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S.C. Halts Conforming Foreclosures

Foreclosure

A South Carolina supreme court judge has halted foreclosures on Fannie Mae and Freddie Mac loans. The moratorium is targeted at loans that qualify for modifications under a federal program. Two other big states have also recently extended the time needed by lenders to foreclose.

Supreme Court of South Carolina Chief Justice Jean H. Toal issued a restraining order late yesterday stopping the foreclosure process on mortgages secured by one- to four-unit properties in the state and owned or guaranteed by either of the two secondary lenders, according to a court statement. In addition, loans serviced by companies that signed on to the Home Affordable Modification Program are impacted.

The moratorium applies to mortgages that might be eligible for modification under the program.

Fannie filed a petition requesting the restraining order to prevent dismissals on loans that sit too long while being considered for modification. If the foreclosures were dismissed and the modification wasn’t completed, then the servicer would be faced with additional foreclosure expenses.

“In South Carolina, judges have the discretion to cancel an ongoing foreclosure process if there is a significant delay between the foreclosure judgment date and the actual foreclosure sale,” Fannie spokesman Brian Faith said in a statement. “This ruling will allow us the flexibility to evaluate problematic mortgages in the state for possible eligibility for the administration’s modification program and reduce the overall borrower and company costs associated with the foreclosure process.”

Plaintiffs in foreclosure actions will be required to provide an affidavit indicating whether the loan could qualify for modification under the government plan.

Fannie said it has identified 1,110 cases in the state that are slated for foreclosure sale the first week of this month.

Foreclosures on loans approved for modification will be dismissed, while foreclosures can proceed on loans when the affidavit indicates the loan is not subject to modification. If a counter affidavit is filed, a circuit court judge will determine the applicability of the modification program.

“Absent injunction, mortgagors eligible for relief under the HMP program could be denied their right to participate because their property was sold at the foreclosure sale,” the court quoted Fannie as saying in its request. “This qualifies as irreparable injury for which the court should provide redress in the form of a temporary injunction.”

The judge noted that she was troubled by the “the ex parte nature of this petition,” though she still granted the injunction.

During March, South Carolina saw 812 foreclosures completed, according to RealtyTrac. Foreclosure filings were made on 2,366 properties.

In California, Gov. Arnold Schwarzenegger signed a law in February that imposes a 90-day foreclosure moratorium on lenders that do not offer a comprehensive loan modification program. The California Foreclosure Prevention Act allows lenders to avoid the moratorium as long as their modification program is based on the program outlined by the Federal Deposit Insurance Corporation.

California real estate owned filings were 14,352 in March, while foreclosure filings occurred on 107,785 properties, RealtyTrac reported.

And over in Texas, the state senate passed Senate Bill 472, the Mortgage Foreclosure Deferment Act — which extends from the requirement for foreclosure notices to 45 days from 20 days. It also gives borrowers 14 days to vacate their properties.

The Texas bill also requires a notice of rights to be included with the default notice. It also requires a contact number for collections.

Texas saw 3,449 REO filings and foreclosures filed on 10,616 properties in March.

In Re Federal National Mortgage Association (“Fannie Mae”) Loans Subject to Foreclosure Sale.
2009-05-04-01, May 4, 2009

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