The U.S. Court of Appeals for the Ninth Circuit recently held that for cram-down valuations, 11 U.S.C. § 506(a)(1) requires the use of “replacement value” based upon the adoption of the replacement value standard in Associates Commercial Corp. v. Rash, 520 U.S. 953, 956 (1997). In so ruling, the Ninth Circuit interpreted Rash to instruct that valuation of collateral in a cram down must be based on the debtor’s desires (i.e., the proposed use of the collateral in the debtor’s plan of reorganization), and without consideration of the value that the secured creditor would realize in an immediate sale. Accordingly,…
Posts published in “Mortgage Banking Foreclosure Law”
Mortgage Banking Foreclosure Law
The Bankruptcy Appellate Panel of the U.S. Court of Appeals for the Ninth Circuit recently affirmed the dismissal of an adversary proceeding without leave to amend, holding that: (a) the debtors failed to state a claim for wrongful foreclosure under California law; (b) the debtors failed to state a claim for breach of contract or breach of the implied covenant of good faith and fair dealing because they were not third-party beneficiaries of the pooling and servicing agreement; (c) the debtors failed to state a claim for breach of the deed of trust or breach of the implied covenant of…
The U.S. Court of Appeals for the Tenth Circuit recently held that a borrowers’ federal court claim attempting to void a foreclosure sale based on a prior demand to cancel the loan under the federal Truth in Lending Act (TILA) was barred by claim preclusion for failure to raise the issue in a prior state court action. A copy of the opinion in Pohl v. US Bank is available at: Link to Opinion. The plaintiff borrowers refinanced the loan on their home in May 2007. In 2009, the borrowers defaulted on their loan. In March 2010, believing that their lender had…
The U.S. District Court for the Middle District of Florida recently granted a mortgage servicer’s motion to dismiss a borrower’s claim that the servicer violated the federal Real Estate Settlement Procedures Act (RESPA) by allegedly failing to respond in a timely or adequate manner to a written Request for Information (“RFI”). In so ruling, the Court held that the servicer’s conduct did not cause the claimed actual damages incurred in preparing and sending the letters to the servicer, as required by RESPA at 12 U.S.C. § 2605(f). The Court also referenced the Supreme Court of the United States’s ruling in…
The Court of Special Appeals of Maryland, the intermediate appellate court in that state, recently held that a party who authorizes a foreclosure trustee to initiate a foreclosure action on a deed of trust must be licensed as a collection agency in the state before filing the foreclosure lawsuit, and that this licensing requirement applies to trusts formed outside of the State of Maryland. A copy of the opinion in Blackstone v. Sharma is available at: Link to Opinion. A statutory trust formed in Delaware filed two foreclosure lawsuits against homeowners in Maryland through a substitute trustee. The trust through…
The U.S. Bankruptcy Court for the Southern District of Florida recently held that a bankruptcy debtor’s Chapter 11 proceeding should not be dismissed as filed in bad faith to delay or avoid foreclosure, but could not confirm the debtor’s proposed plan to lease its commercial property asset to a business that generates income from medical marijuana. A copy of the opinion in In re Arm Ventures, LLC is available at: Link to Opinion. A limited liability company (“debtor”) owned 48.8 percent of a commercial property in Miami Beach, Florida (the “commercial property”) that was secured by a mortgage held by…
The Appellate Court of Illinois, First District, recently ruled that the mortgagee of a reverse mortgage loan held an interest in the secured property to the extent that the borrower inherited an interest in the property following the non-borrower’s spouse’s intestate death. Accordingly, the Court reversed the trial court’s dismissal of the reverse mortgagee’s foreclosure complaint and remanded the matter for further determination of the borrower’s inherited interest in the subject property. A copy of the opinion in Reverse Mortgage Solutions, Inc. v. Rahman is available at: Link to Opinion. The borrower and his spouse purchased the subject property as…
The U.S. Court of Appeals for the Sixth Circuit recently concluded that Michigan’s assignment of rents statute sufficiently deprived the assignor of the ownership of the rents such that the rents could not be included in the assignor’s bankruptcy estate. The primary issue before the Court was whether Michigan’s assignment of rents statute allowed the assignor to retain sufficient rights in the rents for the rents to be included in the assignor’s bankruptcy estate. The bankruptcy court determined that the debtor’s assignment of the rents gave the assignee a security interest in the rents but did not change the ownership,…
The U.S. Court of Appeals for the Ninth Circuit recently affirmed a trial court’s summary judgment ruling in favor of a bank and against the City of Los Angeles on the City’s claims that the bank violated section 3605(a) of the federal Fair Housing Act (FHA) through alleged discriminatory lending practices, and that the bank was unjustly enriched. A copy of the opinion in City of Los Angeles v. Wells Fargo & Co. is available at: Link to Opinion. As you may recall, section 3605(a) of the FHA makes it unlawful for financial institutions “to discriminate against any person in…
The U.S. Court of Appeals for the Ninth Circuit recently amended its opinion in Ho v. ReconTrust Co., maintaining and affirming its prior ruling that the trustee in a California non-judicial foreclosure did not qualify as a debt collector under the federal Fair Debt Collection Practices Act (FDCPA). The amendments to the prior ruling among other things add that a California mortgage foreclosure trustee meets the FDCPA’s exclusion from the term “debt collector” for entities whose activities are “incidental to … a bona fide escrow arrangement” at 15 U.S.C. § 1692a(6)(F). The Ninth Circuit also removed its prior discussion of…
The County Court of the Nineteenth Judicial Circuit in and for St. Lucie County, Florida recently dismissed a borrower’s amended complaint against a mortgage servicer alleging violations of the Florida Consumer Collection Practices Act (FCCPA) for sending mortgage statements to the borrower following involuntary dismissal, without prejudice, of a foreclosure action. In dismissing the action with prejudice, the Court held that the statements sent by the defendant mortgage servicer were not attempts to collect a debt, and therefore not actionable under the FCCPA. In addition, the Court held that the plaintiff borrower failed to state a cause of action because…
The Supreme Court of the United States recently held that a city qualifies as an “aggrieved person” under the federal Fair Housing Act, 42 U.S.C. § 3601 et seq., and thus that the plaintiff city in this action had standing to assert claims under the FHA against banks the city believed were engaging in unlawful discriminatory lending practices. According to the city, the unlawful lending practices caused, among other damages, a disproportionate number of foreclosures and vacancies in majority-minority neighborhoods, which impaired the city’s effort to assure racial integration, diminished the city’s property-tax revenue, and increased demand for police, fire,…