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Home Foreclosures: 5.13.2.2.1 Introduction

In several jurisdictions with judicial foreclosures the courts systems have created their own mediation or conference programs for foreclosure cases. These programs did not require specific legislation. Instead, the courts set up the programs under their general case management authority.

Home Foreclosures: 5.13.2.2.2 Foreclosure conference programs implemented by bankruptcy courts

Several bankruptcy courts have also issued general orders creating mediation programs to address foreclosure issues.462 These general orders provide the authority for a bankruptcy court to direct parties to confer and consider loss mitigation in connection with a mortgage foreclosure. A program along these lines has been in effect in the bankruptcy courts for the Southern District of New York since 1993.463

Home Foreclosures: 5.13.2.4.1 Introduction

In most jurisdictions a statute does not set out a good faith negotiation requirement applicable to lenders seeking to foreclose. Nevertheless, courts still have ample authority to require parties to a foreclosure to negotiate in good faith. This is true regardless of whether the proceeding came before the court in the context of a judicial or non-judicial foreclosure. Once the matter is before the court, the authority derives from the courts’ general powers to control the conduct of litigation.

Home Foreclosures: 5.13.2.4.2 The meaning of “good faith”

Statutes and rules for certain foreclosure conference programs define the elements of “good faith” participation. These elements may include appearance by a representative with appropriate authority to settle or the timely production of specific documents.532 Defining specific tasks or conduct as constituting good or bad faith is obviously the most effective way to set an enforceable standard. However, clearly defined standards are not always available. This does not mean that there are no standards to enforce.

Home Foreclosures: 5.14.2 National COVID-19 Foreclosure Restrictions

Federal Legislation. Effective in March 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act included a number of measures to protect consumers facing hardships related to the COVID-19 pandemic.547 The CARES Act imposed a sixty-day moratorium on certain foreclosure activity.

Home Foreclosures: 5.14.3 State COVID-19 Foreclosure Restrictions Based on State Executive Orders and Court Administrative Orders

Beginning in March 2020, many state officials imposed restrictions on commercial activities in their jurisdictions due to the pandemic. As part of their responses officials ordered moratoria on foreclosures and evictions within certain states. These orders provided important protections to borrowers, particularly those who did not have federally backed loans subject to nationwide foreclosure prohibitions.

Home Foreclosures: 5.14.4 State Statutory Responses to the COVID-19 Pandemic

In response to the COVID-19 pandemic, several states went beyond moratoria and stays of foreclosure activity to enact measures that imposed more substantive obligations on servicers and lenders.584 A New York statute effective in March 2020 set standards for mortgage lenders and financial institutions that are subject to regulation by the state’s Department of Financial Services.585 The law imposed on servicers of non-federally backed loans a requirement to approve borrowers for forbearance alon

Home Foreclosures: 5.14.5 Strategies to Challenge a Foreclosure As a Violation of Pandemic-Related Protections

Violation of federal or state COVID-19 moratoria. As described above, the effective periods for COVID-19-related foreclosure moratoria varied considerably, as did the scope of activities prohibited. The moratorium under the federal CARES Act lasted sixty days and expired on May 17, 2020. Other state-based moratoria expired during the course of 2020 and 2021, with a few extending into early 2022. At a minimum, most of these moratoria barred the filing of new judicial foreclosure complaints and the conduct of non-judicial foreclosure sales.

Home Foreclosures: 5.15.4 Protections Against Forfeiture of Installment Contracts

The Act also provides protections against the forfeiture of land installment contracts similar to those provided for mortgages.686 While the servicemember is on active duty, a land installment contract may not be terminated for breach of its terms occurring before or while on active duty. The property may not be forfeited without a court order.687 A deposit or an installment on the contract must have been paid prior to active duty to obtain the protections of this section.

Home Foreclosures: 5.15.5 Interest Rate Reduction Under the Act

The Act requires that a lender reduce the interest rate to six percent on any loan obligation incurred prior to active duty.690 The loan shall not bear a rate higher than six percent during the period of active duty and one year thereafter,691 unless a court decides, on application by the lender, that the servicemember’s ability to pay the higher interest rate is not materially affected by military service.692 Interest in excess of six percent must

Home Foreclosures: 5.15.6 Waiver of Rights Under the Act

A servicemember may waive any of the rights or protections provided by the Act.702 In certain circumstances, the agreement to waive protections under the Act must be in writing and executed during or after the servicemember’s period of active duty. The agreement must specify the legal instrument to which the waiver applies and, if the servicemember is not a party to that instrument, the servicemember concerned must be specified.703

Home Foreclosures: 5.15.7 Remedies for Violation of the Act

Prior to the 2010 amendments, which expressly recognized a private right of action under the SCRA, courts recognized that the Act preserved the servicemember’s right to pursue a claim for wrongful conversion.707 In addition, most courts held that the former version of the Act created a private cause of action for violations.708 The debtor was not confined to raising the violation of the Act defensively, in response to a foreclosure or other seizure of property, but could sue affirmatively.

Home Foreclosures: 5.15.8 The SCRA in Bankruptcy

The SCRA applies in bankruptcy cases.721 For example, in adversary actions and in proceedings to lift the automatic stay, the bankruptcy courts must enforce the Act’s protections against default and may grant stays of proceedings.722 Bankruptcy courts must apply the reduction of interest rates to six percent for pre-military service obligations.723 One bankruptcy court held that the interest rate reduction to six percent must be applied to reduce p

Consumer Banking and Payments Law: 3.12.6.6 Any Person Can Sue Any Person for Breach of Warranty or an Act Violation

Any person who breaches a warranty in connection with a substitute check or fails to comply with any requirement imposed by the Act or FRB regulations shall be liable to any person for the lesser of the amount of the substitute check or the amount of loss suffered as a result of the breach or failure.795 Liability also includes interest and expenses (costs and reasonable attorney fees, and other expenses of representation).

Consumer Banking and Payments Law: 3.13.2.1 In General

The UCC definition of “signature” is quite broad,834 and the UCC recognizes that a principal can be bound by the signature of an agent if the principal would be bound by the agent’s signature on a simple contract.835 These rules taken together mean that a drawer can authorize someone else to draw money out of his account by authorizing the creation of a check that the drawer himself does not sign.

Consumer Banking and Payments Law: 3.13.2.2 Authorization in Telephone Transactions

For transactions prior to June 13, 2016, if the RCC was allegedly authorized as part of a transaction governed by the FTC Telemarketing Sales Rule (which governs more than traditional telemarketing),856 the telemarketer is not allowed to generate an RCC on behalf of the consumer unless the telemarketer has “express verifiable authorization” from the consumer.857 Authorization is “deemed verifiable” if it is written and signed by the consumer,858 it

Consumer Banking and Payments Law: 3.13.5 Remotely Created Payment Orders

The newest and most troubling variation on remotely created checks is known variously as a “remotely created payment order,” “electronically created payment orders,” or a “non-check e-check.”914 A remotely created payment order is similar to an RCC, but it starts as an image and not as a paper item. The payee takes the consumer’s bank account and routing number and places them in an electronic template that creates an electronic file for processing through the check clearing networks.

Consumer Banking and Payments Law: 10.1 Overview

There are three types of involuntary takings from consumers’ bank accounts: garnishment, setoff, and taking pursuant to a security interest. This chapter deals with the latter two. Banks use the right of setoff to seize funds from the consumer’s account to pay amounts for a debt owed to the same bank, such as for an overdraft, a bank fee, or a car loan. A party (including a bank) can also take a security interest in the consumer’s bank account. When the consumer defaults on an obligation, the party seizes the bank account as its collateral.