Eric Houser is the President of Houser & Allison, a firm that represents lenders and servicers in all 13 of the firm’s offices across the country from California to New York. Houser has been practicing law for 29 years and has a State and National litigation practice specializing in consumer and commercial finance, default servicing, title, bankruptcy, and technology litigation. Mr. Houser has extensive litigation experience in issues involving the Real Estate Settlement Procedures Act, Truth In Lending Act, Home Mortgage Disclosure Act, Fair Credit Reporting Act, and the Fair Debt Collection Practices Act. He has tried cases from Maui, Hawaii to Litchfield, Connecticut, and many other places in between. He is a frequent public speaker. Houser & Allison is a member of the Legal League 100.
What are some of the more recent changes in the law that have impacted our industry?
Most recently in February 2016, the California Supreme Court came down with the long-awaited decision in the Yvanova v. New Century matter. This case has had notoriety because it is the first decision to reach the California Supreme Court which touches upon a borrower’s challenge to assignments of a loan (including securitization based claims) to support a wrongful foreclosure claim. The Court essentially concluded that a home loan borrower has standing to claim a nonjudicial foreclosure was wrongful because an assignment by which the foreclosing party purportedly took a beneficial interest in the deed of trust was not merely voidable but void, depriving the foreclosing party of any legitimate authority to order a trustee's sale. Borrowers' counsel are pleased with the decision which will most certainly increase litigation in California.
California has also expanded liability for servicers and lenders for tort damages (credit damage, possible emotional distress and punitive damages) in a wrongful foreclosure action and for servicing practices. In other words, Courts are tougher on our clients in California and best practices must always be used to prevent additional exposure.
The same goes for New York although in New York, the Courts have taken a different, less legalistic approach. The Courts have stalled the foreclosure process with multiple settlement conferences and long delays. New York has imposed more restrictions and requirements for lenders and servicers and has expanded liability for noncompliance, including the imposition of sanctions waiving interest for months or years if the court finds a lender did not negotiate in good faith in settlement conferences. The hot issue in New York continues to be the lender's standing to foreclose. The major hurdle in establishing standing is establishing possession of the note endorsed in blank at the time the action was commenced. Some courts have tried to expand this requirement by denying summary judgment unless the lender establishes the chain of custody for the entire history of the note including methods of delivery, dates of delivery and the identities of courier and recipient. Borrowers have also attempted to defeat standing to foreclose by arguing that the trustee did not receive possession of the note by the closing date set forth in the applicable pooling and servicing agreement (“PSA”) or by claiming that the assignment of mortgage is defective. Fortunately, the Appellate Division has effectively quashed any challenges to the PSA by definitively holding that borrowers do not have standing to challenge any alleged non-compliance. Ultimately, proof of possession at the time of commencement is the key to establishing standing.
Additional hot issues in New York relating to foreclosures are actions being dismissed for failure to establish compliance with RPAPL 1304 which mandates that a 90 day notice to be sent prior to foreclosure. The courts are now requiring that an affidavit of service be provided for this notice, which servicers were not doing. This has created a problem in cases where the statute of limitations has expired. Attorneys for lenders are making arguments to address the issue and so far the issue is unsettled.
What are the most challenging states at the moment?
Right now, New Mexico and Maine. The Courts in these states have, in my opinion, created barriers to enforcement of the mortgage, but have also created high exposure in terms of monetary damages. Clients must be very careful in all states at this time but in particular these two states.