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The Supreme Court of Arkansas recently held that the sale notices used by some Arkansas law firms was too vague to satisfy the requirements of the Arkansas Statutory Foreclosure Act (the “Act”). Davis v. PennyMac Loan Services, LLC, 2020 Ark. 180 (May 7, 2020) In order to initiate a statutory foreclosure, the Act requires the recording of a Notice of Default and Intention to Sell (“Notice”) that states “the default for which the foreclosure is made.” Ark. Code Ann. § 18-50-104(b).
The Notice at issue in Davis stated that “a default has been made with respect to a provision in the mortgage” (emphasis added). The Court found that such boilerplate language was not specific enough description of the default to satisfy the Act. As the attorneys for the borrowers in Davis argued, such vague language does not disclose whether the default that caused the foreclosure was a payment default or some other type of default provided for in the mortgage document such as destruction of the property, making false statements to the lender in order to obtain the loan, or permitting the presence of hazardous substances.
We recommend that servicers check with their attorneys to be sure the language used in their form Notices will survive the scrutiny they will be subjected to in light of Davis. Moreover, servicers and attorneys alike should be cautious of using one-size-fits-all forms that do not take into account the specific type of default for which the foreclosure is made.
CARES Act Moratorium Updates
CARES ACT: Foreclosure mratoriums legislated by the CARES Act expired as of May 17, 2020. However, Fannie Mae, Freddie Mac, FHA, and VA have each issued additional directives extending the moratoriums until June 30, 2020, excluding Vacant and Abandoned Properties. Access our complete Coronavirus Response blog, #PadgettPrepared, for more pandemic-response information.
FNMA has extended the suspension of foreclosure-related activities through June 30, 2020. “During the period of the extension, servicers may not, except with respect to a vacant or abandoned property, initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure sale. This suspension does not apply to mortgage loans secured by properties that have been determined to be vacant or abandoned.”
Freddie Mac has extended the suspension of foreclosure-related activities through June 30, 2020. “During the period of the extension, servicers may not, except with respect to a vacant or abandoned property, initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure sale. This suspension does not apply to mortgage loans secured by properties that have been determined to be vacant or abandoned.”
HUD has placed a moratorium on occupied FHA mortgages through June 30, 2020, which applies to the “initiation of foreclosures and to foreclosures in process”. The moratorium does not apply to vacant and abandoned properties.
VA has placed a moratorium on occupied FHA mortgages through June 30, 2020, which applies to the “initiation of foreclosures and to the completion of foreclosures in process”. The moratorium does not apply to vacant and abandoned properties.
Moratorium extended to June 30, 2020. Does not apply to vacant and abandoned properties. Read more here.
Recently, several national title insurance companies have sent out bulletins to their agents regarding their company's position on how the CARES Act is affecting the industry. Specifically, some of the title insurance companies are requiring additional steps in order to insure properties related to foreclosure sales held during the moratoriums imposed by the CARES Act. At least one title insurance company has decided to not insure any property related to a foreclosure action during the timeframe that the CARES Act applies, whether the Act covers that property or not. These measures from the title insurance companies will apply to any foreclosure sale held between March 18, 2020 through May 17, 2020 during the current period the Act is in place. Of note, these restrictions and additional requirement also apply to any post-foreclosure conveyances and REO transactions. This will affect any conveyance to HUD or the VA since title insurance policies are required to be submitted along with the title packages. The CARES Act continues to have an impact on the industry, so it is important to understand the potential challenges with obtaining title insurance for post-foreclosure processes including conveyances and REO. PLG has been diligent in working with multiple national title insurance companies to ensure our clients' post-foreclosure needs are met. We have a plan in place in order to issue the title insurance policies in compliance with the requirements set forth by the title insurance companies so our clients' sales subject to conveyance and REO transactions can move forward. PLG is also continuing to stay connected to the local title insurance underwriters for any changes in their requirements as the industry moves forward during these unique times.
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