Alerts

City of Aurora Now Requires Registration of Vacant or Foreclosed Properties

May 19, 2016

Ordinance Number 016-004 was recently enacted in Aurora, Illinois and requires all vacant or foreclosed properties to be registered by the owner with the city. The ordinance defines “owner” broadly; it includes a mortgagee that has instituted foreclosure proceedings against the mortgagor, or a mortgagee that is authorized to act to secure or repair the property, according to the terms of the mortgage. Under the guidelines of the ordinance, the director of the city’s Department of Neighborhood Standards will evaluate all buildings believed to be vacant. If the director determines a building is vacant, a notice will be sent to all owners and individuals responsible for registration of the building....

Kentucky Supreme Court Permits Limited-Representation Agreements by Debt Settlement Companies

April 7, 2016

When negotiating resolutions for debtors, most creditors’ attorneys have dealt with debt settlement companies at some point. The number of debt "adjusting," "relief" or "assistance" companies have proliferated in recent years. Many companies have expanded their services to include not just negotiation, but also active assistance in the legal process....

Use It or Lose It When Pursuing Personal Deficiency Judgments

April 6, 2016

On June 5, 2015, the First District of the Illinois Appellate Court issued its decision in LSREF2 Nova Investments III, LLC v. Michelle Coleman, relating to breach-of-note actions following a mortgage foreclosure. The decision impacts how all mortgage lenders in Illinois should pursue personal deficiency judgments....

Congress Extends Foreclosure Relief for Servicemembers on Active Duty through 2017

March 23, 2016

On March 21, 2016, the U.S. House of Representatives passed the "Foreclosure Relief and Extension for Servicemembers Act of 2015." The original legislation provided servicemembers protection from foreclosure for nine months after their active duty terminated; it was later extended to one year, but only through 2015. The new bill will make the 12-month period applicable again through 2017, after which time, if Congress takes no other action, it will return to nine months....

Mortgage Servicer Successfully Wields Bona Fide Error Defense Against FDCPA Claim: Would Your Procedures Hold Up, Too?

March 22, 2016

A mortgage servicer servicing loans for another entity is generally subject to the Fair Debt Collection Practices Act (FDCPA), which imposes liability for communications to a borrower containing false, deceptive or misleading representations. The FDCPA affords a narrow carve-out to the general rule of strict liability: The "bona fide error" defense, as construed by the courts, is designed to protect against liability for genuine errors such as clerical or factual mistakes. (The defense is not available for mistakes of law or misinterpretations of the FDCPA's requirements.) To successfully assert this defense, a debt collector must establish all three of the following conditions; that the violation: (1) was not intentional; (2) was the result of a bona fide error; and (3) occurred despite the maintenance of procedures reasonably adapted to avoid the error. A recent federal district court case illustrates a winning application of the bona fide error defense. The borrower had filed a class-action suit against both the servicer and the owner of the loan, based on the servicer having sent two monthly billing statements which did not reflect credit for the amount recovered from a completed foreclosure sale, and after the debt had been discharged in bankruptcy....

How IRS Form 982 Can Aid Financial Institutions with Debtor Settlements

February 24, 2016

For any financial institution seeking to negotiate with one of its debtors over a lump-sum settlement of the debtor's delinquent, unsecured debt,(1) one potential roadblock is IRS Form 1099-C. This form reports the amount of a debtor's debt that is forgiven or canceled, and although a debtor is unlikely to want any such debt to be taxed as income, financial institutions are required by law to issue this form. In light of these facts, the issue becomes how to keep debtors from walking away from a mutually beneficial settlement. One possible solution is IRS Form 982, which allows a debtor to exclude the amount canceled from his income up to the extent of his insolvency at the time the debt is settled....

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