Temporary Restraining Order Shuts Down Foreclosure Sales in SC

A temporary restraining order has been issued by the Supreme Court of South Carolina involving loans subject to modification under the Home Affordable Modification Program. In a nutshell, the order issued by Chief Justice Jean Hoefer has shut down foreclosure sales in South Carolina, according to William LeRoy, president and chief executive, American Legal Financial Network. Under the order, the lender, investor or plaintiff will have to execute an affidavit by May 15 indicating that the loan does not qualify for any government programs or that it did qualify but the lender has exhausted all loss mitigation efforts required under the programs. The TRO applies to loans owned or guaranteed by Fannie Mae or Freddie Mac, or a servicer participating in the HMP. Larry Platt, a partner with the Washington law firm of K&L Gates, says Fannie is wearing two hats here. The first is as either the owner of mortgage loans in foreclosure or the guarantor of the related mortgage-backed securities. "It essentially is saying that it wants to postpone foreclosures until it is clear that the borrower has realized his or her right to be considered for a loan modification under Fannie's eligibility guidelines. Any owner has a right to postpone a home loan foreclosure that is being pursued on its behalf," he said. Second, Mr. Platt says Fannie is acting as agent of the Department of Treasury in cases where a servicer has signed a Servicer Participation Agreement. "That agreement obligates participating servicers to delay the finalization of foreclosures until after the servicer has determined whether the borrower qualifies for a modification. In this case, Fannie is using the courts to enforce compliance with the contracts that it is administering on behalf of Treasury."