Cutting Edge Bankruptcy & Debt Collection Law

Contrary to earlier unconfirmed reports that the Harris County Commissioners’ Court had cancelled the foreclosure sales on August 5, the sales are apparently proceeding anyway.   The 2007 amendments to the Texas Property Code do not allow the commissioners to prohibit the sales during inclement weather, rather they allow the mortgage company an additional 48 hours after the deadline to file the 21 day notice of the sale when on the last day the court house was closed.  It is very telling that the mortgage companies lack the decency to cancel the sales.  It is not surprising to most of us as we know that they hold sales on January 1 and July 4 every time when these dates fall on the first Tuesday of the month.  The statutory provision  is listed below:

§ 51.002.  SALE OF REAL PROPERTY UNDER CONTRACT LIEN.
(a)  A sale of real property under a power of sale conferred by a
deed of trust or other contract lien must be a public sale at
auction held between 10 a.m. and 4 p.m. of the first Tuesday of a
month.  Except as provided by Subsection (h), the sale must take
place at the county courthouse in the county in which the land is
located, or if the property is located in more than one county, the
sale may be made at the courthouse in any county in which the
property is located.  The commissioners court shall designate the
area at the courthouse where the sales are to take place and shall
record the designation in the real property records of the
county.  The sale must occur in the designated area.  If no area is
designated by the commissioners court, the notice of sale must
designate the area where the sale covered by that notice is to take
place, and the sale must occur in that area.
(b)  Except as provided by Subsection (b-1), notice of the
sale, which must include a statement of the earliest time at which
the sale will begin, must be given at least 21 days before the date
of the sale by:
(1)  posting at the courthouse door of each county in
which the property is located a written notice designating the
county in which the property will be sold;
(2)  filing in the office of the county clerk of each
county in which the property is located a copy of the notice posted
under Subdivision (1); and
(3)  serving written notice of the sale by certified
mail on each debtor who, according to the records of the mortgage
servicer of the debt, is obligated to pay the debt.
(b-1)  If the courthouse or county clerk’s office is closed
because of inclement weather, natural disaster, or other act of
God, a notice required to be posted at the courthouse under
Subsection (b)(1) or filed with the county clerk under Subsection
(b)(2) may be posted or filed, as appropriate, up to 48 hours after
the courthouse or county clerk’s office reopens for business, as
applicable.
(c)  The sale must begin at the time stated in the notice of
sale or not later than three hours after that time.
(d)  Notwithstanding any agreement to the contrary, the
mortgage servicer of the debt shall serve a debtor in default under
a deed of trust or other contract lien on real property used as the
debtor’s residence with written notice by certified mail stating
that the debtor is in default under the deed of trust or other
contract lien and giving the debtor at least 20 days to cure the
default before notice of sale can be given under Subsection (b).
The entire calendar day on which the notice required by this
subsection is given, regardless of the time of day at which the
notice is given, is included in computing the 20-day notice period
required by this subsection, and the entire calendar day on which
notice of sale is given under Subsection (b) is excluded in
computing the 20-day notice period.
(e)  Service of a notice under this section by certified mail
is complete when the notice is deposited in the United States mail,
postage prepaid and addressed to the debtor at the debtor’s last
known address. The affidavit of a person knowledgeable of the facts
to the effect that service was completed is prima facie evidence of
service.
(f)  Each county clerk shall keep all notices filed under
Subdivision (2) of Subsection (b) in a convenient file that is
available to the public for examination during normal business
hours.  The clerk may dispose of the notices after the date of sale
specified in the notice has passed.  The clerk shall receive a fee
of $2 for each notice filed.
(g)  The entire calendar day on which the notice of sale is
given, regardless of the time of day at which the notice is given,
is included in computing the 21-day notice period required by
Subsection (b), and the entire calendar day of the foreclosure sale
is excluded.
(h)  For the purposes of Subsection (a), the commissioners
court of a county may designate an area other than an area at the
courthouse where sales under this section will take place that is in
a public place within a reasonable proximity of the county
courthouse and in a location as accessible to the public as the
courthouse door.  The commissioners court shall record that
designation in the real property records of the county.  A sale may
not be held at an area designated under this subsection before the
90th day after the date the designation is recorded.  The posting
of the notice required by Subsection (b)(1) of a sale designated
under this subsection to take place at an area other than an area of
the courthouse remains at the courthouse door of the appropriate
county.

Acts 1983, 68th Leg., p. 3525, ch. 576, § 1, eff. Jan. 1, 1984.
Amended by Acts 1984, 68th Leg., 2nd C.S., ch. 18, § 3(b), eff.
Oct. 2, 1984;  Acts 1987, 70th Leg., ch. 540, § 1, eff. Jan. 1,
1988;  Acts 1993, 73rd Leg., ch. 48, § 5, eff. Sept. 1, 1993;
Acts 2003, 78th Leg., ch. 554, § 2, eff. Jan. 1, 2004.

Amended by:
Acts 2005, 79th Leg., Ch. 533, § 1, eff. June 17, 2005.
Acts 2005, 79th Leg., Ch. 555, § 1, eff. September 1, 2005.
Acts 2007, 80th Leg., R.S., Ch. 903, § 2, eff. June 15,
2007.

§ 51.0021.  NOTICE OF CHANGE OF ADDRESS REQUIRED.  A
debtor shall inform the mortgage servicer of the debt in a
reasonable manner of any change of address of the debtor for
purposes of providing notice to the debtor under Section 51.002.

Added by Acts 2003, 78th Leg., ch. 554, § 1, eff. Jan. 1, 2004.

The U.S. Senate passed HR 3221 on Saturday and the President indicated that he would sign the bill into law Monday. While the bill does expand the availability of government insured home loans to a number of borrowers, the bill fails to address the eight hundred pound gorilla which is the mortgage companies who refuse to work with borrowers facing financial difficulties. The bill does nothing to force those mortgage companies to work with borrowers. All it does is it allows mortgages to be refinanced into government loans if the current lender consents and it appears to give loan servicers more flexibility in working out solutions. What is really missing is the ability of consumers to force lenders to modify the loans and the ability to do so in a bankruptcy. Right now real estate investors, corporations, and everyone else have this privilege but homeowners may not modify the loans on their principal residence. Regardless, regulators have indicated that it may take a year to promulgate regulations implementing this law.

Sections of the bill of interest are:

SEC. 402. SAFE HARBOR FOR QUALIFIED LOAN MODIFICATIONS OR WORKOUT PLANS FOR CERTAIN RESIDENTIAL MORTGAGE LOANS.

(a) Standard for Loan Modifications or Workout Plans- Absent contractual provisions to the contrary–

• (1) the duty to maximize, or to not adversely affect, the recovery of total proceeds from pooled residential mortgage loans is owed by a servicer of such pooled loans to the securitization vehicle for the benefit of all investors and holders of beneficial interests in the pooled loans, in the aggregate, and not to any individual party or group of parties; and

• (2) a servicer of pooled residential mortgage loans shall be deemed to be acting on behalf of the securitization vehicle in the best interest of all investors and holders of beneficial interests in the pooled loans, in the aggregate, if for a loan that is in payment default under the loan agreement or for which payment default is imminent or reasonably foreseeable, the loan servicer makes or causes to be made reasonable and documented efforts to implement a modification or workout plan or, if such efforts are unsuccessful or such plan would be infeasible, engages or causes to engage in other loss mitigation, including accepting a short payment or partial discharge of principal, or agreeing to a short sale of the property, to the extent that the servicer reasonably believes the modification or workout plan or other mitigation actions will maximize the net present value to be realized on the loan over that which would be realized through foreclosure.

(b) Safe Harbor- Absent contractual provisions to the contrary, a servicer of a residential mortgage loan that acts or causes to act in a manner consistent with the duty set forth in subsection (a), shall not be liable for entering into a qualified loan modification or workout plan, to–

• (1) any person, based on that person’s ownership of a residential mortgage loan or any interest in a pool of residential mortgage loans or in securities that distribute payments out of the principal, interest and other payments in loans on the pool;

• (2) any person who is obligated to make payments pursuant to a derivatives instrument determined in reference to any interest referred to in paragraph (1); or

• (3) any person that insures any loan or any interest referred to in paragraph (1) under any law or regulation of the United States or any law or regulation of any State or political subdivision of any State.

(c) Rule of Construction- No provision of this section shall be construed as limiting the ability of a servicer to enter into loan modifications or workout plans other than qualified loan modification or workout plans.

(d) Definitions- For purposes of this section, the following definitions shall apply:

• (1) QUALIFIED LOAN MODIFICATION OR WORKOUT PLAN- The term `qualified loan modification or workout plan’ means a modification or plan that–

• • (A) is scheduled to remain in place until the borrower sells or refinances the property, or for at least 5 years from the date of adoption of the plan, whichever is sooner;

• • (B) does not provide for a repayment schedule that results in an increase in the outstanding principal balance of the loan, including by deferred or unpaid interest, fees, or other charges; and

• • (C) does not require the borrower to pay additional points and fees.

• (2) RESIDENTIAL MORTGAGE LOAN DEFINED- The term `residential mortgage loan’ means a loan that is secured by a lien on an owner-occupied residential dwelling.

• (3) SECURITIZATION VEHICLE- The term `securitization vehicle’ means a trust, corporation, partnership, limited liability entity, special purpose entity, or other structure that–

• • (A) is the issuer, or is created by the issuer, of mortgage pass-through certificates, participation certificates, mortgage-backed securities, or other similar securities backed by a pool of assets that includes residential mortgage loans; and

• • (B) holds such loans.

(e) Effective Period- This section shall apply only with respect to qualified loan modification or workout plans initiated prior to January 1, 2011.

Here is how the Senators voted:

This blog covers bankruptcy and debt collection topics and news.  I like to provide citations and full text of referenced documents wherever possible to allow you to fully understand and make up your own mind about the issues covered.  Look forward to providing great content!

I would also like to thank Jujutacular for the use of image above of the Houston Skyline.

Alex