Foreclosure
Complications
Thomas S. Mowle
El Paso County Public Trustee
Foreclosure
Complications
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Bankruptcy
Deferment
Rescission
Court-ordered Set-Aside
Partial Release During Foreclosure
Late Amended Mailing List
Missed Deadlines
Other Errors
Bankruptcy
• A Bankruptcy filing creates an automatic stay
on the foreclosure. No action adverse to the
borrower may be taken while the stay is in
effect.
• No penalty for actions we take before we find
out that the stay is in effect.
• May be notified by borrower, holder’s
attorneys, or by U.S. Bankruptcy Court
• Notify holder’s attorney if they did not tell us
Bankruptcy
• Bankruptcy Prior to NED Recording
– If find out before recording NED, pull the file –
Don’t record the NED
– If find out after NED recorded, then NED recording
violated the stay. Attorney must withdraw the
foreclosure, and re-file.
– Mark the file as “to be withdrawn”
– Cancel publications, do not mail notices
– Attorney may wait until after stay is lifted to file
the withdrawal
Bankruptcy
• Bankruptcy Prior to Completion of Publication
– Common practice: this includes filing on last day
of publication
– Cancel remaining publications and notices
– If publish prior to receiving notice, but BK filed
prior to final publication: counts as prior to pubs
– Do not continue sale while in bankruptcy
– When stay lifted, re-record the NED and set all
deadlines as if the foreclosure just started
– Charge restart fee: $75
Bankruptcy
• Bankruptcy After Completion of Publications
– Do not take to sale – Continue sale week to week
– When stay is lifted, recalculate final sale date.
– The final sale date is extended a number of days =
the number of days the bankruptcy stay was in
effect
Bankruptcy
• Erroneous Sale – Stay in effect during sale
– Watch for late filings up until time of sale
– When stay is lifted:
• Reinstate deed and note
• Recalculate final sale date based on length of
bankruptcy stay – may not be time left to take to sale
• Set sale date 24-49 days after notified
• Mail and Publish Notice one time
– Charge resume sale fee -- $50
Bankruptcy and Cures
• If borrower files intent to cure, we pass it to
attorney – not “adverse” to borrower
• Some attorneys will provide figures, some will
not – do not continue sale for late figures, just
week-to-week for bankruptcy
• If cure figures provided, we pass them along
to the borrower
Foreclosure
Complications
•
•
•
•
•
•
•
•
Bankruptcy
Deferment
Rescission
Court-ordered Set-Aside
Partial Release During Foreclosure
Late Amended Mailing List
Missed Deadlines
Other Errors
Deferment
• If property may be eligible for deferment
program, attorney must provide paperwork
with the filing
• If provides eligibility paperwork late, then
foreclosure must be restarted
• Attorney may take back the eligibility notice
within 15 days if the property has not been
posted
Deferment
• After NED accepted, attorney must post the
property within 15 days (cannot post prior to
NED accepted and file number assigned)
• Attorney must provide an affidavit of posting
within 20 days of NED accepted
• If affidavit not received, notify the attorney
one time, and then continue the sale week to
week until received
• Don’t publish or mail notice until have affidavit
Deferment
• HUD-approved counselor may qualify
borrower for deferment program
• Counselor must notify us within 30 days of first
contact with the borrower, which must be no
more than 20 days after the notice posted
• Yes, we have to enforce those deadlines
• If qualified for deferment, cancel pubs and do
not mail 2nd notice until deferment ends
• If hear nothing from counselor, do nothing
Deferment
• While in deferment, continue sale week to
week – do not continue full 90 days up front
• After 90 days, or upon notification of
termination by housing counselor, take file out
of deferment
• Bankruptcy ends deferment – restart will be
required
• Charge fee: $75
• Publish and mail notice of deferred sale
Foreclosure
Complications
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•
•
•
•
•
•
•
Bankruptcy
Deferment
Rescission
Court-ordered Set-Aside
Partial Release During Foreclosure
Late Amended Mailing List
Missed Deadlines
Other Errors
Rescission
• If property sold to holder, holder may rescind
sale within 8 business days if provide notice +
– Pay $100 fee + recording costs up front
– Provide stamped envelopes
• Record notice, and reinstate note and deed
• Mail notice of rescission to mailing list
• If asked to reschedule sale, charge $50 fee and
– Set sale date 30-45 days in future
– Publish and mail combined notice once
Foreclosure
Complications
•
•
•
•
•
•
•
•
Bankruptcy
Deferment
Rescission
Court-ordered Set-Aside
Partial Release During Foreclosure
Late Amended Mailing List
Missed Deadlines
Other Errors
Set-Aside by
Court Order
• Like rescission, except by the courts
– Used if past the 8th business day
– Used if a third party purchased the property
– No specific cost to set-aside, no envelopes
• Record order, and reinstate note and deed
• If asked to reschedule sale, charge $50 fee and
– Set sale date 30-45 days in future
– Publish and mail combined notice once
Foreclosure
Complications
•
•
•
•
•
•
•
•
Bankruptcy
Deferment
Rescission
Court-ordered Set-Aside
Partial Release During Foreclosure
Late Amended Mailing List
Missed Deadlines
Other Errors
Partial Release During
Foreclosure
• Attorney sends an “Amended” NED
– Details undefined – may be new NED called
“Amended”, or may be correction to recorded NED
– Amended NED must describe what property was
released, and the recording information
• Set sale for 65 days in the future, unless later
– If sale continued, republish 5x, and mail notice
– Charge $100 Fee
• NOT a way for attorney to correct errors in
filing – especially overstating encumbrance
Foreclosure
Complications
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•
•
•
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•
Bankruptcy
Deferment
Rescission
Court-ordered Set-Aside
Partial Release During Foreclosure
Late Amended Mailing List
Missed Deadlines
Other Errors
Late Amended
Mailing List
• Attorney sends an “Amended” Mailing list
after the 2nd mailing has been sent
• Set sale for 65 days in the future
• Mail notice with updated scheduled sale date
• Do NOT republish
• We only send 3rd mailing before sale if
– Late Amended Mailing list
– Amended NED
– Missed deadlines
Foreclosure
Complications
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•
•
•
•
•
•
•
Bankruptcy
Deferment
Rescission
Court-ordered Set-Aside
Partial Release During Foreclosure
Late Amended Mailing List
Missed Deadlines
Other Errors
Missed Deadlines
• If Public Trustee fails to meet deadlines, other
than for publication, must restart foreclosure.
We waive all fees in this case.
• If publications missed, delay sale for 65 days
• Publish and mail notice with new sale date
Foreclosure
Complications
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•
•
•
•
•
•
•
Bankruptcy
Deferment
Rescission
Court-ordered Set-Aside
Partial Release During Foreclosure
Late Amended Mailing List
Missed Deadlines
Other Errors
Other (Minor) errors
• Errors in notices can be corrected in 2nd notice
• Errors in recorded NED can be corrected with
a scrivener’s affidavit to the NED
• Errors in later recorded documents require
correction to prior documents
• Attorney handles omitted parties
• If in doubt about need to correct, contact
other Public Trustees or attorney
Final Advice
Final Advice
Don’t believe the attorney, or
investors, if they say that
“every other Public Trustee”
does it some other way.