Collateral Estoppel Doctrine Bars Re-Litigation of Issues Already Decided
On April 5, 2016, the North Carolina Court of Appeals affirmed the dismissal of an action brought by a former borrower seeking to enjoin the sale of the foreclosed property. While not breaking any new legal ground the opinion reminds us of the following legal principles:
Late Fees: Complying with North Carolina Law and Collecting Late Fees in a Reinstatement Context
Collectability of Late Fees
Presuming that the applicable loan documents permit the note holder to seek late charges for the failure to timely remit the periodic loan payment, and almost all promissory notes will likely contain language similar to that found in the Fannie Mae/Freddie Mac Multistate Fixed Rate Note (“GSE Note”)1, late fees are collectable conditioned on compliance with state law.
Recent Appellate Decision Is Favorable to Foreclosing Note Holder and Its Law Firm But Leaves Open Whether Discovery Is Permissible in a Foreclosure
There is no statutory authority in North Carolina with respect to the right of a lender, mortgagee or beneficiary (“lender”) under a deed of trust to enter a secured property or take action to preserve, repair or re-key a secured property, or to otherwise exercise possession, dominion or control over the secured property.
The Statute of Limitations and Two-Dismissal Rule and their Impact on Foreclosure Filings
Although the federal Protecting Tenants at Foreclosure Act expired in December 2014, when Congress declined to extend its terms, North Carolina enacted legislation, which became effective on October 1, 2015, which provides similar protections to tenants occupying foreclosed residential property. North Carolina Session Law 2015-178 added a new section to the power of sale foreclosure statute, § 45-21.33A, which provides that:
Given the increased emphasis on compliance with consumer-protection laws in recent years, it is expected that banks and mortgage companies will be familiar with all the federal laws and regulations impacting lending and servicing. However, it is also important to remember that the individual States often have their own regulatory framework that must be adhered to.
Following a foreclosure sale the general rule is that the amount of the debt is reduced by the net proceeds realized from the sale, setting the deficiency amount the foreclosing creditor may seek to recover. N.C.G.S. § 45-21.31(a)(4). However, when the foreclosing creditor is the successful high bidder at the foreclosure sale this general rule is abrogated by N.C.G.S. §45-21.36, which provides the debtor with two alternative defenses. Branch Banking & Trust Co. v. Smith, 769 S.E.2d 638, 640 (N.C. Ct. App., 2015).
Borrower’s Defense to Deficiency Action Where Lender Purchases Secured Property at Less than True Value Now Available to Guarantor
The guaranty agreement is a common security mechanism lenders utilize to increase the likelihood of repayment of a commercial loan in the event of default. This is especially true in situations where the borrower is a limited asset or one asset business. In such circumstances, the lender often looks to the member/manager(s) of the business to guarantee the debt obligation.
A Blow to the “You Can’t Prove You’re the Holder” Defense
Production of Original Note Indorsed in Blank Is Alone Sufficient to Prove Petitioner Is Holder of Valid Debt Under North Carolina Special Proceeding Foreclosure Statute
Anti-Modification Provision Protecting Mortgages Secured by Principal Residences Affirmed by U.S. Court of Appeals
Borrower Must Follow Procedural Requirements to Maintain Foreclosure Challenge
Cash-for-Keys Offer by Servicer Following Foreclosure Sale Not Unlawful Debt Collection Activity
Realtor Wins Chance to Prove Sellers Acted in Bad Faith when they Accepted Offer to Purchase Home One Day After Listing Agreement Was Terminated