Patricia Paruch, Kemp Klein Law Firm
New OCC Review Standards Target Foreclosure Abuse
By Douglas E. Kelin, Lipson, Neilson, Cole, Seltzer & Garin, PC
On April 19, 2013, the Office of the Comptroller of the Currency (OCC) published new guidance for residential mortgage servicers to establish minimum foreclosure processing standards. The new standards are intended to create consistency in servicer review and validation of files when a foreclosure sale is imminent.
The failure of the nation's largest lenders to strictly comply with applicable law in the years after the housing crisis resulted in last year's $25 billion national mortgage settlement. Widespread failures in the foreclosure process included errors in foreclosure documents, failing to provide sufficient notice of default, foreclosing on borrowers protected by bankruptcy or in the midst of a valid loan modification, and foreclosing on mortgages that lenders did not own.
To correct foreclosure abuses, the new OCC guidance presents thirteen questions for servicers to consider within sixty days prior to commencing a foreclosure sale, such as whether all notices were timely and whether the borrower is in active bankruptcy. Similar to the OCC's guidelines, the Federal Reserve issued its own guidance to its member banks which created universal guidelines for the residential mortgage industry. Bank servicers will use these standards to determine whether to postpone, suspend, or cancel a scheduled foreclosure sale due to foreclosure defects.
The new guidance emphasizes strict compliance with foreclosure laws for accountability and for the appropriate treatment of borrowers. Lenders and servicers still struggling with foreclosure compliance are urged to utilize the guidelines as a supplement to their existing compliance protocols. Attorneys assisting clients with foreclosure can use this new guidance as a checklist to ensure strict compliance with applicable law. Responsible servicers should focus less on speed, and more on technical accuracy to foreclose while avoiding the numerous potential claims of aggrieved borrowers.
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July 10-13, 2013
A Chain is Only as Strong as its Weakest Link
By Glen Zatz, Bodman PLC
Following the recent Kim case (Kim v. JPMorgan Chase Bank, NA, 493 Mich 98 (2012)), the Court of Appeals held that a foreclosure by advertisement was voidable, but not void ab initio, where an assignment from one mortgagee to another mortgagee in the chain of title was not recorded (Sobh v. Bank of America, Mich App No. 308441, June 6, 2013, unpublished). As in Kim, Chase Bank acquired all of Washington Mutual's assets by purchase agreement, including plaintiffs' mortgage. Chase never recorded an assignment of the mortgage before assigning the mortgage to Bank of America (BOA).
MCL 600.3204(3) provides "[i]f the party foreclosing a mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale . . . evidencing the assignment of the mortgage to the party foreclosing the mortgage." BOA argued that MCL 3204(3) "does not require that all interim assignments be recorded . . . rather . . . all that is required is that the party foreclosing the mortgage record the assignment to it prior to the date of sale. Nowhere does the current statute require the recording of any interim assignments that may have been made between the date the initial mortgage was given and the date the last assignment was recorded prior to sale." The Sobh court rejected this and found that Kim squarely addressed this issue when it said "a mortgagee cannot validly foreclose a mortgage by advertisement before the mortgage and all assignments of that mortgage are duly recorded." (Emphasis added).
As in Kim, the court remanded before setting aside the foreclosure sale for plaintiffs to show that they were prejudiced by the failure to comply with MCL 600.3204. The lesson: Lenders should ensure that all mortgage assignments are recorded.
The views and opinions expressed in these articles are those of the authors, and they do not reflect in any way the positions of the State Bar of Michigan or the Real Property Law Section. These columns are meant for informational purposes only and should not be construed as legal advice.