Fannie Mae recently announced its Foreclosure Time Frames and Compensatory Fees for Breach of Servicing Obligations. It updated the allowable foreclosure time frames for four states (FL, MD, NV, and NY) and stated that it may begin conducting reviews of servicer loan files, processes, or procedures. Where Fannie Mae finds delays in foreclosures, it will exercise its remedy to assess compensatory fees as deemed necessary.
This could mean that servicers will pursue foreclosures more aggressively to get more cases through the process within the allowable guidelines.
For each state, Fannie Mae has published guidelines for the allowable time lapses between the time the case is referred to the attorney for action and the completion of the foreclosure sale. These allowable time frames represent the time typically required for routine, uncontested foreclosure proceedings, given the legal requirements of the applicable jurisdiction. The timelines presume that there are no delays outside the control of the servicer or attorney such as diligent participation in an opt-in mediation or unavoidable judicial process or administrative delays.
These time frames range from as few as 60 days in Michigan, West Virginia and a few other states, to as many as 420 days in some parts of New York. In Ohio, the applicable time frame frame from referral to an attorney to sale is 210 days.
Although Fannie Mae is seeking to expedite foreclosure sales, it does remain committed to alternatives. It stated in its most recent quarterly filing that loss mitigation strategies, including loan modifications, should be done early in the delinquency stage.
We believe that repayment plans, short-term forbearances and loan modifications can be most effective in preventing defaults when completed at an early stage of delinquency. Similarly, we believe that our foreclosure alternatives are more likely to be successful in reducing our loss severity if they are executed expeditiously. Accordingly, it is important to work with delinquent borrowers early in the delinquency to determine whether a home retention or foreclosure alternative will be viable and, where no alternative is viable, to reduce delays in proceeding to foreclosure and obtaining recoveries.
But, remember that these time lines are for uncontested foreclosures. If a homeowner actively asserts a defense, or a counterclaim, these guidelines do not apply. Defending against foreclosure can delay the sale of a home by years. In one extreme case, here in Ohio, a homeowner was able to delay the sheriff's sale by 11 years, during which time he remained in his home without making any payments.
In 1996, Mr. Davet was served with a foreclosure notice on his Cuyahoga County, Ohio 1940’s 6 bedroom home. Unlike many homeowners that just take their foreclosure medicine and move on to rent, Richard Davet decided he was going to fight back against NationsBanc Mortgage Corp. and challenge them till the end in an Ohio court of law.
Davet planted his heels firmly and turned his fight into a full time job as he hit the books at the library of Case Western Law School. He began his fight by challenging the lawsuit and then prolonged the suit by flooding the court with motions, objections and affidavits, and he appealed the judge’s rulings at every chance, which bought him 11 years mortgage payment free in his home.
Mr. Davet attempted to take his fight the Supreme Court. However, it declined to hear his case.
Lenders, servicers, and large foreclosure law firms, sometimes referred to as "foreclosure mills," are notorious for abusing the rules. This can sometimes lead to valid counterclaims that can be asserted to protect the homeowners. The best examples come from New York, where one particular judge has cracked down on shoddy foreclosure practices.
Suffolk County Judge Jeffrey Arlen Spinner has made several headlines for canceling mortgages and even awarding homeowners with six-figure damages.
First, in November, the judge canceled a $292,500 mortgage because of what he called IndyMac Bank's "unconscionable, vexatious and opprobrious" conduct during mandatory loan-modification negotiations (IndyMac Bank v. Yano-Horoski, 2005-17926).
In March, he ordered Wells Fargo to pay a homeowner $155,000 for entering his house without his permission and changing the locks (Wells Fargo v. Tyson, 2007-28042).
And then in April, the judge ordered Emigrant Mortgage to pay a couple $100,000 as damages for what he said was an "unconscionable, unreasonable [and] overreaching" mortgage agreement. (Emigrant Mortgage Co. v. Corcione, 2009-28917).
While I have not seen any of these types of rulings in Ohio (yet), I have witnessed some similar abuses. I have seen (or heard about) bad faith in modification negotiations, failure to provide discovery, attempts to force settlements without providing a current mortgage balance, etc. With the dockets clogged with foreclosures, it is only a matter of time until judges start to crack down on the questionable tactics of the lenders and their attorneys.
Another important consideration is the potential impact of a jury trial. With approximately 1 in 7 mortgages in foreclosure or delinquent, the odds are that someone on the jury will have a personal experience to relate to the homeowner. Right or wrong, many homeowners are fed up with the way lenders are treating homeowners - they got a bailout but the foreclosures are continuing.
Ordinarily, a jury trial cannot be had in a foreclosure case. However, the right counterclaims may entitle the homeowner to a jury trial. This should frighten the lenders and their attorneys. If Judge Spinner is willing to award homeowners more than $100,000 in damages, what would a jury do?