South Carolina Supreme Court Stays Foreclosures
Photo by Michael Mulligan
Yesterday, the South Carolina Supreme Court granted a motion filed by the Federal National Mortgage Association (“Fannie Mae”) requesting that the Court enjoin “all judicial officials in South Carolina conducting foreclosure sales on May 4 (or the next judicial sales date) from dismissing all eligible one to four unit owner occupied properties securing Fannie Mae portfolio mortgage loans and MBS pool mortgage loans guaranteed by Fannie Mae for which there is a foreclosure judgment.” Fannie Mae brought this motion because it wanted cases continued, or stayed, rather than dismissed, pending review to determine medication eligibility under federal programs. (See my May 4 post for a link to these programs).
The temporary restraining order (TRO) prevents foreclosure of any property in which the loan is held or guaranteed by Fannie Mae or Freddie May or held by a servicer who has agreed to participate in the Home Affordable Modification Program (HMP). Justice Toal’s decision to add HMP-participating servicers in the TRO is a big plus for homeowners who might not have Fannie Mae/Freddie Mac loans but who were stuck in the Kafkaesque process of fighting off foreclosure while, at the same time, dealing with a loan modification. In many of these cases, the loss mitigation departments of huge lenders or servicers have promised modification while the foreclosure departments have pressed on with foreclosure leaving home owners with no means of keeping their homes.
Specifically, Justice Jean Toal ordered that:
“By May 15, 2009, the plaintiff in every mortgage foreclosure action stayed by this order shall serve on all other parties to the action (including petitioner and/or Freddie Mac as appropriate) an affidavit setting forth its belief whether the loan is subject to modification under the HMP. If the affidavit indicates that the loan is subject to modification under the HMP, the foreclosure shall be stayed pending a determination if the loan will be modified. If the loan is modified, the foreclosure action shall be dismissed. If the loan is not modified, the foreclosure may proceed.
If the affidavit indicates that the loan is not subject to modification under the HMP, the TRO will be lifted unless petitioner, Freddie Mac or another party serves and files a counter affidavit asserting that the loan is subject to modification under the HMP by May 22, 2009. If a counter affidavit is timely filed, the TRO will remain in effect until the master-in-equity or circuit court judge determines if the HMP is applicable to the loan. The lower court shall insure that these determinations are made in an expeditious manner.
If the loan is determined not to be subject to modification under the HMP, the TRO shall be lifted and the foreclosure may continue. If the lower court determines that the loan is subject to modification and the loan is modified, the foreclosure action shall be dismissed. If the lower court determines that the loan is subject to modification but the loan is not subsequently modified, the TRO shall be lifted and the foreclosure may continue.”
For those of us who have dealt with disorganized, non-responsive lenders and servicers on these issues, this is a welcome development. Interestingly, the federal government (Fannie Mae) requested this relief. Over half of all U.S. home loans are backed by Fannie Mae and Freddie Mac, so the effect of the order will be to temporarily halt the vast majority of foreclosures in South Carolina.
As I have said repeatedly, modification saves lenders money. Modification is good for the homeowner, the lender, the neighborhood, and the taxpayer. Any loss of revenue in modification pales in comparison to the loss the lender will have if the home is foreclosed.
–Russ DeMott
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Comments
It would be nice if it happened throughout the country. Many people are waiting for modifications and we may need to take the lenders to court to get them to modify the loans that they are required to modify. It would be nice if the Senate could change their minds and do the right thing and pass the mortgage modification bill.
A bit late for me, as my home was just foreclosed. But my attempts to work with the mortgage company, and the filling out of the forms, wound up in the credit card dept, which then began sending me offers for a credit card !!!
They even called and said they were looking at my financial declaration, and that is what “qualified” me for the card.
Without question there is a huge disconnect between loss mitigation and forclosure departments.
[...] the Home Affordable Modification Program [HAMP]. Blogger Russ Demott points out the importance of the inclusion of HAMP-eligible loans. Justice Toal’s decision to add HMP-participating servicers in the TRO is a big plus for [...]