Mortgages

Bank with actual knowledge of intent to create homeowners association bound by covenants even though the mortgage was recorded before the homeowners assocation declaration

An appellate court in New Jersey held that a bank that received a mortgage on a piece of property was bound by a later-recorded homeowners association covenants because it had actual knowledge that the developer planned to subject the property to the declaration. Fulton Bank of N.J. v. Casa Eleganza, 473 N.J. Super. 387, 281 A.3d 252 (N.J. App. Div. 2022). This was the case even though New Jersey...

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Foreclosure sale cannot be set aside even though the foreclosure price was only nine percent (9%) of fair market value

In a demonstration of the broken nature of our foreclosure system, the Alaska Supreme Court held in Thomas v. Joseph P. Casteel Trust, 496 P.3d 403 (Alaska 2021), that a foreclosure was lawful even though the buyer at foreclosure paid a mere nine percent (9%) of the fair market value of the property. Only if there were procedural irregularities could the foreclosure be set aside. This type of case makes the owner’s equity vanish into thin air and is inconsistent with the historical policies... Read more about Foreclosure sale cannot be set aside even though the foreclosure price was only nine percent (9%) of fair market value

Banks are both owners and landlords when they buy tenant-occupied property at a foreclosure sale

Banks seem to have a hard time understanding that when they obtain title to property through a foreclosure sale that they not only own the property but have taken on themselves all the obligations that an owner has. If the property is occupied by tenants, the bank-owner is automatically the new landlord and the law imposes duties on landlords. The law also requires owners not to let their property become a nuisance. But this simple legal truth is repeatedly resisted by some banks. This rule extends to any entity that is the legal owner of the property and that includes the trustee of...

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Judicial foreclosure is not “debt collection” under FDCPA

The Ninth Circuit held, in Barnes v. Routh Crabtree Olsen PC, 963 F.3d 993 (9th Cir. 2020), that judicial foreclosure is not a form of “debt collection” covered by and regulated by the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692e-g. The court relied on the Supreme Court’s decision in Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029 (2019) that a law...

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Loan modification agreements unenforceable unless in writing

An appellate court in California has held that the state's statute of frauds require loan modification agreements to be in writing to be enforceable. Reeder v. Specialized Loan Serv., LLC, 2020 WL 4345001 (Cal. Ct. App. 2020). This is an expected application of the statute of frauds but it does not mean that some courts, in other factual settings, might make exceptions if the... Read more about Loan modification agreements unenforceable unless in writing

Bank has standing to foreclose despite inability to produce the note on which the mortgage was based

The New Jersey Supreme Court allowed a bank to foreclose on property without direct evidence that it had the right to foreclose. Ordinarily, the foreclosing entity must produce the note that memorializes the underlying debt. The UCC allows foreclosure when notes have been lost, UCC 3-309, if a “lost note affidavit” is filed with the court. In Investors Bank v. Torres, 2020 WL 3550701 (N.J. July 1, 2020), the homeowner borrowed money from one lender who filed a foreclosure action but...

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Hawaii Supreme Court measures deficiency judgment by reference to fair market value rather than foreclosure price

The Hawai'i Supreme Court held that deficiency judgments should be measured by the difference between the unpaid debt and the property's fair market value rather than by reference to the difference between the unpaid debt and the foreclosure price. ...

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Nonjudicial foreclosure requires appraisal to ensure foreclosure price is close to fair market value

The Massachusetts Appeals Court has held that nonjudicial foreclosures must be conducted in a fair manner and that the burdens on the party who is foreclosing are greater precisely because the auction sale is not be supervised or conducted by judicial officials. Prop. Acquisition Group, LLC v. Ivester, 2019 Mass. App. LEXIS 44,...

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