PERSON OF THE WEEK: Despite the hoopla surrounding last month's $25 billion foreclosure settlement, the mortgage servicing industry is still facing more than its fair share of woes. To understand the current issues impacting servicers, MortgageOrb spoke with Daniel C. Consuegra, managing attorney at the Law Offices of Daniel C. Consuegra PL, based in Tampa, Fla.
Q: What are the primary elements impacting foreclosure timelines in your jurisdiction?
Consuegra: The arch-nemesis of foreclosure timelines is volume. Servicers have backlogged document execution processes. The courts have backlogged dockets and the mediation program managers have backlogged caseloads. If it were not for the volume of defaulted loans, I do not believe complaint verification, affidavit execution and mandatory mediation would be the issues they currently are.
Document execution has become a hot-button issue due to the alleged robo-signing crisis and dramatic shift in regulatory oversight. The strong response by servicers in creating closely monitored document-signing procedures is positive, but it has become difficult for the servicers to execute the necessary documents in a timely manner, as they are not only required execute affidavits of amounts due and owing, but now must also execute complaint verifications.
Logistically, it has been difficult for servicers. However, we have seen modest improvements, as they have had time to adapt to these new requirements.
Mandatory mediation continues to be a roadblock for moving the cases forward, because it creates a delay regardless of whether the borrower even wants to mediate or stay in the property. Additionally, the mediations that do go forward are largely unsuccessful.Â Â
On a smaller scale, the defense bar has had an impact on timelines. More and more cases become litigated, and as a result of the bad press, defenses, which would have previously been disregarded by the judiciary, are gaining traction.
Q: How has regulatory and servicer oversight of attorneys changed since late 2010, and to what degree has the interaction between servicing departments and attorneys been affected? Are there more touch points involved with loan files now?
Consuegra: Certainly, there has been an increase in the amount and frequency of oversight of attorneys since late 2010, the large majority of which is done by the servicer. The subject matter the servicers are monitoring is largely the same; however, the frequency and intensity with which it is monitored has increased.
As a result of the increased regulatory oversight, servicers have become more engaged in the foreclosure process, and the communication lines between the attorney firms and servicers have improved. In some cases, servicers have been able to use the audits and reviews of firms to pinpoint processes in their organization, that can be improved upon.Â
It does seem that there are more touch points now – in particular, the complaint verification process necessitated more touch points prior to filing.Â
Q: The issue of standing has become a huge sticking point for servicers. Do you believe disputes around standing are doing more harm than good? Is it possible that the legacy of sloppy loan transfers runs the risk of invalidating a significant population of foreclosures that would otherwise proceed unchallenged?
Consuegra: As creditors' attorneys, disputes regarding standing are never good for our client. In large part, servicers have responded well by providing good documentation to justify their standing to bring the action. Occasionally, we run into a true standing issue. However, these just require a bit more care and attention to resolve than others, and it is a matter of carefully preparing the case. If the dispute cannot be resolved by documentation, a trial may be necessary.
The judiciary is supposed to be neutral, and each case must be decided on its own merits. Although they are required to remain neutral, judges are human, and past mistakes by a servicer probably are in the back of their mind and may influence their decisions to some extent. We have not seen any evidence of foreclosures being invalidated on a large scale. Rather, we see a case here or there that takes some additional time to resolve.
Q: From a legislative perspective, are there certain statutes you would like to see enacted? On the flip side, are there legislative proposals that you believe would be detrimental to mortgage servicing operations?
Consuegra: I would like to see a requirement for a registry covering homeowner associations (HOAs) and condominium owners associations (COAs). Both groups want statutory rights and want to be able to strip off the safe harbor if they are not properly named in the foreclosure.Â
But, at times, it is difficult to locate the HOA/COA – and, at times, there are multiple HOAs and COAs on a single file. The foreclosure firms name the HOA/COA when they can be located – but sometimes they cannot be located. The language in the statutes providing for the safe harbor should be cleaned up to provide that whether it is the first mortgagee or a servicer acting on behalf of the first mortgagee who is foreclosing.
That plaintiff still has a safe harbor. I believe these associations are collecting assessments because of a technicality or loophole, and I would like to see that addressed.