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: 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. 

Fannie Mae: 
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:                                 
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.”

FHA/HUD:
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:
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. 

USDA: 
Moratorium extended to June 30, 2020.  Does not apply to vacant and abandoned properties. Read more here.