foreclosure

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First Circuit BAP Applies “Gavel Rule” to Foreclosure Sale

A panel for the First Circuit BAP found that the debtor could not cure and maintain her mortgage in bankruptcy because she had no interest in the property which was sold in a foreclosure sale prior to her bankruptcy petition, despite the fact that the mortgagee failed to record the deed of sale in accordance with state foreclosure law. U.S. Bank Nat’l Assoc. v. Vertullo, Nos. 18-56, 18-63 (B.A.P. 1st Cir. Jan. 10, 2020).

After the debtor defaulted on her mortgage, the mortgagee, U.S. Bank, sold the property to a third party through a foreclosure sale. The foreclosure deed was not recorded. When Ms. Vertullo filed for chapter 13 bankruptcy, the Bank sought to lift the automatic stay in order to evict Ms. Vertullo from the property. Ms. Vertullo countered that, because the foreclosure sale was not recorded within the time required by state law, she retained an interest in the property and could cure and maintain the mortgage through her plan. The bankruptcy court agreed. It denied the Bank’s motion for relief from stay and, in a separate order, confirmed the debtor’s plan. In re Vertullo, 593 B.R. 92, 94 (Bankr. D.N.H. 2018). The Bank appealed both orders to the Bankruptcy Appellate Panel for the First Circuit. [Read more…] about First Circuit BAP Applies “Gavel Rule” to Foreclosure Sale

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SCOTUS Addresses “Debt Collector” Definition

In a unanimous, narrow, decision, the Supreme Court held that an entity merely carrying out nonjudicial foreclosures is not a “debt collector” within the meaning of the FDCPA. Obduskey v. McCarthy & Holthus LLP, 586 U.S. ___, No. 17-1307 (March 20, 2019).

The action arose when the law firm of McCarthy & Holthus, acting as agent for the mortgagee, initiated nonjudicial foreclosure proceedings against Dennis Obduskey. In response to McCarthy’s notice of foreclosure, sent in compliance with Colorado nonjudicial foreclosure law, Mr. Obduskey invoked the FDCPA and sent a letter disputing the debt. When McCarthy went forward with the foreclosure proceedings, Mr. Obduskey filed a complaint in district court alleging violation of the FDCPA’s requirement that, upon notification of a disputed claim, a debt collector must cease collection activities and obtain verification of the debt. The district court found that McCarthy was not a debt collector to which the FDCPA requirements applied. The Tenth Circuit affirmed. Obduskey v. Wells Fargo, 879 F. 3d 1216 (2018). [Read more…] about SCOTUS Addresses “Debt Collector” Definition

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Eleventh Circuit Interprets Section 1328(a)’s “Provided for”

A mortgage paid outside the plan is not “provided for by the plan” for purposes of discharge of the debtor’s personal liability under section 1328(a). Dukes v. Suncoast Credit Union, No. 16-16513 (11th Cir. Dec. 6, 2018).

When she filed her bankruptcy petition, Chapter 13 debtor, Mildred Dukes, was current on two mortgages held by Suncoast Credit Union. Though she listed both mortgages in her schedules, the credit union filed a proof of claim only for the second mortgage. Her confirmed plan stated that the mortgages would be paid outside the plan. Ms. Dukes successfully completed her plan payments and was granted discharge of all debts provided for by the plan. During the course of the plan, however, Ms. Dukes defaulted on both mortgages. The credit union foreclosed on the property under the second mortgage, and sought deficiency judgment against Ms. Dukes under the first mortgage. It moved to reopen her bankruptcy to obtain an order that her personal liability on the first mortgage was not discharged. The bankruptcy court found in favor of the credit union, and the district court affirmed. [Read more…] about Eleventh Circuit Interprets Section 1328(a)’s “Provided for”

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Foreclosure Not Complete Until Deed Recorded so Debtor May Cure and Maintain

Where the debtor’s residence was sold in a foreclosure sale but the mortgagee failed to record the foreclosure deed as required by state law, the debtor had the right to cure and maintain under section 1322(c). In re Vertullo, 18-10552 (Bankr. D. N.H. Oct. 1, 2018).

In this case, the mortgagee, U.S. Bank, moved for relief from stay, arguing that because the foreclosure auction was completed prior to Darlene Vertullo’s chapter 13 bankruptcy filing, the property did not enter the bankruptcy estate and she could not cure and maintain under section 1322(c). Ms. Vertullo countered that U.S. Bank’s failure to record the deed allowed section 1322(c) to preempt the state law which would have otherwise divested her of ownership interest in the property upon foreclosure sale at auction. [Read more…] about Foreclosure Not Complete Until Deed Recorded so Debtor May Cure and Maintain

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Tax Sale May Be Avoided as Constructively Fraudulent

A tax sale was avoidable as constructively fraudulent where the state tax foreclosure sale procedures did not include notice and bidding procedures likely to result in the debtors’ receiving “reasonably equivalent value.” Hampton v. Ontario County, No. 17-6808, and Gunsalus v. Ontario County, No. 17-6810 (W.D. N.Y. July 18, 2018).

In two separate cases with substantially identical facts, the Western District of New York addressed whether the bankruptcy court improperly dismissed the debtors’ adversary proceeding seeking to avoid the transfers of the debtors’ homes in tax sales. [Read more…] about Tax Sale May Be Avoided as Constructively Fraudulent

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Ocwen To Show Cause Why It Shouldn’t Be Held in Contempt

Ocwen’s misconduct led the bankruptcy court to not only grant the debtor’s motion for temporary restraining order but to order Ocwen, as servicer for U.S. Bank, to show cause why it should not be held in contempt for violation of a Consent Order entered between the debtor and lender during her chapter 13 bankruptcy. Arrington v. Ocwen Loan Servicing, LLC, No. 12-70435, Adv. Proc. No. 17-70029 (Bankr. N.D. Ala. Sept. 25, 2017). [Read more…] about Ocwen To Show Cause Why It Shouldn’t Be Held in Contempt

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Demand for Full Payment Does Not Accelerate Mortgage Maturity Date

Demanding full payment of a mortgage after the debtor’s default did not accelerate the maturity date such that the limitations period for filing a foreclosure action was moved up. Washington v. Bank of New York Mellon, No. 15-3210 (3rd. Cir. Sept. 30, 2016) (unpublished).

Though the mortgage agreement specified a maturity date of 2037, the debtor, Gordon Washington, argued that when Bank of New York demanded full payment and filed its first foreclosure action in 2007, it activated the mortgage agreement’s acceleration clause and established a new maturity date for the mortgage. The foreclosure action failed for lack of prosecution and the creditor filed a new action after Mr. Washington had filed his bankruptcy petition in 2014. Mr. Washington then sought an order to the effect that the creditor no longer had an interest in the property because the limitations period had elapsed. [Read more…] about Demand for Full Payment Does Not Accelerate Mortgage Maturity Date

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Surrender Ends State Foreclosure Fight

“Debtors who surrender their property in Bankruptcy may not oppose a foreclosure action in state court.” Failla v. Citibank, No. 15-15626 (11th Cir. Oct. 4, 2016). Bankruptcy debtors, David and Donna Failla, opted, under section 521(a)(2)(B), to surrender their home but continued to live in the house and oppose Citibank’s state court foreclosure action. The trustee abandoned the property as having negative value. Citibank moved to compel surrender. The bankruptcy court granted the motion ordering the Faillas to cease opposition to foreclosure in the state court. The district court affirmed. [Read more…] about Surrender Ends State Foreclosure Fight

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Borrower Has Standing to Challenge Void Assignment

The Supreme Court of California held that a borrower on a home loan secured by a deed of trust has standing to base an action for wrongful foreclosure on allegations that defects in the purported assignment of the note and deed of trust renders the assignment void. Yvanova v. New Century Mortgage Corp., No. S218973 (Cal. Feb. 18, 2016). [Read more…] about Borrower Has Standing to Challenge Void Assignment