If your bank is in the process of a merger or has agreed to buy or sell a portfolio of mortgage loans, notices must be provided to the borrowers before and after the transaction closes. Care must be taken to determine the notices required and how they are worded to avoid violating potentially conflicting laws.

The U.S. Court of Appeals for the First Circuit recently rejected a bankruptcy trustee’s effort to avoid a mortgage on the basis that the acknowledgment signed by the borrowers’ attorney-in-fact was defective under Massachusetts law, holding that the acknowledgment was not materially defective because as a matter of agency law the attorney-in-fact’s signature was the borrowers’ “free act and deed.”

The U.S. District Court for the Middle District of Florida, Orlando Division recently ruled that debtors’ FCCPA and TCPA claims did not arise out of and were not related to their mortgage to fall under the jury waiver provisions in the mortgage where the claims arose out of attempts to enforce a debt that was discharged in bankruptcy.

The Court also ruled the debtors sufficiently stated a claim under FCCPA by alleging the creditor received notice of the debtors’ bankruptcy case to constitute actual knowledge the debtors’ were represented by counsel.

“[T]he price received at a California tax sale” properly held under state law “conclusively establishes ‘reasonably equivalent value’ for purposes of” the Bankruptcy Code’s (“Code”) fraudulent transfer section (§ 548(a)(1)), held the U.S. Court of Appeals for the Ninth Circuit on Sept. 8, 2016. In re Tracht Gut LLC, 2016 WL4698300, at *1 (9th Cir. Sept. 8, 2016). Affirming the lower courts, the Ninth Circuit reasoned that “California tax sales have the same procedural safeguards as the California mortgage foreclosure sale” approved by the U.S. Supreme Court in BFP v.

Massachusetts bankruptcy courts have invalidated mortgages containing defects, including the failure of lenders to observe strict formalities in the execution of mortgage acknowledgements. See our prior post on this very topic at Lender Beware: The Tragic Consequences of Defective Mortgage Acknowledgements.

The Bankruptcy Appellate Panel of the Sixth Circuit recently held that a condominium unit owners association did not violate a debtor’s Chapter 7 discharge order by scheduling a sheriff’s sale to complete a prepetition foreclosure.

Rejecting the bankruptcy court’s conclusion that the in rem foreclosure sale was scheduled to induce payment of discharged pre-petition condominium fees, the Sixth Circuit BAP noted that “all foreclosure litigation potentially can induce payments of discharged debt to avoid a foreclosure sale.”

A district court in Nevada recently granted a mortgage company’s motion to dismiss FCRA claims where the reported debt had been discharged in bankruptcy.The opinion serves as a reminder of the rules governing the reporting of discharged debt.In Riekki v. Bayview Fin. Loan Servicing, the consumer alleged that the subject debt was discharged pursuant to his Chapter 13 bankruptcy and that the creditor continued to report balances through the pendency of the bankruptcy as well as post-petition.Riekki v. Bayview Financial Loan Servicing, 2:15-cv-2427, 2016 U.S. Dist.

REAL PROPERTY UPDATE

We have written on other occasions on Civic Partners Sioux City, LLC.

The Supreme Court of Ohio recently held that, when debt on promissory note secured by mortgage has been discharged in bankruptcy, the holder of the note may not pursue collection against the maker of note, but the mortgagee has standing to foreclose on the collateral property, and can use the amounts due on the note as evidence to establish that it may collect from the forced sale of the property.