Creditors' Rights Blog

In North Carolina, original jurisdiction over power of sale foreclosure hearings rests with the Clerk of Superior Court in the county where the secured property is located.  After years of bulging dockets and responsibilities in other areas growing, Clerks of Court and their Assistant Clerks are looking for ways to move cases and clear off their dockets.  As a result, current trends show an increase in dismissals at all stages of the foreclosure process.  
Servicers realized a significant victory in the recent Eleventh Circuit decision in In re Failla, --- F.3d ----, 2016 WL 5750666 (11th Cir, October 4 , 2016), when the Court held that a debtor who surrenders his house in bankruptcy may not oppose a foreclosure action in state court.  The Eleventh Circuit has jurisdiction for Alabama, Florida and Georgia.
Of particular significance for the note holder or servicer that files a satisfaction of a deed of trust in North Carolina, but then discovers the satisfaction was recorded in error, a divided North Carolina Court of Appeals in a case of first impression has held that if the satisfaction was erroneously recorded for any reason, then the recording party may avail itself of N.C.G.S. § 45-36.6(b) and file a notice of rescission, restoring the deed of trust to its prior recorded status.  Wells Fargo Bank, N.A. v. American National Bank and Trust Company, No. COA15-689 (N.C.App.
Servicers should be aware of a new Fannie Mae Servicing Guide update with respect to the reimbursement for property preservation expenses.  Building on its own internal policy of using clearboarding to secure vacant properties in REO status where there is a risk of vandalism or local law requires boarding, on November 9, 2016 Fannie Mae announced changes to its Servicing Guide that will permit servicers to seek reimbursement for the expense of installing clearboarding over doors and windows of abandoned properties prior to foreclosure sale.
Lenders and servicers fortunate not to qualify as “debt collectors” under the FDCPA should nevertheless be mindful that the CFPB has an alternative weapon in its considerable arsenal to tag them with liability for behavior that the Bureau deems improper.
On November 1, 2016, the North Carolina Court of Appeals issued an opinion, albeit unpublished , clarifying whether a lender’s alleged refusal to modify a mortgage loan is actionable.  The case, McLean v Bank of America, NA,  (NC Court of Appeals Case No. COA16-97), 2016 WL 6440500, involves a lawsuit brought by a homeowner against her former and present mortgage lenders and servicers.
As a result of years of property development, and the passage of time, along the border between North Carolina and South Carolina many of the original markers denoting the boundary line between the two states have been lost or destroyed.  There was much confusion among many property owners and state and local government agencies as to the exact location of the border between the two states.
North Carolina is a “pure race” jurisdiction, meaning that the person first in time to record a deed to, or a lien against, a parcel of real property generally has priority against all subsequent grantees or lien holders.  Thus, if a lender records its deed of trust immediately upon settlement of a loan transaction, the deed of trust will be superior to any other lien subsequently recorded against the same parcel of real property.  N.C.G.S. § 47-18(a).
Complying with the debt validation notice requirement of 15 U.S.C. § 1692g should be plain sailing for the experienced debt collector:  make sure to send the notice within five days of the “initial communication”; track the statutory language; and, don’t “overshadow” the notice by sending conflicting or confusing messages about how and when the consumer may challenge the alleged debt.  A recent decision from the United States Court of Appeals for the Seventh Circuit shows just how badly things can go wrong for debt collectors who fail to follow these essential rules.
In a case of first impression, in Daugherty v. Convergent Outsourcing, Inc., --- F.3d ----, 2016 WL 4709712 (5th Cir. September 8, 2016), the U.S. Court of Appeals for the Fifth Circuit was presented with the issue whether a debt collection letter that offered the consumer alternative settlement options, but did not disclose the debt was time-barred or threatened litigation, could mislead the least sophisticated consumer and therefore violate 15 U.S.C. § 1692.

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