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Southern Points
Safely guiding you through today's changing mortgage environment
Fall, 2013
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Positive Words from Clients and Borrowers!
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"Could you service all states so I could retain you for all my files? I appreciate all of you over there, I never have to worry about getting my files worked and corrected when they are with your firm."
- Client
If you've received great service, we'd love to hear from you! Please email [email protected] with your comments.
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| Need Training? |
Do you have any new staff that need training on mortgage default laws in Georgia, Tennessee, Mississippi, or Alabama? Want to update existing staff or provide more in depth information to managers? We are happy to prepare materials and deliver learning sessions on site for you! Just email [email protected] to discuss your needs.
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| Giving Back | |
We feel it's important to stay active in our community, as well as yours! Here's some of the charitable efforts we've been involved in this quarter:
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Greetings!
There's no doubt how important compliance is, but it's also a time-consuming focus that puts our free time at a premium. Personally, I'm traveling a lot less and find it challenging to identify the right time for important touch points. I know your time is extremely valuable, so I want to thank each of you for making the time to review our newsletter and stay connected with our firm. I hope it's a beneficial use of your time. Have an enjoyable holiday season and an even better 2014!
Best Regards,
Glen D. Rubin
Managing Partner
Rubin Lublin, LLC
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Proposed Amendments to the Federal Rules of Bankruptcy
Written By: Victoria Baggett, Associate
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The Advisory Committee on Federal Rules of Bankruptcy Procedure published proposed amendments to the current rules and forms and circulated this to the bench, bar and public with requests for comments and feedback. Many of the proposed amendments revisions simply reorganize and clarify the existing rules, but two of the proposed amendments contain substantive changes that could significantly impact the practice of creditor bankruptcy.
Rule 3002 Filing Proof of Claim or Interest
The Advisory Committee's Memorandum, dated May 8, 2013, states that the Bankruptcy Judges and Trustees surveyed by the Committee expressed "dissatisfaction with the requirements for filing a proof of claim" with regards to Chapter 13 practice. The Advisory Committee seeks to remedy this dissatisfaction by amending Rule 3002.
The amendment to Rule 3002(c) drastically shortens the amount of time in which a creditor may file a claim to 60 days after the bankruptcy filing date for Chapter 7, Chapter 12, and Chapter 13 cases. Or, if a Chapter 7 case converts to a Chapter 12 or Chapter 13 case, the bar date is set 60 days after the conversion date.
The 60 day deadline is easy to calculate and will occur prior to confirmation hearings in Chapter 13 cases, but it will likely prove difficult to comply with for servicers. Subdivisions (c)(6) and (c)(7) attempt to provide some exceptions and caveats to the 60 day filing deadline. Subdivision (c)(6) is amended to extend the bar date in circumstances where the debtor fails to provide the creditor with sufficient notice. Subdivision (c)(7) applies only to secured creditors filing a claim as to the debtor's principal residence and creates a 2-part filing deadline: the claim will be considered timely if (A) the Official Proof of Claim Form is filed within 60 days of the bankruptcy filing and (B) any supplemental attachments required by Rule 3001(c)(1) and (d) are filed within 120 of the bankruptcy filing.
Although subdivision (c)(7) attempts to mitigate the rigid Proof of Claim filing deadline imposed upon secured creditors that hold a security interest in the debtor's principal residence, it may ultimately increase costs associated with preparing Proofs of Claim due to the multiple filings and sparks additional questions and ambiguities. Can the information contained in the original filed claim be amended within the 120 day period if initially filed within the 60 day deadline or can the claim be amended during the 120 days only if there are outstanding supplemental documents to be filed? Does the 120 deadline strictly apply to required supplemental documents? In theory, the amended Rule 3002 will clarify and simplify the Proof of Claim filing procedure and requirements, but in practice it may result in unforeseen complications, hardship, and confusion for all parties involved.
The Chapter 13 Plan Form and Rule 9009
Rule 9009 is amended to require use of and prohibit alterations to the Official Forms, specifically with regards to the Chapter 13 Plan Form. Currently, changes to Official Forms are generally permitted, but the amended rule instead carves out a narrow list of permissible modifications. Overall, Rule 9009 and the Chapter 13 Plan Form provide for a more consistent, organized format.
Official Form 113 is the new, required Chapter 13 Plan Form. Part 3 of the Plan addresses the treatment of secured claims, but several sections of Part 3 leave room for misinterpretation.
Section 3.1 "Maintenance of payments and cure of any default" warrants both positive and negative feedback. It requires the inclusion of certain information that is often excluded from Chapter 13 Plans. However, the language regarding the ongoing payment amount, more particularly its beginning date, and the escrow portion of the payment is either unclear or omitted.
Section 3.5 "Surrender of collateral" contains unclear verbiage with regards to what the termination of the stay permits. Amended Section 3.5 of Part 3 states that "...debtor(s) consent to the termination of the stay under 11 U.S.C. � 362(a) and � 1301...upon confirmation of the plan." This raises two concerns. First, the verbiage suggests that the debtor consents to the termination of the co-debtor stay which, in and of itself, raises issues as to what is allowed by law. Second, in keeping with the proposed amendments' objective to become more user-friendly, the reference to code sections should be accompanied by a brief description of the code sections (i.e. .the co-debtor stay under 11 U.S.C � 1301) and additional verbiage explaining what the stay and co-debtor stay entail.
Many, including our firm, are providing comment to the new Rules and Chapter 13 Plan Form in hopes of eliciting substantive changes or, at a minimum, clarification. Until such time as the Rules and new Plan form are made official, we will continue to provide comment and promote a favorable outcome.
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Can I Get a Witness?
Written By: Jason Thurber, Associate
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Witness only closings have always been a hot topic in Georgia. Both the Georgia Bar and Supreme Court have taken an active role in ensuring that witness only closings do not occur in the state of Georgia. A "witness only" closing occurs when a Georgia licensed attorney sits with a borrower to sign their closing/loan documents and purports to act just as a witness or notary, and claims no responsibility for any other part of the closing process.
With the new CFPB regulations governing lenders in the mortgage origination and closing process, the topic of witness only closings is heating up yet again. CFPB regulations require lenders to actively manage their third party vendors and hold the lenders accountable for actions of those vendors. It is estimated that there are nearly 30,000 settlement providers in the United States, so as can be imagined, maintaining accountability for each individual settlement service provider becomes a daunting task for a national lender. In an effort to sustain appropriate oversight, many lenders have made the move to narrow their list of "preferred providers" of settlement services and are shifting toward partnering with national title companies that claim to be able to manage closings in all 50 states. This becomes an issue in states that require attorneys to handle all aspects of real estate closings, like Georgia.
National title companies must partner with local attorneys to be able to handle closings in attorney states. This is where the slippery slope begins. Many of these title companies want to control the closing process internally, while operating outside of the state, since they have the direct relationship with their lender client. They then engage a Georgia licensed attorney to physically sit at the table with the borrower for the closing. If the Georgia attorney agrees to this, and does not have any other direct relationship to the closing process, this practice could constitute a "witness only" closing, which is forbidden in Georgia.
The State Bar of Georgia recently published a revised advisory opinion on this topic, Formal Advisory Opinion No. 10-R2. The opinion clearly states that a Georgia attorney who performs a "witness only" closing violates the Georgia Rules of Professional Conduct. Under Georgia law, an attorney must handle a real estate closing, which includes review of documentation, resolution of any errors in paperwork, review and clearing of title issues, and otherwise acting with competence in the closing transaction. Under the opinion, the "...lawyer has an affirmative obligation to review the work product and may not use it unless he/she revises it if necessary, approves it, and adopts it as his/her own. The lawyer is responsible for the entire closing transaction and each document used in the transaction..." Additionally, the opinion holds that when a lawyer purports to act merely as a witness, he or she is misrepresenting the role of a lawyer in the closing transaction.
National lenders who are partnering with national title companies as their preferred settlement providers need to be aware of the rules in Georgia, and should be sure that their title company vendors are partnering with attorneys or law firms in Georgia that understand the rules regarding witness only closings and unauthorized practice of law. Only then can the lender be comfortable that they are meeting their obligations to their consumers under the CFPB.
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Litigation Corner:
Triaging Title: A Behind the Scenes Look into Title Curative
Written By: Brittney Beckom, Associate
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 The term "Triage" is said to have arisen during World War I by French doctors treating the battlefield wounded at aid stations behind the front. In title litigation, we meticulously triage referrals behind-the-scenes of the foreclosure front to reform, establish, or judicially cure numerous title issues that could otherwise halt a potential foreclosure. Right now, we are seeing a large number of referrals for the following common title issues: unrecorded/lost/misplaced security deed, improper execution of deeds, prior open lien, probate/heirship issue and missing spousal interest/break in the chain of title. To continue reading this article, click here.
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A Quick Look at the Servicemembers Civil Relief Act
Written By: Emlyn Lucas, Associate
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 With Veteran's Day fast approaching, it is important to highlight some of the protections afforded members of our armed forces and matters the firm has recently encountered in regards to the Servicemembers Civil Relief Act (SCRA).
The SCRA provides that real property owned by a servicemember cannot be foreclosed upon, sold, or seized during the period of active military service or up to twelve months thereafter without a court order or by written agreement of the servicemember waiving these protections. In order for the SCRA to apply, the obligation must be one for which the servicemember is still obligated, and the obligation must have originated before the period of active military service began.
To continue reading this article, click here.
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Improved But Still Problematic: Tax Sales in Alabama
Written By: Cindy Williams, Partner
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Ad valorem tax sales in Alabama can present problems for mortgage lenders. Becoming more familiar with the tax sale process in general can assist loan servicers in identifying common pitfalls. The tax year in Alabama is October 1- September 30 with taxes due on October 1 and delinquent after December 31. Unlike many states, delinquent taxes are sold every year in Alabama. Sales are generally held in April and May, and these delinquent taxes can be purchased by the state or a third-party. There is an initial three-year redemption period which is extended as long as the borrower remains in possession of the property. Back taxes, interest at a rate of 12%, fees and penalties must be paid to redeem the property. Additional fees for personal property assessments and costs for insurance and improvements are also required in certain circumstances.
At the tax sale, a third-party bidder is allowed to bid an amount greater than the taxes due, usually referred to as an "overbid." Interest on the overbid amount (up to 15% of the assessed value of the property) is also charged at a rate of 12% and must be paid to redeem the property from the tax sale. The handling of the overbid funds after the tax sale has posed a problem to lenders in the past. Previously, many tax officials would pay the overbid only to the party who assessed the property, which is usually the borrower. In some instances large overbids were paid to the borrower either before or after redemption, which resulted in the lender having to pay the overbid amount to complete the redemption with little hope of recovering the overbid funds from the borrower. Effective August 1, 2013 the statute was changed to avoid this outcome. Alabama Code � 40-10-28 requires the overbid to be held in a separate account in the county treasury during the initial three-year redemption period and thereafter, if no redemption has been made, in the general fund. A redeeming party can claim the overbid up until 10 years after the tax sale. The section further provides that the overbid shall be paid to any person or entity entitled to redeem the property, which includes the mortgage holder.
To continue reading this article, click here.
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The Mobile Home - An Oxymoron for the Mortgage Lending Industry
Written By: Josh Hopkins, Associate
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While mobile homes provide affordable housing alternatives to homeowners, this type of housing is becoming an increasingly big headache for the mortgage industry. For the purposes of this discussion, we will consider "mobile" or "manufactured" homes (hereafter referred to as "MH") to be homes fabricated (usually in two sides) and transported to real estate. Since these types of homes are fabricated "off-site" and transported on public highways, some states require MH's to be titled with the DMV office like any other motor vehicle.
Once a MH has been built, the manufacturer creates a Manufacturer's Statement or Certificate of Origin (MSO/MCO). This is the first "title" to the MH. The MSO contains a VIN# (just like a car) and is endorsed to the purchaser. At that time, state law will determine if the purchaser is required to title the home with the state by surrendering the MSO and having a "car" title issued.
While a MH is intended to be a residence (real property), the irony is that this type of "home" is initially titled like a car (personal property). Due to this "hybrid" nature of the property being used as collateral for a mortgage loan (and to be encumbered by the lender's security instrument), it is imperative that the originating lender require the MH to be formally converted from personal to real property.
To continue reading this article, click here.
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Navigating Eviction Appeals
Written By: Igor Stephens, Associate
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Rubin Lublin, LLC handles eviction actions in Georgia, Tennessee, Alabama and Mississippi and each state has a unique set of laws and procedures that must be adhered to with specificity in order to obtain legal relief. The majority of the eviction actions that our firm files are after a foreclosure, though our staff are fully trained and able to process any type of eviction matter. The eviction procedures in the states our firm litigates usually favor the landlords, and therefore, we are able to secure possession quickly and efficiently. These procedures usually do not require a court hearing and are handled with only paperwork needed to be sent to the court. However, there are times when an eviction action takes longer to effectuate because former borrowers or occupants stall the process by filing meritless appeals to higher courts. The process of seeking an appeal is sometimes as easy as filing a piece of paper asking for a review of the lower court's decision; this is sometimes referred to as a direct appeal.
To continue reading this article, click here.
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Lauren Fierman
Marketing Director
770.246.3353
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