New Directive May Affect Pending Foreclosure Sale

July 1st, 2010

The Real Deal: Your Legal Update for Real Estate
Volume 3, Number 2, July 2010

New Directive May Affect Pending Foreclosure Sale

The Home Affordable Modification Program (HAMP) Supplemental Directive 10-02 became effective June 1st, 2010. The directive contains borrower outreach and communication guidelines for foreclosure actions while a borrower is being evaluated under HAMP. Significant changes relating to a pending foreclosure and outlined in this supplemental directive include:

If foreclosure activity has already been initiated, the foreclosure sale cannot occur until after the servicer, also known as the firm that collects payment of interest and principal from borrowers, has determined the borrower is ineligible under HAMP (or make “reasonable solicitation efforts”).
The servicer must give the borrower 30 days to respond to HAMP “Non-Approval Notices” in certain circumstances before conducting the foreclosure sale.
The servicer must provide the foreclosure attorney certification in writing that the borrower is ineligible for HAMP before the attorney conducts the foreclosure sale.

A servicer may not conduct a scheduled foreclosure sale unless and until at least one of the following has occurred:

The borrower is evaluated for HAMP and is determined to be ineligible for the program
The borrower is offered a trial period plan, but fails to make a trial period payment by the last day of the month in which such payment is due
The servicer has established right party contact, has sent at least two written requests asking the borrower to supply required information in accordance with this Supplemental Directive and has otherwise satisfied the Reasonable Effort solicitation standard, and the borrower failed to respond by the dates indicated in those requests
The servicer has satisfied the Reasonable Effort solicitation standard without establishing right party contact
The borrower or co-borrower states he or she is not interested in pursuing a HAMP modification and such statement is reflected by the servicer in their servicing system.

The servicer may not conduct a foreclosure sale within the 30 calendar days after the date of a Non-Approval Notice or any longer period required to review supplemental material provided by the borrower in response to a Non-Approval Notice unless the reason for non-approval is

(1) ineligible mortgage,

(2) ineligible property,

(3) offer not accepted by borrower/request withdrawn or

(4) the loan was previously modified under HAMP

Servicers must develop and implement written procedures applicable to all loans that are potentially eligible for HAMP (and are subject to the Borrower Solicitation requirements of the Supplemental Directive) that require the servicer to provide to the foreclosure attorney/trustee a written certification that one, one of the five circumstances listed above exists, and two, all other available loss mitigation alternatives have been exhausted and a non-foreclosure outcome could not be reached. This certification must be provided no sooner than seven business days prior to the scheduled foreclosure sale date or any extension thereof.

Should you have questions regarding HAMP and how it affects foreclosures, please feel free to contact me at (480) 464-1111 or by email.

Enforcing Parking on Public Streets

Every year Arizona lawmakers are bombarded with requests from homeowner groups to prohibit associations from stopping folks from parking their vehicles on public streets inside the association. The homeowner association groups feel they need to enforce parking and most can understand why. If associations could not prohibit parking on public roads inside their communities, streets may become unsafe. For example, drivers’ views may be blocked by parked cars so they are not able to see a child chasing after a basketball. Some streets are narrow, making it difficult for emergency vehicles to navigate.

There are only two legal cases in the entire nation that tackle the question of whether an association can prohibit parking of vehicles on public roads inside associations. They both say the association can enforce parking if the recorded Declarations of Covenants, Conditions and Restrictions (CC&Rs) of the community say they can. This is because, those cases reason, CC&Rs constitute a contract between the association and its members. In other words, in communities with CC&Rs of that nature, members contractually agree that they will not park their cars on public roads inside the association. This analysis does not extend to the general public.

The Undiscovered Lien
By Scott L Potter, Esq
spotter@jacksonwhitelaw.com

One of the first and last checklist items on any real estate transaction or escrow is the status of title. Is it clean? What happens when you sell a property or worse, represent a buyer in the purchase of a property where an undiscovered or undisclosed title interest appears after closing?

Although there are many title interests that may appear unexpectedly after closing, one of the more common in the current economic climate and this area of recent expansion is the mechanics and materialmen’s lien.

Arizona law gives every person that provides labor and materials for the construction of improvements to real property an automatic lien against the property for the reasonable value of the materials and labor expended in the improvement thereof. Although work may have been performed on a property well in the past, the lien may not be recorded prior to closing. In fact, liens may not be recorded for months after closing on a property. The reason for this is that Arizona law allows a lien to be recorded 120 days after completion of the project. Before a lien is recorded, a title report will not disclose the existence of the potential claim. If a property with a new construction building or recent remodeling closes immediately after construction finishes, it may be four months before a lien is actually recorded for unpaid work. Because the person who provided labor and materials to the improvement of the property has an automatic lien against the property, the reality is that the purchaser will be forced to pay off the lien or face losing the property to a lien foreclosure.

The best way to protect prospective purchasers is to understand the intricacies of Arizona lien statutes. Consulting an attorney will deepen your understanding of this area of law. When pursuing a property on behalf of a client, make sure to determine if work has recently been performed on the property. Whether the entire structure is new construction or the property simply underwent a remodel, there is a risk that a hidden lien may be lurking in the wings to surprise the unsuspecting home buyer. As an agent you should request copies of unconditional lien waivers for any contractor or supplier that provided work or materials towards the construction of the improvements. However, even with lien waivers in hand, there may be an unknown lien claimant. The best way to ensure your client’s property interest and investment is protected is to make sure your client purchases a title policy. In the event of an undiscovered lien, the title company will pick up defense of the claim, your client will be at ease, and you won’t have to feel liable for professional malpractice.

JacksonWhite Adds Family Law to Growing List of Practice Areas
JacksonWhite pleased to announce the recent June 2010 hire of family law attorney Timothy Durkin. Durkin joins the other 21 attorneys at JacksonWhite practicing in a number of other legal areas including, among others, real estate, bankruptcy, elder law, criminal defense, commercial litigation, labor and employment law, and HOA law.

For questions on family law or for information on a consultation, call (480) 464-1111 or visit Family Law’s new Web site.

This newsletter is provided for informational purposes only and is not intended to replace individual legal advice. Please consult a knowledgeable attorney regarding your specific needs. For more information on Real Estate issues, contact Scott L. Potter.

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New Directive May Affect Pending Foreclosure Sale

July 1st, 2010