Developments regarding residential mortgage foreclosure proceedings continue to roll in at a fast clip. Recently, the Federal Housing Finance Agency issued a directive to servicers regarding documentation problems, and the New York state courts began requiring attorney affirmations on document validity.

We have been assisting our clients in doing due diligence reviews of their foreclosure documentation practices and in complying with these two new directives, as well as other state laws.

Last week, Ballard Spahr held a webinar titled "The Residential Foreclosure Documentation Brouhaha: How to Proceed From Here." This Wednesday at noon (ET), we will present a CLE for Free program in our Philadelphia office covering the information provided in the webinar, updated to reflect more recent developments. The live program will provide one hour of CLE credit. For registration information, please click here.

Federal Housing Finance Agency

On October 13, 2010, the Federal Housing Finance Agency announced a policy framework for addressing possible foreclosure process deficiencies. In the framework, the FHFA urges lenders and servicers to verify quickly their foreclosure processes and makes specific recommendations for ensuring documentation is accurate at each stage. Specifically, the FHFA requires the following:

New cases. Match statements in affidavits against the current foreclosure process and revise affidavits to accurately reflect the level of review conducted by the signer; ensure that notarizations are executed properly.

Pending cases, with no judgment. Match statements in affidavits against the current foreclosure process, and, to the extent necessary, execute new affidavits that accurately reflect the level of review conducted by the signer or that have proper notarizations.

Foreclosure judgment has been entered; sale has not occurred. Match statements in affidavits against the current foreclosure process, and, to the extent necessary, 1) execute new affidavits that accurately reflect the level of review conducted by the signer or that have proper notarizations, and 2) have the judgment ratified by the court.

Sale has occurred; eviction proceedings are necessary or have commenced. Delay progressing with eviction proceedings or service until statements in affidavits have been matched against the current foreclosure process, and, to the extent necessary, 1) execute new affidavits that accurately reflect the level of review conducted by the signer or that have proper notarizations, and 2) have the judgment ratified by the court.

Property is in real estate owned status. To the extent the affidavits used in the foreclosure case had defects, it may be necessary to work with foreclosure counsel to ensure that a purchaser will be able to obtain title insurance.

New York State Courts

New York state courts, where more than 80,000 foreclosures are pending, issued a notice requiring attorneys managing foreclosure cases to submit an affirmation to the court about the validity of the documents filed, effective immediately. The notice requires the following:

New cases. The affirmation shall be submitted with the Request for Judicial Intervention.

Pending cases, with no judgment. The affirmation shall be submitted with the Order of Reference or a proposed Judgment of Foreclosure.

Foreclosure judgment has been entered; sale has not occurred. The affirmation shall be submitted to the referee, and a copy of the affirmation shall be filed with the court no later than five days before the scheduled sale. The affirmation requires the attorney to swear to the following:

  1. On the stated date the attorney communicated with a stated titled person at the lender or servicer who informed the attorney that he or she had done the following:
    1. Personally reviewed the documents and records relating to the case
    2. Reviewed the summons and complaint and all other papers filed in the court to support the foreclosure
    3. Confirmed both the factual accuracy of the documents and court filings and also the accuracy of the notarizations
  2. That based upon conversations with the stated person and the attorney’s own review of the documents and filings, to the best of the attorney’s knowledge and belief, all documents in support of the foreclosure are complete and accurate in all relevant respects

The New York Times reports that Chief Judge Jonathan Lippmann of the State of New York commented that he does not believe that the affirmation will stall foreclosure activity in New York, but, if it does, "so be it."