Recently, the United States Court of Appeals for the Eleventh Circuit issued a decision in Landau v. Roundpoint Mortgage Servicing Corporation, 2019 WL 2428443 (11th Cir. June 11, 2019) that provided mortgage servicers some clarity as to their duties in handling pending foreclosure sales during ongoing loss mitigation. In Landau, a borrower was approved for a six-month loan modification trial plan after the entry of a final judgment of foreclosure. Because the foreclosure sale was set to take place during the pendency of the approved trial plan, the servicer of the loan moved to reschedule the foreclosure sale. The borrower, in turn, sued the servicer, alleging that moving to reschedule the sale, as opposed to moving to cancel the sale altogether, was a violation of 12 C.F.R. §1024.41(g) of Regulation X promulgated under the Real Estate Settlement Procedures Act (RESPA). The borrower’s contention was that the motion to reschedule was seeking an order of sale, a violation under RESPA since a servicer is prohibited from seeking an order of foreclosure sale after a borrower has submitted a complete loss-mitigation application.
The Court in Landau reviewed § 1024.41(g)of RESPA’s Regulation X to determine what comprises an “order of sale” in order to determine if a motion to reschedule a foreclosure sale differed from an already-existing order of sale issued through a final judgment. The Landau court explained that:
A motion for order of sale is a substantive and dispositive motion that seeks authorization from a court to conduct a foreclosure sale at all, while a motion to reschedule a foreclosure sale under an already-existing order of sale is a non-substantive, housekeeping-type motion that does no more than seek permission to change the date of sale that the court has previously ordered.
The Landau Court went on to state that treating a motion to reschedule a foreclosure sale, which does not in itself seek the entry of a non-existent order of sale, as a violation of RESPA would be inconsistent with its consumer protection purposes and would serve to disincentivize servicers from working with borrowers on loss-mitigation after a final judgment is entered.
In closing, the Landau decision helps servicers lessen any delay in having a property sold in the event that a borrower is unable to complete loss mitigation and/or a trial plan modification. However, Landau does not change the already standard industry practice of servicers moving to suspend a foreclosure sale during any period in which a borrower is performing under a loss mitigation agreement as required by the Mortgage Servicing Rules under the Real Estate Settlement Procedures Act (Regulation X).