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Unfair and Deceptive Acts and Practices: 11.9.2.4 First Amendment and Other Issues in Defamation Claims by Dealers

News media perform an important public service when they publicize information about consumer fraud. When a dealer who is the subject of such a report sues for defamation, First Amendment issues may arise. The United States Supreme Court has held that a libel plaintiff who is a public figure must show that a news media defendant acted with actual malice.1433 Even persons who are not public figures may have to show actual malice if they voluntarily thrust themselves into the vortex of a public issue.

Unfair and Deceptive Acts and Practices: 11.9.4.2 Self-Incrimination and the Right to Confront Witnesses

While a corporate seller accused of fraudulent business practices may also be subject to criminal prosecution, corporations are not protected by the privilege against self-incrimination, so may not invoke the right to withhold evidence in a civil UDAP action.1473 An individual may invoke the Fifth Amendment right to withhold evidence, but the court may have the authority to compel the testimony upon issuing a protective order against its use in a criminal proceeding.1474 In the alternative,

Unfair and Deceptive Acts and Practices: 11.9.4.3 Due Process and Other Challenges to UDAP Enforcement Procedures

Courts have rejected arguments that state UDAP enforcement actions are based on arbitrary or discriminatory enforcement.1477 A defendant in a civil UDAP enforcement action does not have a due process right to appointed counsel.1478 There may, however, be a right to counsel when the state seeks imprisonment of a defendant in a contempt proceeding for violation of a UDAP injunction.1479

Unfair and Deceptive Acts and Practices: 11.9.5 Other Constitutional Challenges

Sellers have been uniformly unsuccessful in challenging UDAP regulations as invalid delegations of legislative authority1484 or as improper exercises of statutory authority by the state attorney general or other rule-making agency.1485 Many decisions reject claims that UDAP statutes or regulations violate equal protection rights.1486 UDAP statutes awarding attorney fees and costs to one side but not the other do not violate the Equal Protecti

Home Foreclosures: 1.2.8 Should the Homeowner File for Bankruptcy to Protect the Home?

Filing bankruptcy triggers an automatic stay for most debtors, freezing the creditor’s ability to foreclose on the home. An emergency filing of a voluntary petition, along with certification of compliance with the 2005 Act’s credit counseling requirement, stays foreclosure;60 other bankruptcy forms must be filed within fourteen days thereafter. The consumer’s attorney should notify the creditor of the automatic stay. Remedies for violation of the stay include recovery of actual damages, attorney fees, and equitable relief.

Home Foreclosures: 1.2.9 Manufactured Home Foreclosures

State law governs whether a manufactured home must be foreclosed upon as real property or repossessed as personalty. If the property is treated as real estate under state law, then foreclosure procedures are the same as those covered in Chapter 5, infra. As with other real estate, a loan workout agreement or modification may be available prior to foreclosure on a manufactured home.

Home Foreclosures: 1.2.10 Real Estate Installment Sales

Real estate installment sales laws in many states provide special consumer protections if the purchaser defaults. Statutory or decisional law may treat real estate installment sales agreements as security agreements in some circumstances. State foreclosure law would then apply.

Home Foreclosures: 1.2.11 Reverse Mortgage Foreclosures

Reverse mortgage loans are a special type of home-secured loan that allows the borrower to convert equity into cash without having to sell the property or make periodic payments. Most reverse mortgages are insured by the federal government and have numerous requirements that must be satisfied before the servicer can foreclose. Reverse mortgage foreclosures are typically triggered by the failure to pay property charges as they come due or by a maturity event such as non-occupancy or death of the homeowner. Questions that advocates should ask include:

Home Foreclosures: 1.2.12 Is the Foreclosure Pursuant to a Property Tax Lien?

If a homeowner’s property taxes are not paid by the date set by statute, the unpaid taxes become a lien on the property. If the tax lien is not satisfied by payment, the taxing authority may initiate the tax sale process. The sale process varies depending on the locality. In some jurisdictions the property is sold; in others a certificate or lien is sold. In other states, no sale occurs at all, and the taxing authority simply takes the property. In all states, however, the taxing authority must follow all statutory requirements.

Home Foreclosures: 1.2.13 Is It Possible to Set Aside the Foreclosure Sale?

Generally, an irregularity in the foreclosure process, including an unconscionably low sales price, may be grounds to invalidate a completed foreclosure sale. If the mortgage was foreclosed upon by power of sale, the homeowner must generally initiate an action to set aside the sale. If the foreclosure was conducted by judicial process, the homeowner may file a motion in the foreclosure action to set aside the foreclosure judgment or to attack the sale. Some states have sale confirmation processes in which objections to the sale must be made.

Home Foreclosures: 1.2.14 Is the Consumer Liable for a Deficiency After the Sale?

If the foreclosure sale price is not sufficient to satisfy the mortgage debt, the lender may be able to obtain a deficiency judgment. Some states have placed restrictions on deficiency judgments, such as requiring that the borrower be given credit for the “fair value” of the property regardless of the foreclosure sale price. Certain states set strict time limits for bringing deficiency claims or set other procedural requirements for pursuit of them. Other states, by statute, do not permit deficiency claims at all after non-judicial foreclosures.

Home Foreclosures: 1.3.1 Overview

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.

Home Foreclosures: 1.3.2.1 Mortgage Originator

The mortgage loan originator68 is the entity that makes the loan and whose name appears as the lender on the loan note and mortgage.69 The originator may or may not be the party that currently holds the loan and has the right to receive payments on the loan.70

Home Foreclosures: 1.3.2.2 Mortgage Broker

Traditionally, mortgage brokers acted as an intermediary between borrowers and lenders. They did not originate loans. Instead, mortgage brokers were merely middlemen bringing home purchasers or homeowners and lenders together. Brokers operated on behalf of borrowers and attempted to find them the best loans available. This type of arrangement created a special duty on the part of the broker to act in the best interest of the borrower.71

Home Foreclosures: 1.3.2.3 Loan Officer

Loan officers are employees of financial institutions who assist home buyers or homeowners in selecting a mortgage loan product offered by their institutions. They are essentially in-house salespeople for banks or mortgage companies. Until recently, loan officers were not required to be individually licensed (although their institutions would generally be licensed entities). Many loan officers must obtain an individual license after undergoing pre-licensing training and passing an exam.76

Home Foreclosures: 1.3.2.4 Mortgage Electronic Registration System (MERS)

The Mortgage Electronic Registration System (MERS) is an electronic registry and clearinghouse established to track ownership and servicing rights in mortgages. For many home loans, MERS, as “nominee” for the lender, is the mortgage holder of record or the named beneficiary on a deed of trust. MERS typically has no legal or beneficial interest in the promissory note. Prior to 2012, mortgage servicers often initiated foreclosure proceedings in MERS’ name and served documents on borrowers stating that MERS was foreclosing on their homes.

Home Foreclosures: 1.3.2.5 Real Estate Agent

Real estate is often sold through real estate agents or real estate brokers (not to be confused with mortgage brokers, see § 1.3.2.2, supra). They list the property in newspapers, circulars, and computer databases. The agents usually represent the seller of the property.

Home Foreclosures: 1.3.2.6 Appraiser

Originators, or in some cases mortgages brokers, hire an appraiser or appraisal management company (AMC) to determine the value of the property. AMCs are essentially brokers for appraisal services. They administer networks of independent appraisers to perform appraisals.

Home Foreclosures: 1.3.2.7 Closing Agent or Attorney

The mortgage loan closing or settlement is usually conducted by an agent for the lender.81 Often this agent is an attorney. The name and address of the closing agent, also known as the settlement agent, is listed on the HUD-1 settlement statement or “Closing Disclosure.” Homeowners are sometimes under the mistaken impression that the closing agent works for them. This is not surprising since the homeowner pays the agent’s bill for conducting the closing and other pre-closing activity, such as searching title and preparing documents.

Home Foreclosures: 1.3.2.8 Escrow Agent

If all of the monies from the loan proceeds are not distributed at the loan closing, the closing agent is usually responsible for holding the remainder until certain events occur. If it is a home improvement loan, it is common for the remaining proceeds to be paid to a home improvement contractor once work is completed.

Home Foreclosures: 1.3.2.9 Private Mortgage Insurance Companies

Mortgage insurance is common in mortgage transactions involving home purchases. When the borrower’s down payment is less than 20% of the purchase price, private mortgage insurance is generally required. The cost of this insurance is added to the borrower’s monthly payment and escrowed by the lender. If the borrower defaults, the mortgage insurer will pay the lender some of the monies not recouped in the foreclosure process.

Home Foreclosures: 1.3.2.10 Government Mortgage Guarantors

There are special government programs that provide mortgage insurance or guarantees to lenders who make mortgage loans to homebuyers who meet certain criteria. These programs are offered by the federal government (the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development; the Rural Housing Service, which is part of the U.S. Department of Agriculture; and the Department of Veterans Affairs) or by a state housing finance agency. Under these programs, the insurance may cover close to 100% of losses.