature of Party) . in your employ or under your direction (including independent contractors).
and signed pursuant to Washington Court Rules. CR 26(g). 200<>. <>Law Firm of Opposing Counsel By _______________________ <>Opposing Counsel WSBA#<> Attorney for <>Plaintiff/<>Defendant .ANSWERS GIVEN this _______ day of ______________.
1639. State. but are not limited to: (1) Failure to provide two (2) completed disclosure copies stating the <mortgagor name(s)> right to cancel the transaction as required under 12 C. §§ 1635. 226. By way of further explanation. State. 12 C. Loan # NOTICE OF RESCISSION RE: <mortgagor’s name(s)> PROPERTY ADDRESS: <> Ladies and Gentlemen: We represent <mortgagor name(s)> in the above referenced loan that was entered into with <mortgagee’s name> on <month> <day>. State. (3) Providing one uncompleted notice of rescission rights to the <mortgagor name(s)>.23. material disclosures to the <mortgagor name(s)> were omitted in the course of this transaction. 226. Zip Ref. These disclosures include. (2) Failure to provide a complete and accurate disclosure of. the amount financed. and Regulation Z. <year>.C. In this transaction. <year> VIA CERTIFIED MAIL AND FIRST CLASS MAIL – RETURN RECIEPT REQUESTED Mortgagee #1 Name Address City. and the annual percentage rate.R. We have been authorized by <mortgagor name(s)>.R. and are hereby exercising the right to rescind this transactions on their behalf pursuant to the Federal Truth in Lending Act.F.F. Zip Ref. 15 U.<Month> <day>. inter alia. Zip Ref. .S. Loan # Mortgage #3 Name Address City. finance charge.23(b). Loan # Mortgagee #2 Name Address City. <mortgagee’s name> took a security interest in the <mortgagor’s name> home and primary residence.
The secured interest on the <mortgagor name(s)> property being held by <mortgagee’s name> is void upon our rescission under 15 U.S.C. § 1635, Regulation Z § 226.23. By these regulations, you have twenty (20) days after receipt of this notice of rescission to return to our clients all monies paid and to take the appropriate action to terminate your security interest in the <mortgagor name(s)> property. You must also discontinue the pending nonjudicial foreclosure on their home. We are prepared to offer tender of an appropriate amount due, as required by 12 C.F.R. 226.23(d)(3), after all relevant credits have been applied by you to the <mortgagor name(s)> account. Please be advised that if you do not return all of the consideration paid by the <mortgagor name(s)> to date and cancel your security interest in the above named subject property, you will be liable for actual and statutory damages under 15 U.S.C. § 1640(a) along with any and all other applicable Federal and Washington State remedies. Sincerely,
_____________________________ <attorney name> Attorney
_____________________________ <mortgagor name> Borrower
_______________________________ <mortgagor name> Borrower
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON COUNTY OF KING
Plaintiff, NO. v. , Defendants. COMPLAINT FOR MISREPRESENTATION, UNFAIR AND DECEPTICE PRACTICES, VIOLATION OF MORTGAGE BROKER PRACTICE ACT, RESPA AND THE FEDERAL TRUTH IN LENDING ACT,AND FOR INJUNCTIVE RELIEF. SEA
I. PARTIES 1.1 1.2 Plaintiff is a resident or King County, Washington, ABC Mortgage, Inc. is a Washington Corporation and is a loan broker doing business
in King County, Washington. 1.3 John Doe Loan Originator is believed to be an employee of ABC Mortgage and
24 25 26 27 28
represented that Plaintiff could get a loan that would reduce his payments, lower his interest, and fix
Leen & O’Sullivan, PLLC
COMPLAINT FOR MISREPRESENTATION, UNFAIR AND DECEPTICE PRACTICES, VIOLATION OF MORTGAGE BROKER PRACTICE ACT, AND FOR INJUNCTIVE RELIEF-1.
520 EAST DENNY WAY SEATTLE, WASHINGTON 98122 (206) 325-6022 FAX (206) 325-1424
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
his rate for 5 years. John Doe is believed to be married to Jane Doe , and all acts and/or omissions were taken on behalf of the marital community composed of John and Jane Doe . 1.4 Lender Financial, LLC is a lender doing business in King County, Washington. II. FACTUAL ALLEGATIONS 2.1 Plaintiff owns a townhouse in Seattle, WA. This is the Plaintiff’s residence although
he is presently on active duty in the U.S. Army and the house is temporarily rented. 2.2 On September 18, 2006, Plaintiff received an unsolicited call from an agent of ABC
Mortgage. She asked the Plaintiff if he would be interested in a refinance at a 2% APR, fixed for 5 years, with a lower payment that Plaintiff’s loan in place at that time. She stated that John Doe would call Plaintiff. 2.3 Within a week, John Doe, of ABC Mortgage called Plaintiff and discussed various
rates that he would qualify for. Doe offered a fixed rate of 4%, with cash out, fixed for 5 years. 2.4 Plaintiff advised Doe that he did not need to take any cash out but was interested in a 4% loan. He stated he would send the Plaintiff a Good Faith Estimate (hereinafter “GFE”) for some options. 2.5 2.6 On October 11, 2006, Plaintiff received two different GFEs. Plaintiff elected to proceed with the terms of the GFE that allowed a loan of $305,600
with approximately $45,000 cash out. Plaintiff relied on the payment being what was specified as $1,227 for principal and interest, which would change after one month to $1,329, per month, covering principal and interest, but remain at that level for 5 years. 2.7 The Plaintiff received Truth-in-Lending (hereinafter “TIL”) disclosures with the
25 26 27 28
GFEs that did not make sense to him. He questioned the variations and was told by Deeter that the
Leen & O’Sullivan, PLLC
COMPLAINT FOR MISREPRESENTATION, UNFAIR AND DECEPTICE PRACTICES, VIOLATION OF MORTGAGE BROKER PRACTICE ACT, AND FOR INJUNCTIVE RELIEF-2.
520 EAST DENNY WAY SEATTLE, WASHINGTON 98122 (206) 325-6022 FAX (206) 325-1424
further. 2006 at an escrow.000 so Plaintiff would have to wait for 3 years before the loan could be economically restructured.1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 payment would be fixed consistent with the GFE. 520 EAST DENNY WAY SEATTLE. was capped at 5% APR.10 Plaintiff received no net tangible benefit from this refinance but rather found himself in a worse financial situation.13 Had the Plaintiff been aware of the actual terms of the ABC loan he would not have signed the papers. Plaintiff received a statement from Lender Financial who Plaintiff signed loan documents in Mexico on December 4. for the first time. PLLC COMPLAINT FOR MISREPRESENTATION. 2. he was told. apparently had funded the loan.11 On February 20. 2006.375%. “YSP 0-3%”) was a broker fee of $6. Inc. WASHINGTON 98122 (206) 325-6022 FAX (206) 325-1424 . that the $259 of arrears would be added to his loan balance each month. It stated the rate was 8. 2.8 Netco. VIOLATION OF MORTGAGE BROKER PRACTICE ACT. prior to meeting Mr.9 Several months later. 2. 2. UNFAIR AND DECEPTICE PRACTICES. Doe called the Plaintiff and said.329 did not even cover the interest and. The existing loan he had on the property. AND FOR INJUNCTIVE RELIEF-3.12 The Plaintiff began to inspect his documents and discovered that the TIL disclosure he was given at closing stated 8. and sent them back to ABC. far better loan than the ABC Mortgage loan. The Plaintiff made corrections on the disclosure documents. that the loan was a negative amortized loan and that his payment of $1. 2. When the Plaintiff called Lender.14 The Plaintiff noticed that disclosed on the final loan closing statement but not on the 25 26 27 28 GFE (other than a vague reference.976%.29% but one mailed to him after closing stated 13. Plaintiff requested that Doe produce the loan he had sold the Plaintiff. 2.876 paid by Lender Leen & O’Sullivan. Doe. initialed the changes. there was a pre-payment penalty of about $12. 2. The Plaintiff did not receive a Consumer Handbook on Adjustable Rate Mortgages.
IV. 4.86 entitling the Plaintiff to restitution of all excessive fees and costs. if mortgage brokers will induce borrowers into loans above rates that borrowers would qualify. FIRST CLAIM – VIOLATION OF THE WASHINGTON MORTGAGE BROKER PRACTICES ACT 3. excessive fees. and damages for excessive interest paid. treble damages and injunctive relief. PLLC COMPLAINT FOR MISREPRESENTATION. WASHINGTON 98122 (206) 325-6022 FAX (206) 325-1424 . 2. VIOLATION OF MORTGAGE BROKER PRACTICE ACT.15 The Plaintiff has very good credit scores and was qualified to receive a prime loan rather than what Defendants supplied him.1 By misrepresenting to Plaintiff that he would receive benefits from a refinance with Homecomings and the other Defendants have violated the Washington Consumer Protection Act RCW 19. the Defendants have violated RCW 19. UNFAIR AND DECEPTICE PRACTICES.16 As a proximate result of the Defendant’s actions and/or omissions. This fee was for “upselling” the loan. 520 EAST DENNY WAY SEATTLE. The total fees charged for the Plaintiff’s loan were excessive and unreasonable. 2.1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Financial to A+ Mortgage. III. AND FOR INJUNCTIVE RELIEF-4. Homecomings did not disclose this to the Plaintiff.2 LenderFinancial advertises to mortgage brokers that it will pay a kick back (yield 24 25 26 27 28 spread premium) outside of escrow. Plaintiff has suffered and will continue to suffer damages because of higher interest. Leen & O’Sullivan. a practice that increases the cost of the loan to the consumer in exchange for an increased to the broker. UNFAIR AND DECEPTIVE ACTS AND PRACTICES (ALL DEFENDANTS) 4.1 As a result of the actions and omission of Defendants as alleged above.146 entitling Plaintiff to damages and penalties including reasonable attorney fees. SECOND CLAIM. and impairment of his credit and payment of a pre-payment penalty should he attempt to mitigate his damages by a refinance.
3. PLLC COMPLAINT FOR MISREPRESENTATION.5 Lender Financial has engaged in numerous transactions where borrowers end up in worse financial shape than their existing loans. 4. WASHINGTON 98122 (206) 325-6022 FAX (206) 325-1424 . Plaintiff prays for the following relief: 1.7 Plaintiff is entitled to reasonable attorney fees and costs pursuant to the statutes cited herein and pursuant to the loan agreement between the parties. 4. That the court award damages to Plaintiff for increased costs.1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 4.6 Unless enjoined from making loans to borrowers that do not have some net tangible benefit from the refinance. AND FOR INJUNCTIVE RELIEF-5.86 et seq. including prepayment penalties so plaintiff can obtain a prime loan which he qualifies for.876 to induce the Plaintiff to obtain a refinance that had no benefit to Plaintiff. all Defendants will continue to cause harm to consumers in violation of RCW 19. 4.86. 4. ABC agreed to provide an expensive loan product to Plaintiff in exchange for the kickback. UNFAIR AND DECEPTICE PRACTICES.4 Lender Financial knew or should have known that if ABC had properly disclosed what it was doing or if Lender had truthfully disclosed what it was doing. That Defendants be ordered to comply with all applicable consumer finance laws. V. That the court award damages. Leen & O’Sullivan. 520 EAST DENNY WAY SEATTLE.3 In this case. no rational borrowers would refinance under those conditions. and reasonable attorney fees allowed by RCW 19. VIOLATION OF MORTGAGE BROKER PRACTICE ACT. 4. treble damages. That Defendants be enjoined from making loans that have no net tangible benefit to borrowers and cause financial harm to consumers. 21 22 23 24 25 26 27 28 2. THIRD CLAIM: VIOLATION OF FEDERAL TRUTH IN LENDING ACT AND REALESTATE SETTLEMENT PRACTICES ACT WHEREFORE. Homecomings Financial paid ABC Mortgage $6.146 and RCW 19.
VIOLATION OF MORTGAGE BROKER PRACTICE ACT. UNFAIR AND DECEPTICE PRACTICES. David A. DATED this _____ day of July.1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5. That the court award other relief that may be proper. 520 EAST DENNY WAY SEATTLE. Leen Attorney for Plaintiff WSBA #3516 Leen & O’Sullivan. That Lender be enjoined from offering kickbacks to brokers (yield spread premiums) unless properly and legally disclosed under RCW 19.146 and the Federal Real Estate Settlement Practices Act. PLLC COMPLAINT FOR MISREPRESENTATION. 6. 2007. AND FOR INJUNCTIVE RELIEF-6. WASHINGTON 98122 (206) 325-6022 FAX (206) 325-1424 .
PLLC COMPLAINT FOR MISREPRESENTATION. 520 EAST DENNY WAY SEATTLE. UNFAIR AND DECEPTICE PRACTICES.1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Leen & O’Sullivan. WASHINGTON 98122 (206) 325-6022 FAX (206) 325-1424 . AND FOR INJUNCTIVE RELIEF-7. VIOLATION OF MORTGAGE BROKER PRACTICE ACT.
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