In a win for secured creditors, the Ninth Circuit Court of Appeals recently held that a debtor who sought to cure a pre-petition default of its loan through its Chapter 11 plan must pay the default rate of interest set forth in the note. In Pacifica L 51 LLC v. New Investments Inc., the debtor proposed to pay the outstanding amount due under the note at the pre-default interest rate.  This proposal was in accordance with law in the Ninth Circuit, which held that even if a loan agreement provided for a higher post-default interest rate, a debtor who cured a default was entitled to repay at the lower, pre-default rate.

Continue Reading Ninth Circuit Holds Debtor Must Pay Default Interest Rate in Order to Cure Under Bankruptcy Plan

Massachusetts is notorious for having hyper-technical rules about notarization.  The trouble started in 2009 with the bankruptcy case of Matthew H. Giroux.  Mr. Giroux signed a mortgage in front of a notary public.  He acknowledged to the notary public that he signed the mortgage voluntarily for its stated purpose.  The notary public signed where he was supposed to, affixed his notarial seal, and inserted the expiration of his commission.  The mortgage was then recorded in the appropriate registry of deeds.  The notary public, however, forgot to insert Mr. Giroux’s name in the certificate of acknowledgement (the notary block on the mortgage); so it said: “[B]efore me personally appeared _____________ to me known to be the person (or persons) described in and who executed the foregoing instrument . . . .”  The bankruptcy court didn’t like that and invalidated the mortgage.

Ok, lesson learned.  Notaries—don’t forget to fill in the name of the person who signed the mortgage.

Continue Reading New Forms May Alleviate Some Concerns About Massachusetts Notarizations

For better or worse, banks frequently obtain possession of, or title to, pieces of property.  Often times, these parcels of land have been neglected and are in poor condition.  It would not be surprising to find a property that a bank obtained via foreclosure that had decaying trees looming over a neighbor’s fence.  But what happens when that tree falls, causing damage to the neighbor’s property?  Is the bank liable?  Continue Reading TIMBER! – Liability for damage to private property caused from a fallen tree?

Appellate Case Update

The Connecticut Appellate Court has (finally) recently weighed in on the topic of whether or not a claimed defense of a violation of the Connecticut Unfair Trade Practices Act (“CUTPA”) constitutes a legally sufficient special defense to a foreclosure action in Connecticut.  Put simply, the result of this case is that CUTPA is not a legally sufficient special defense to foreclosure.  In reaching this decision, the Court outlined that the intent of the Act is to permit claims for violation of its provisions and was not meant not to shield parties from liability on existing claims by opposing parties who are alleged to have violated its terms.

Continue Reading CT Unfair Trade Practices Act is Only a Sword – Not a Shield in Foreclosure Actions

Massachusetts bankruptcy courts have invalidated mortgages containing defects, including the failure of lenders to observe strict formalities in the execution of mortgage acknowledgements.   Continue Reading The Massachusetts Supreme Judicial Court Lends a Helping Hand to Inadvertent Lender Omissions in the Execution of Mortgage Acknowledgements

A bank director’s responsibilities are similar to directors of other types of corporations, including the duties of loyalty and care. Federal banking regulators have strong enforcement powers to address violations of law, breaches of fiduciary duty, or unsafe and unsound practices. When an FDIC-insured bank goes into receivership, the FDIC undertakes an investigation to determine the reason for the failure and whether to pursue claims against directors, officer or their parties for corporate waste, breaches of fiduciary duty or negligence.

Continue Reading What Community Bank Board Members Need to Know About D&O

On January 1, 2015, Connecticut adopted an additional method of foreclosure known as foreclosure by market sale.  This method permits an owner-occupant of a 1-4 family residential property who is in default of the first mortgage to obtain the lender’s consent to market and sell the property in order to avoid a judicial foreclosure.

Continue Reading Amendment to Connecticut’s Foreclosure By Market Sale Statute

One of the plethora of new procedures enacted in the 2016 General Assembly’s legislative session is a concept which is being dubbed a “judgment of loss mitigation.”  The procedure seems straightforward at first – a lender can seek to have the Court approve a modification of a mortgage loan and sanction the mortgagee’s priority over any other encumbrances of record or it can approve a conveyance of all interest of the mortgagor to the mortgagee within the new statutory structure.  So, why do lenders need to be aware of this new procedure?  And will this newly enacted process help anyone? Continue Reading Connecticut Foreclosures: Judgment of Loss Mitigation – Good, Bad or Unnecessary?

You might wonder whether lenders can enforce a guaranty of a loan from an individual or entity that has no formal connection with the borrower, i.e. someone who is not an owner or affiliated company. Generally, the answer is yes with some qualifications for potentially insolvent guarantors discussed below. However, lenders are well-advised to take the steps outlined at the end of this post to minimize the risk of a subsequent challenge by the guarantor.

Continue Reading Enforcing Personal Guaranties

In Connecticut, the General Statutes have granted “super” priority status to certain types of municipal liens.  As a result, these liens jump to the head of the priority line, even if your bank has a first-mortgage on the property. These liens include costs for property taxes, water and sewer assessments, violations of blight ordinances and a municipality’s costs in demolishing unsafe buildings.

Continue Reading Super Priority Municipal Liens: When Is Your First Mortgage Not First In Line?