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Home Foreclosures: 3.4.3.3 The Eaton Decision

In Eaton v. Federal National Mortgage Association,183 the Massachusetts Supreme Judicial Court looked at the related question of whether, at the time of foreclosure, the “mortgagee” must also have authority to enforce the promissory note that the mortgage secures.

Home Foreclosures: 3.6.1 Do Borrowers Have Standing to Challenge Loan Document Transfers?

Lenders have occasionally argued that borrowers lack standing to challenge the validity of preforeclosure transfers of mortgages, deeds of trust, and notes. According to the lenders, the validity of assignments and other transfers of loan documents is purely a matter between the parties to these transactions and borrowers have no stake in questions about their validity.302 Lenders have raised these standing objections most frequently in the context of non-judicial foreclosures, when borrowers file complaints to enjoin or set aside a sale.

Home Foreclosures: 3.6.3.3 Is the Loan Properly Included in the Trust?

The terms of a pooling and servicing agreement govern when and how a trust acquires mortgages. For example, some PSAs permit the trust to acquire only mortgages that are current, precluding the trustee from accepting loans that are in default. A trust agreement may set a closing date after which new mortgages may not be added to the trust pool.

Collection Actions: 3.7.8.1 Terminology

Although courts use varying terminology, this chapter uses the term “tolling” to mean suspension of the running of the limitations period and “reviving” to mean restarting the running of the limitations period from the beginning. When the limitations period is five years—and two years remain on the period—and the period is tolled, then two years continue to remain left in the period until the tolling of the period ceases. If the action is revived, then the counting goes back to zero, and the limitations period does not expire for five more years.

Home Foreclosures: 3.6.4 Role of Document Custodian

A holder may retain possession of a note through an agent.372 Transfers of possession of a note can occur directly or through the holder’s agent.373 Pooling and servicing agreements typically designate a financial institution to serve as the custodian of the notes and security instruments for the loans in the trust’s pools. The designated custodian serves as the trust’s agent for the limited purpose of maintaining possession of these documents.

Home Foreclosures: 3.6.5 Evidentiary Problems

Regardless of whether a judicial or non-judicial foreclosure is involved, challenges to authority to foreclose often come down to issues of evidence. In summary judgment proceedings and at trials servicers must present evidence regarding the status of notes and mortgages. This includes evidence of possession of notes and the dates of indorsements. It can also mean providing evidence of the written assignments of mortgages and deeds of trust. Servicers rely on professional witnesses to establish these facts.

Home Foreclosures: 7.5.5 Higher-Priced Mortgage Loans

A “higher-priced mortgage loan”130 is a first or second closed-end mortgage with an APR that exceeds the “average prime offer rate” (APOR) by the appropriate threshold.131 The higher-priced loan category is designed to match the subprime market and uses rate triggers lower than high-cost loans under HOEPA.132 These loans can be purchase money loans or refinance loans, so long as they meet the APOR trigger.

Home Foreclosures: 7.5.6 The Home Ownership and Equity Protection Act (HOEPA)

The Home Ownership and Equity Protection Act (HOEPA)138 carves out a class of high-rate loans and subjects them to special regulation. For these loans, HOEPA requires additional disclosures, prohibits certain abusive loan terms and practices, imposes additional penalties, and expands the potential liability of assignees.

Home Foreclosures: 7.6.1 Introduction

The Real Estate Settlement Procedures Act (RESPA)147 is the primary federal law directly addressing residential mortgage settlements.148 RESPA, originally enacted in 1974, is intended to ensure that consumers in real estate transactions receive timely information about the nature and cost of the settlement process and to protect consumers “from unnecessarily high settlement charges caused by certain abusive practices.”149 To accomplish these

Home Foreclosures: 7.8 Civil RICO

The federal Racketeer Influenced and Corrupt Organizations Act (RICO)186 provides powerful civil remedies, including attorney fees and treble damages, to victims subjected to a broadly defined range of “racketeering activity” or to the collection of an “unlawful debt,” which is defined as any usurious debt bearing interest of at least twice the “enforceable rate.”187

Home Foreclosures: 7.9 SAFE Act Licensing

Under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act),194 individual loan originators (those involved in processing loan applications) must register with the National Mortgage Licensing System and Registry (NMLSR) and be state-licensed.195 Those employed by a depository institution (such as a bank or credit union) or an entity regulated by a federal banking agency must register with the NMLSR, but are not required to be state-licensed.

Home Foreclosures: 7.10 State High-Cost Mortgage Statutes

State anti-predatory lending laws also can be powerful tools for challenging unfair lending practices and defending against foreclosure. The scope and content of these state laws varies widely.203 Some like HOEPA provide a private right of action for borrowers, while other limit enforcement to government agencies. Some permit double or treble damages, while others limit relief to compensatory damages.

Mortgage Servicing and Loan Modifications: 1.1.1 Scope

This treatise covers the law and provides practical advice related to mortgage servicing and mortgage loss mitigation alternatives. It examines federal and state regulation of mortgage servicing, identifies common abusive servicing practices and potential claims, reviews loss mitigation alternatives for borrowers in financial distress, and provides practical guidance on litigating claims against mortgage servicers.

Mortgage Servicing and Loan Modifications: 1.1.4 Additional Pleadings, Practice Tools, and Primary Source Materials Found Online

This treatise’s digital version, at www.nclc.org/library, includes over 100 legal pleadings, practice tools, and primary source materials relevant to mortgage servicing and loan modifications. The NCLC Digital Library website contains sample loss mitigation counseling forms and sample qualified written requests, extensive primary source materials concerning HUD, VA, and Rural Housing Service, and reverse mortgages—federal statutes, regulations, handbooks, loss mitigation guidelines, and key agency letters.

Mortgage Servicing and Loan Modifications: 1.1.5.1 In General

Mortgage Servicing and Loan Modifications was originally adapted from NCLC’s Foreclosures and Mortgage Servicing (5th ed. 2014). As the content of that treatise continued to expand with new legal requirements concerning mortgage servicing, mortgage loan modifications, and home foreclosures, NCLC split that treatise into two new volumes—Home Foreclosures (2019) and Mortgage Servicing and Loan Modifications (2019).

Mortgage Servicing and Loan Modifications: 1.2.1 Introduction

The workings of the mortgage markets are a mystery to most consumers. However, for an advocate, a basic understanding of how mortgage markets function and the players involved has become essential to the effective representation of mortgage borrowers.