Ensuring that notices related to foreclosure are properly and legally furnished is a traditionally hands-off consideration for servicing organizations. After all, creditors' attorneys exist to effectively own the foreclosure file and everything related to it.
Nonetheless, given today's high foreclosure volumes and the constant vigilance of outside parties, servicers are well-advised to stay abreast of notification-compliance nuances. It's a complicated, busy area that involves a number of players – borrowers, attorneys, trustees and process servers among them – under the watchful eyes of state, county and local governments.
Moreover, while routine functions such as service of process and posting/publishing are growing more active, these governments are revisiting and revising age-old statutes to confront current market realities and neighborhood blight.
Service of process, whereby a borrower is given legal notice of a foreclosure via a petition, summons or complaint, is "instrumental," says Vic Draper, executive vice president of ProVest.
"It gives homeowners the opportunity to truly know what is going on," he adds.
Service of process is a particularly common practice in judicial-foreclosure states. Considering that some of today's foreclosure hot spots – Ohio, Indiana and Florida, for instance – are also judicial-foreclosure states, process servers are being lit up with unprecedented pipelines.
"Florida, in terms of judicial states, probably has the highest volume," says Keith McMaster, president of Excel Innovations. "With the high volumes, clients have asked us to do a lot more data integration – which is really good for us and good for the clients, because it eliminates a lot of the re-keying.
"We've also had to step up and help the court systems as best we can – trying to suggest different ways for the courts to keep up with the filings," he adds.
ProVest, according to Draper, has had the same experience in Florida, where some estimates place the increase in foreclosure rates since early 2007 at 200% or more. In turn, the courts have been hammered.
For instance, until recently, Dade County staffed only one clerk of courts office – which simply could not keep apace with the filing volume. ProVest and other parties helped the clerk of courts establish three satellite office in the county to handle the backlog.
"It's helping to get the Florida foreclosure timeline closer back to what it used to be," he says.
Wide workload
Florida, of course, is not alone in its troubles. Consider the case in Maryland, where Gov. Martin O'Malley, D-Md., recently signed emergency legislation designed to contend with the state's housing crisis.
The legislation revised many aspects of the state's foreclosure regulations, including those related to borrower notification. Historically, Maryland borrowers were alerted to a foreclosure action via a simple mailing. But now, lenders and servicers are mandated to make personal service of process to deliver a docket package that serves the foreclosure papers and outlines the severity of the situation.
"One of the things you're going to see more of, from the legislative front, is an assurance that due process is being given to homeowners," Draper says, noting that Ohio had revisited its foreclosure laws a few years ago, and states such as Texas and Kentucky are considering changes for 2009.
McMaster notes that, for all parties in this arena, scalable technology that can handle spikes in workload is a key element in keeping up with these high volumes. Most importantly, such technology eliminates the re-keying of data – boosting efficiency and minimizing errors – and provides immediate access to foreclosure milestones.
"Timing is a key issue – passing the data back and forth," Draper remarks.
One company specializing in this space, NetDirector, offers a platform for the exchange of data among trading partners in servicing.
According to Harry Beisswenger, the company's chief operating officer, data dictionaries based on transaction types – such as service of process – help attorneys "talk" to both servicers and process servers.
When personnel in the field complete service orders, information can be updated in real time and loaded into the attorney's foreclosure case management or document management system. In turn, the information is available to the servicer.
Beisswenger notes that NetDirector also helps trading partners handle documents electronically – primarily affidavits, date-stamped complaints and service-returned notices – as well as posting/publishing tasks.
Foreclosure sales
Notification of a trustee, sheriff or foreclosure sale via posting/publishing might seem, on the surface, to be a mundane exercise. But it is important to note that each state governs these dispositions through specific statutory mandates – none of which are exactly same.
"It varies widely by state," says Miriam Moore, president of Lender Processing Services' (LPS) Agency Sales & Posting (A.S.A.P.) and Default Title and Closing divisions. The A.S.A.P. unit, which works with servicers, attorneys and trustees to conduct foreclosure posting and publishing, operates in 17 states.
Moore notes that some states do not require newspaper-publication of a foreclosure sale, while others might insist on as many as 10 public listings prior to the disposition. The frequency of listings varies – 10 is at the top end – but most statutes mandate an average of three notices preceding the sale.
"The process we're talking about, in the Western states, is usually referred to as a trustee sale," says Larry LaCom, chief title officer of the LPS divisions. "It's not a court proceeding. It's a private proceeding that is governed by statutes."
None of these statutes, Moore and LaCom say, is new. However, several states have imposed – or are in the process of introducing – new requirements on the parties conducting these proceedings.
California's recent S.B.1137 is a perfect example. The legislation necessitates additional borrower contact prior to recording notices of default, as well as additional posting requirements to enable occupants to be informed about pending foreclosure actions.
Also, LaCom says, some states and jurisdictions are imposing new inspection requirements to determine a property's occupancy status and, if it is vacant, requiring that lenders and servicers register the property and maintain it through the course of the foreclosure. Here, stiff penalties are in play for noncompliance.
"That's the change," Moore comments. "They're requiring a lender to act in advance of the lender becoming the owner of the property. If the property is vacant during the course of the foreclosure, they must register the property and maintain it."
As a part of this strategy, dozens of cities and counties nationwide are mandating that a property manager's contact information be posted publicly – during or after a foreclosure – to help ensure that a property's appearance is maintained.
"In the suburban areas, it's not so much that the properties are crumbling and attracting crime, but that the unkempt properties create an appearance that upsets the neighbors," LaCom says.
He notes that in California alone, at least 15 cities and counties have written such ordinances – most within the last five or six months. And most likely, the industry will see more of the same in the future.
