Saturday, November 29, 2008

Any Georgia Foreclosure Conducted Between December 2, 2008 and January 6, 2009 May Be Wrongful.

Fannie Mae and Freddie Mac issued a press release on November 20, 2008 stating, in writing and by definition – publically, that they have instructed, “[their] loan servicing organizations and retained foreclosure attorneys [ * * * ] to suspend foreclosure sales on occupied single-family properties as well as the completion of evictions from occupied single-family properties scheduled to occur from November 26, 2008 until January 9, 2009.”

A survey of the Legal Organs in Georgia (Fulton, DeKalb, Gwinnett, Cobb, etc.), does not reveal any slowdown in the publication of foreclosures. Clearly, any advertisement that went to press prior to November 20, 2008 cannot be easily removed prior to the foreclosure date. (They can be removed, but it requires affirmative action to do so).

The Fannie Mae press release seems to cover: 1) any Fannie Mae or Freddie Mac Mortgage, 2) that is handled by one of its servicers or one of its attorneys, contract or otherwise, 3) that concerns a single family residence, 4) that is at or under the current FHA limit of $362,000 or $417,000 for Fannie Mae, and 5) that is scheduled to be foreclosed (in Georgia) in December 2008 or January 2009.

I have watched the foreclosure process in Georgia for over two (2) decades. My guess is that the sheer inertia of the foreclosure process in Georgia will cause many (quite a lot is my personal bet) of these listed properties to be knocked off on the Courthouse steps – Press Release or no Press Release.

Are those foreclosures valid in the face of the Fannie Mae Press Release? Facially, yes. However, they are clearly subject to challenge (read that “wrongful foreclosure”) on at least one legal ground that comes to mind: Promissory Estoppel.

Promissory Estoppel is codified in Georgia at OCGA § 13-3-44. That statute states:

A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

Here, Fannie Mae’s, promise is in writing which is stronger than many of the promissory estoppel claims that are based only on an oral promise.

There are whole treatises devoted to legal elements of wrongful foreclosure. For that overview, go read them. However, if you or your client own a single family home in Georgia (which Security Deed foreclosed fits within the minimums for FannieMae and FreddieMac – not more than $417,000.00 in the foreclosed loan amount), the Security Deed fits within the prohibitions stated in the November 20, 2008 Press Release and it is foreclosed upon in Georgia between December 2, 2008 and January 6, 2009, your client probably has a “good faith basis” to sue to set aside that foreclosure and has a “good faith basis,” to sue the lender for damages for foreclosing during the moratorium.

The lender will argue that the debtor was still in default on the day of the foreclosure and the foreclosure was proper. The borrower should file suit sounding in “wrongful foreclosure,” to set aside the foreclosure and argue that “but for,” the public promise from Fannie Mae, the borrower would have paid off the debt. Now, contrary to this being merely a lawyer’s argument, I have worked with many (mostly developers or owners with means) owners who have borrowed huge sums immediately prior to a foreclosure to pull properties out of foreclosure. Fannie Mae’s public promise (so the argument should go) has caused or did cause the borrower to focus his/her/its economic resources somewhere else, because Fannie Mae “promised” not to foreclose in December 2008 or January 2009.

Hugh Wood, Atlanta, GA

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WASHINGTON, Nov. 20 /PRNewswire-FirstCall/ -- In order to support the streamlined modification program announced on November 11, 2008, Fannie Mae today issued a notice to its loan servicing organizations and retained foreclosure attorneys directing them to suspend foreclosure sales on occupied single-family properties as well as the completion of evictions from occupied single-family properties scheduled to occur from November 26, 2008 until January 9, 2009.

The temporary suspension of foreclosures is designed to allow affected borrowers facing foreclosure to retain their homes while Fannie Mae works with mortgage servicers to implement the streamlined modification program scheduled to launch December 15. Foreclosure attorneys and loan servicers will be instructed to use the additional time to reach out to borrowers who have defaulted on their loans and continue to pursue workout options. The initiative applies to loans owned or securitized by Fannie Mae.

The streamlined modification program is aimed at the highest risk borrower who has missed three payments or more, owns and occupies the primary residence, and has not filed for bankruptcy. The program creates a fast-track method for getting troubled borrowers into an affordable monthly payment through a mix of reducing the mortgage interest rate, extending the life of the loan or even deferring payments on part of the principal. Servicers have flexibility in the approach, but the objective is to create a more affordable payment for borrowers at risk of foreclosure.

"The streamlined modification program by Fannie Mae, Freddie Mac, Hope Now and 27 mortgage servicers is an important step forward in addressing the systemic issues driving the increase in foreclosures," said Fannie Mae President and Chief Executive Officer Herb Allison. "Until the streamlined modification program is fully implemented, we felt it was in the best interest of both borrowers and Fannie Mae to take this extra step to ensure that homeowners with the desire and ability to prevent a foreclosure have an opportunity to stay in their homes. We encourage other servicers of non-GSE mortgages to participate in the streamlined modification program to bolster our collective efforts to stem the foreclosure crisis."

Fannie Mae will be working with foreclosure attorneys and servicers to reach out to the more than 10,000 borrowers the company estimates would be affected during this period. Borrowers who have Fannie Mae loans that are scheduled for foreclosure between November 26, 2008 and January 9, 2009, will be contacted directly by the attorney handling the foreclosure. If the home is occupied, Fannie Mae has instructed servicers and attorneys to suspend the foreclosure.

Allison also said Fannie Mae's loan servicers are prepared to work with borrowers during this period, even if previous workout efforts have been unsuccessful. As part of the company's "Second Look" initiative, Fannie Mae personnel have been reviewing seriously delinquent loans to determine if the borrower has been contacted and all workout options have been exhausted.

The streamlined modification program and temporary suspension of foreclosures are two of a series of steps Fannie Mae has taken to expand its foreclosure prevention efforts, which are designed to give loan servicers and foreclosure attorneys tools to find the best solution for a borrower in financial trouble. Fannie Mae and its many partners in the housing industry urge borrowers in financial difficulty to reach out to their loan servicers, regardless of whether they are facing imminent foreclosure. Solutions may be available that could make an existing mortgage more affordable.

"Fannie Mae is committed to working with FHFA to implement the streamlined modification program as quickly as possible to help prevent unnecessary foreclosures," Allison said. "We must and will do more."

Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. In 2008, we mark our 70th year of service to America's housing market. Our job is to help those who house America. Fannie Mae CONTACT: Brian Faith of Fannie Mae, 202-752-6720
Web site:

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Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
Phone: 404-633-4100
Fax: 404-633-0068

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