Alabama law permits the creation of public corporations known as “improvement districts,” which can then issue bonds that are similar to bonds issued by a municipal corporation. These bonds can be used to finance improvements within the district. In Aliant Bank v. Four Star Investments, Inc., the Alabama Supreme Court allowed claims against the directors of one of these improvement districts to go forward despite claims of immunity. The Court also allowed certain fraud claims to go forward against the directors as well as other related individuals and entities. In addition to authorizing lenders to bring suit, the opinion also serves as a strong reminder that lenders should monitor their collateral and promptly investigate any signs of misconduct.
In a case of first impression for the Court, the Eleventh Circuit recently addressed whether federal district courts retain original subject matter jurisdiction over state law claims included in a class action filed pursuant to the Class Action Fairness Act (“CAFA”) even after all class claims have been dismissed. In Wright Transportation, Inc. v. Pilot Corporation, No. 15-15184, ___ F.3d ___ (Nov. 22, 2016), the Court sided with the other Circuits that have addressed this question, holding that CAFA confers original jurisdiction over state law claims that qualify as CAFA claims, and that this jurisdiction survives the dismissal of class claims.
Pilot Corporation contracts with long-haul trucking companies to sell diesel fuel at discounted rates. In 2013, Wright Transportation, Inc., an Alabama company and Pilot customer, filed a putative class action in the Southern District of Alabama, alleging that Pilot employees withheld discounts without their customers’ knowledge or approval. Wright asserted claims under the federal RICO statute, as well as various state law claims which, Wright alleged, qualified as CAFA claims, thereby vesting the district court with subject matter jurisdiction.
The district court eventually dismissed several of Wright’s claims, including the RICO claims and the class claims. Specifically, the district court dismissed the class claims because, while the case was pending, a rival class-action in the Eastern District of Arkansas reached a court-approved settlement. Both Wright and Pilot acknowledged that judicial approval of the settlement would divest Wright of standing to pursue the class claims. However, state law claims for breach of contract and unjust enrichment, both of which originally qualified as CAFA claims, survived for Wright individually.
The case was then consolidated with six similar lawsuits into one multidistrict-litigation proceeding in the Eastern District of Kentucky. However, soon thereafter, the MDL court discovered information showing that Pilot was an Alabama citizen, therefore depriving the court of diversity jurisdiction as to Wright’s claims. Without deciding the question of whether original jurisdiction still existed over those claims pursuant to CAFA, the MDL court remanded the case to the Southern District of Alabama.
On remand, Wright asked the district court to dismiss the remaining claims without prejudice so that it could re-file them in Alabama state court. Pilot opposed Wright’s motion, asserting that the district court retained CAFA jurisdiction over Wright’s state law claims notwithstanding the dismissal of all class claims. Ultimately, the district court granted Wright’s motion, holding that the dismissal of the class claims (and the RICO claims) had stripped it of original jurisdiction, and declining to exercise supplemental jurisdiction over the remaining state law claims.
Pilot appealed to the Eleventh Circuit, arguing that CAFA conferred original jurisdiction over all of Wright’s claims, including the state law claims, at the time that Wright actually filed them such that jurisdiction could not have divested when the class claims were dismissed. The Court agreed with Pilot, concluding that CAFA effectively serves as an extension of diversity jurisdiction, which is not destroyed by post-filing changes to a party’s citizenship. Thus, a post-filing change in circumstances does not remove subject matter jurisdiction under CAFA, even when the class claims are dismissed. In other words, original subject matter jurisdiction for claims brought under CAFA cannot be divested unless the trial court determines that it did not actually possess original subject matter jurisdiction at the time of the initial filing. Because there was no allegation that the district court lacked subject matter jurisdiction at the time Wright’s claims were originally filed, the Court concluded that CAFA continued to confer original federal jurisdiction over the remaining state law claims despite the dismissal of Wright’s class claims.
Although Wright provides support for class action defendants who wish to remain in federal court following the dismissal of CAFA claims, it is important to note that this ruling is relatively narrow. First, and most importantly, the Court suggests that, although a plaintiff who originally filed its class action in state court cannot amend its complaint after removal to federal court in order to divest the federal court of CAFA jurisdiction, a plaintiff who originally filed its lawsuit in federal court is free to amend its complaint in order to remove claims upon which the court’s original jurisdiction is based. Second, in Wright, all of the remaining state law claims qualified for CAFA jurisdiction; therefore, the Court did not have to analyze the issue of supplemental jurisdiction. Litigants who wish to remain in federal court following the dismissal of class claims will still have to establish the district court’s jurisdiction over any remaining non-CAFA claims.
In Turner v. Wells Fargo, N.A., No. 2150230, Wells Fargo foreclosed on a home after the homeowners tendered a bad check and attempted to send catch-up payments that did not include required penalty fees. Wells Fargo, which purchased the home in foreclosure, obtained summary judgment in the trial court after initiating an ejectment action against the former owners. On appeal, the Alabama Court of Civil Appeals affirmed the summary judgment, holding that Wells Fargo had substantially complied with the terms of the mortgage and was therefore entitled to initiate the foreclosure.
In 2006, Donna Turner and Trenton Turner, Jr. executed a promissory note and mortgage for the purchase of a home. The note was eventually sold to Wells Fargo, and Carrington Mortgage Services serviced the loan. In 2011, the Turners tendered checks to Carrington that were returned due to insufficient funds. The Turners ultimately satisfied the principal and interest payments, but Carrington assessed several penalty fees for the bad checks. The Turners repeatedly sent checks that were sufficient to pay the principal and interest, but Carrington returned these checks because they were not sufficient to pay the mounting penalty fees.
In late 2011, Carrington notified the Turners of its intent to foreclose, and in early 2012, Wells Fargo accelerated the mortgage and sent the Turners a notice of foreclosure. Wells Fargo ultimately purchased the home at a foreclosure sale. Because the Turners refused to vacate the home, Wells Fargo filed a complaint for ejectment. The trial court entered summary judgment in favor of Wells Fargo, and the Turners appealed to the Alabama Court of Civil Appeals.
Specifically, the Turners contended that Carrington caused the default by returning the checks that were tendered in 2011, that Wells Fargo failed to provide sufficient notice pursuant to the terms of the mortgage contract, and that Wells Fargo failed to show it was the holder of the note. The Court rejected all three arguments. First, the Turners admitted that they neglected to send Carrington checks that were sufficient to cover the penalty fees that accrued in 2011, and they did not dispute that the note allowed for such fees. Thus, the Court held that, under the terms of the note, Carrington was entitled to return the insufficient checks, and the Turners failed to cure their default. Second, the Turners asserted that, because the notice of foreclosure sent by Wells Fargo did not contain the precise notice language included in the mortgage contract, the foreclosure was void. The Court disagreed, holding that the notices substantially complied with the mortgage’s notice requirements. Therefore, the Court held that there was no genuine issue of fact supporting the Turner’s claim that they did not receive proper notice. Finally, the Turners contended that Wells Fargo did not produce substantial evidence that it was the holder of the note and mortgage. However, Wells Fargo presented to the trial court an executed assignment of the mortgage and note, which was recorded in the probate court prior to the foreclosure. Thus, the Court held that Wells Fargo did, in fact, present substantial evidence that it was the holder of the mortgage and was entitled to foreclose. Accordingly, the Court affirmed the trial court’s judgment.
There is no more pressing problem facing business organizations today, of all types, than cybersecurity threats. For a highly regulated industry like banking, regulators are watching closely to see how the IT governance structure at a bank can manage this risk.
Recently, the Federal Financial Institutions Examination Council, which coordinates the examination process at all of the federal banking agencies, issued a new “management booklet” on IT risk management examinations, replacing one that had not been updated since 2004.
Perhaps not surprisingly, given how many well-publicized hacks have occurred in the past decade, particularly in the last year, the new booklet incorporates cybersecurity concepts as part of IT risk management for banks:
- Board Role. Starting at the top of the bank, the new guidance requires that the board of directors set the tone and direction for an institution’s use of IT, and says that the board should approve the IT strategic plan, as well as its information security program “to protect the institution from ongoing and emerging threats, including those related to cybersecurity.”
- IT Steering Committee. Another cybersecurity requirement in the new booklet is for the board, or a “steering committee” tasked by the board to oversee IT risk management, and to review and determine the adequacy cybersecurity training for staff.
- CISO. The “Chief Information Security Officer” is required to inform the board, management and staff of information security and cybersecurity risks and the role of staff in protecting information, and to “champion” a security awareness and training program.
Banks can expect their examiners immediately to begin using this new examination booklet, and therefore would be well-advised to determine compliance with its requirements as far in advance as possible of the next examination.
The new Information Technology Examination Handbook can be found here.
For additional information, please contact Brad Neighbors at email@example.com
The residential mortgage market underwent a significant regulatory change on October 3, 2015, when the TILA-RESPA Integrated Disclosure (TRID) rule went into effect. TRID was promulgated by the Consumer Financial Protection Bureau (CFPB). As the name implies, TRID combines the disclosure requirements of the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). These disclosures must be provided to consumers in connection with home mortgage loans. TRID is more than a re-codification of existing regulations, however. It is a major overhaul of the mortgage application and closing process.
The most visible change of TRID is the forms that must be provided to borrowers. The Truth in Lending Statements, Good Faith Estimate, and HUD-1 Settlement Statement have been replaced by the “Loan Estimate” and “Closing Disclosure.” The new forms are supposed to be more streamlined and easier for consumers to understand. Behind those forms, however, is an almost 1900-page rule filled with new directives for mortgage lenders and other industry participants.
TRID imposes a significant compliance burden on the residential mortgage market. So much so, in fact, that several industry groups requested a grace period from the CFPB. They wanted a guaranty that good-faith violations would not be punished while the industry adjusts to the new regulations. The CFPB declined to provide such a grace period, but indicated that it will initially focus on remedial actions rather than punishment. However, CFPB Director Richard Cordray recently stated that many technology vendors have done a poor job implementing TRID. This should concern any lender that relies on a third-party vendor for its mortgage loan origination software. If the third-party vendor fails to comply with TRID, the lender will likely be held responsible.
Failure to comply with TRID can have significant consequences. One potential consequence is an enforcement action by regulators. This should come as no surprise. What may be less obvious, however, is the risk of litigation from individual borrowers. TRID greatly increases the risk of private lawsuits for disclosure violations.
The increased litigation risk is largely due to the fact that TRID blurs the line between TILA and RESPA. TILA offers borrowers a private right of action. RESPA generally does not. Although TRID relies on both TILA and RESPA, the CFPB implemented the new rule entirely under Regulation Z (the regulation that implements TILA). Therefore, the statutory remedies under TILA are now arguably available for any violation of TRID, including those provisions that derive from RESPA. If courts accept this argument, TRID will effectively create a private right of action for numerous disclosure violations where none previously existed.
The increased litigation risk under TRID has not gone unnoticed. Several commenters pointed it out before the rule became final. The CFPB did not share their concern, however. In the final rule, the CFPB summarized the issue as follows:
TILA provides for a private right of action, with statutory damages for some violations, whereas RESPA does not provide a private right of action related to the RESPA GFE and RESPA settlement statement requirements. Some industry commenters expressed concern that if the final rule implements the combined disclosure requirements in Regulation Z, consumers would bring lawsuits seeking TILA’s remedies for RESPA violations. These commenters, which included several trade associations, several title companies, two large banks, and a large non-bank lender, requested that the Bureau specify which provisions of the integrated disclosure rules relate to TILA requirements and which relate to RESPA requirements. One title industry trade association commenter suggested that the Bureau implement the TILA disclosure requirements in Regulation Z and the RESPA disclosure requirements in Regulation X to discourage litigation invoking TILA’s liability scheme for RESPA violations.
While the final regulations and official interpretations do not specify which provisions relate to TILA requirements and which relate to RESPA requirements, the section-by-section analysis of the final rule contains a detailed discussion of the statutory authority for each of the integrated disclosure provisions. As stated in part IV, above, the authority for the integrated disclosure provisions is based on specific disclosure mandates in TILA and RESPA, as well as certain rulemaking and exception authorities granted to the Bureau by TILA, RESPA, and the Dodd-Frank Act. The details of the Bureau’s use of such authority are described in the section-by-section analysis. The Bureau believes these detailed discussions of the statutory authority for each of the integrated disclosure provisions provide sufficient guidance for industry, consumers, and the courts regarding the liability issues raised by the commenters.
Integrated Mortgage Disclosures Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), 78 Fed. Reg. 79,757 (Dec. 31, 2013).
The CFPB’s proposed solution (looking to the section-by-section analysis to determine whether a provision is based on TILA or RESPA) may work better in theory than in practice. The whole purpose of TRID was to integrate the disclosure regimes under TILA and RESPA in a way that created a better consumer experience. To that end, Dodd-Frank gave the CFPB broad flexibility to modify or exempt statutory requirements based on the public interest. The Bureau used that flexibility liberally. As a result, it may be difficult to isolate a particular statutory basis for many of TRID’s requirements.
TILA is already a heavily litigated area of law, and a go-to statute for consumers trying to prevent or delay foreclosure. TRID may add fuel to the fire. Many in the residential mortgage industry fear that it will. Indeed, their concern led the House of Representatives to pass a bipartisan bill creating a four-month grace period for any person who makes a good faith effort to comply with TRID. The bill is now before the Senate, but even if it is eventually signed into law, it will only delay the litigation risk.
It’s unclear whether borrowers can bring new causes of action under TRID, but they will almost certainly try. This may be the next frontier of consumer litigation.
In Ex Parte Acosta, No. 1140200, — So. 3d —, No. 1140200, 2015 WL 3537476 (Ala. June 5, 2015), the Alabama Supreme Court refused to incorporate a jury trial waiver from a collateral loan document into a Promissory Note. Instead, the Court construed the jury trial waiver provision strictly and as only applying to claims arising from the collateral document. Therefore, lenders who want to ensure that a jury trial waiver will cover an entire loan transaction, should revisit the language of their jury trial waiver provisions or incorporate a waiver provision into each loan document.
In 2006, Trinity Bank loaned Sergio Acosta money for several real estate developments pursuant to three separate promissory notes. None of the notes included a jury trial waiver. As consideration for the notes, Acosta simultaneously executed four assignments, transferring his interests in the leases and rents from these real estate developments to the bank. Each of the assignments contained a jury trial waiver provision providing that “Acosta hereby waives any right to a trial by jury in any civil action arising out of, or based upon, this assignment.” After Acosta defaulted on the notes, the bank foreclosed on the property and sued Acosta for the deficiency. In response, Acosta asserted counterclaims against the bank (all of which arose under the notes) and demanded a trial by jury.
The bank moved to strike the jury demand based on the jury trial waiver provision in the assignments. It argued that the jury trial waivers in each of the assignments (which covered any civil action “arising out of, or based upon, this assignment”) were broad enough to encompass the notes. It also argued that the jury trial waiver was incorporated into the notes by reference because the notes expressly state that any loan documents executed in conjunction with the notes (e.g., the assignments) were part of the parties’ entire agreement.
The Alabama Supreme Court rejected both arguments. First, the Court held that the plain terms of the assignments’ jury trial waivers limited those provisions to claims arising from the assignments themselves. Second, the court refused to incorporate the jury trial waivers into the notes merely because notes stated that the assignments were part of the parties’ entire agreement and had been executed at the same time. The Court did note, however, that a slight change in the waiver’s language—“arising out of, or based on, this assignment or the loan documents”—might have changed the outcome. In a separate concurrence, Chief Justice Moore suggested that all pre-dispute, contractual jury trial waivers are unenforceable under the Alabama Constitution. No other justices joined in this concurrence.
Because Alabama courts will strictly construe jury trial waivers, lenders should take care in crafting their agreements to ensure that their jury trial waivers will be enforceable as intended. For example, a lender who desires a jury trial waiver for claims arising from any and all documents in a loan transaction should use a jury trial waiver provision that expressly states that it applies to “all loan documents.” Alternatively, lenders should ensure that every loan document contains a jury trial waiver provision. Lenders who fail to do so may have trouble convincing Alabama courts to strike a plaintiff’s jury demand based on a contractual jury trial waiver.
Please join Balch & Bingham on November 13 for an in-depth discussion about the newly-implemented TILA-RESPA Integrated Disclosure Rules (“TRID”). This seminar will solely focus on post-implementation issues and managing the litigation risks arising from the new rules.
The event will include guest speaker, Richard Horn, a former Senior Counsel and Special Advisor at the Consumer Financial Protection Bureau (CFPB), who led the CFPB team that wrote the TRID rules. Balch attorneys Gregory C. Cook and Jason Tompkins will also speak on potential sources of liability under TRID and developing strategies to avoid TRID-related litigation.
8:30 a.m. – 12:00 p.m.
November 13, 2015
Balch & Bingham’s Birmingham Office
1901 Sixth Avenue North, Ste. 1500
Birmingham, AL 35203
Please register by November 11 to attend. Register here: http://www.cvent.com/d/gfq7tl
Increasingly in courts around the country, borrowers have attempted to transform the Real Estate Settlement Procedures Act (RESPA), along with its implementing regulation (Reg. X), into a “Gotcha!” device through which borrowers could almost automatically recover damages against their mortgage servicers for responding to notices of error or requests for information. The pattern generally goes like this: the borrower sends a letter to the servicer requesting a laundry list of information related to their (usually defaulted) loan. Then, when the servicer does not respond in the exact way desired by the borrower, the borrower will sue the servicer alleging that the servicer’s response was deficient under RESPA, with the borrower seeking actual damages, statutory damages, and attorney’s fees.
Two recent decisions out of the Southern District of Florida are two of the latest federal decisions in the Eleventh Circuit to reject these types of claims by litigious borrowers.
In O’Brien v. Seterus, Inc., No. 9:15-CV-80300, 2015 WL 4514512 (S.D. Fla. June 24, 2015), the borrowers defaulted on their mortgage, and their servicer began regular drive-by inspections of the borrowers’ home. The borrowers sent a qualified written request (QWR) to their servicer, and after receiving the servicer’s response, sued the servicer under RESPA (for the QWR response) and the Florida Consumer Collection Practices Act (FCCPA) (for the drive-by inspections).
The Court granted the servicer’s motion to dismiss the RESPA claim. The QWR had requested a complete loan history and “detailed” information about the property inspections that had been occurring. The servicer’s 52-page response included a payment history for the time the servicer had serviced the borrowers’ loan, as well as the payment history provided by the borrowers’ prior servicer. The servicer’s response also included invoices for all property inspections and explained its reasons for performing the property inspections (i.e., due to the borrowers’ delinquency).
The Court wrote that although the borrower “did not give [the borrowers] the answers they desired, or respond with the level of specificity [the borrowers] apparently requested,” the servicer had adequately responded to the borrowers’ QWR. The Court held that a question about whether the servicer’s exercise of its inspection authority was proper was “a question for a different cause of action—not [RESPA]. RESPA requires a servicer to respond to requests for information. [The servicer] did so.”
By virtue of the Court’s dismissal of the RESPA claim, there was no longer federal question jurisdiction in the case, so the Court dismissed the borrower’s FCCPA claim for lack of subject matter jurisdiction.
In Russell v. Nationstar Mortgage, LLC, No. 14-61977-CIV, 2015 WL 5029346 (S.D. Fla. Aug. 26, 2015), the borrowers sent their servicer five separate qualified written requests (QWRs), primarily seeking a “complete” loan history. The servicer responded to each of these QWRs,
each time sending or referring to a complete payment history from the time the servicer began servicing the loan. The borrowers eventually stopped making their mortgage payments, the servicer foreclosed, and the borrowers filed a RESPA claim against the servicer.
The borrowers argued that the servicer’s repeated failure to provide a payment history for the entire life of the borrowers’ loan, including the period before the servicer serviced their loan, constituted a pattern or practice of RESPA noncompliance, which would entitle the borrowers to statutory damages. Nationstar contended that it had met its obligations to fully and timely respond to each of the borrowers’ QWRs, and that any of the borrowers’ actual damages, other than postage costs, were caused by the borrowers’ own actions in ceasing payments.
Noting that the Eleventh Circuit has characterized a servicer’s obligations under RESPA as rooted in “transparency and facilitation of communication,” the Court followed other recent federal decisions in holding that Nationstar “is not required to give a response that is desired by or satisfies [the borrowers,] but is merely required to provide a statement of its reasons.” The Court found that a servicer has no obligation to provide loan information from a prior servicer in its QWR response if that information could not be the source of a current problem with the borrower’s account. The pay histories provided by the servicer showed, and neither party disputed, that the borrowers’ account was current at the time the servicer began servicing the loan. Accordingly, the Court held that the servicer was not required to provide prior servicer loan histories; thus, there was no pattern or practice of RESPA noncompliance by the servicer.
As to actual damages allegedly caused by the servicer’s QWR responses, the Court derided as “audacious” the borrowers’ argument that they had suffered emotional distress “as a result of writing, mailing, receiving, and processing mail,” including standing in “long lines” at the post office. The Court found that Nationstar could not have provided the borrowers with any information that would have mitigated the damages they claim to have suffered. Moreover, the Court stated in a footnote that it was “not convinced” that actual damages could consist of postage and photocopying costs, but refrained from ruling on that issue.
Though the flood of litigation related to these types of throw-in RESPA claims shows no signs of slowing down, federal decisions such as O’Brien and Russell are providing more and more authority for servicers to draw upon in order to fight back.
It’s a common occurrence – a mortgagor or grantor signs the security instrument a day or two in advance of the loan, or perhaps a note is re-signed a couple of days after closing to correct an error in the original note. Either way, it’s easy to end up with a security instrument that references a “note dated as of” an incorrect date. It shouldn’t matter, some would argue, since the borrower and the lender would certainly understand that the security instrument is meant to relate to the note. But one bank found out the hard way that dates do matter.
In In re Duckworth, a case recently decided by the U.S. Court of Appeals for the 7th Circuit, the court held that a bankruptcy trustee could defeat a prior perfected security interest held by a bank because the security agreement referenced a note dated “December 13, 2008,” while the actual promissory note was dated “December 15, 2008.” The court held that the bankruptcy trustee is “entitled to rely on the text of a security agreement.” Since there was no promissory note dated December 13, 2008, the security agreement didn’t secure anything at all as far as the bankruptcy trustee was concerned. Thus, the bank lost its priority position on the collateral for a $1,100,000 loan. The court, which reversed lower court rulings in the bank’s favor, reached this result even though the borrower admitted that the date discrepancy was a mistake.
While the court recognized that a borrower, as opposed to a bankruptcy trustee, cannot necessarily avoid a security agreement because of this type of mistake, it’s in bankruptcy that perfection really gets put to the test. Cautious lenders may want to review their closing practices to assure conformity of date and other references to notes in their security instruments.
It is now more important than ever for lenders to not allow real estate to be sold for delinquent taxes at a tax sale—whether it is real estate owned by the lender or mortgaged to the lender. New case law has complicated and often made more costly the procedure for redeeming property from a tax sale. Generally, to redeem, a party must pay the amount of delinquent taxes, plus interest and other fees, including interest on any “overbid” paid at the tax sale which does not exceed 15% of the real estate’s market value. The redeeming party also may be required to pay property insurance and the value of certain improvements made upon the property by the tax purchaser. Costly disputes can arise when parties disagree about whether these additional items must be paid, and in what amounts.
Recent opinions have complicated the redemption process. In Ex Parte Foundation Bank (2014), the Alabama Supreme Court held that a probate judge must determine prior to redemption whether any additional amounts must be paid by a redeeming party. Similarly, the Alabama Court of Civil Appeals held in Wall to Wall Properties (2014) that a probate judge must determine whether additional amounts are owed by the redeeming party prior to issuing a redemption certificate.
These and other cases have triggered numerous actions against probate judges, brought by tax purchasers claiming that redemptions are void. In response, most probate judges now require the redeeming party and the tax purchaser to jointly execute an affidavit stating that all required amounts have been paid before the probate judge will issue a redemption certificate. If parties agree on the amounts required to redeem, no issue should arise. However, in redemptions where the amounts are disputed, which often occurs when a tax purchaser claims to have made improvements or other repairs that do not qualify under the Alabama Code, lenders are not able to redeem without further action—even if the claimed amounts are not permitted under the law. Many times when a party seeking to redeem and a tax purchaser disagree over the amounts required to redeem, one or both of them have run afoul of the dispute resolution process for tax redemptions contained in the Alabama Code.
The Alabama Code has a set procedure for resolving disputes about the value of certain improvements that may apply to your specific facts. This process is very tedious and can have consequences for the party not abiding by the specific requirements. Often, but not always, this dispute resolution is required to be completed prior to having the probate judge determine the amounts required to redeem.
These tax sale redemption procedures create new challenges for lenders simply trying to preserve their collateral and owned real estate. The safest and most efficient way for a lender to avoid the problems associated with tax sales is to have effective internal procedures in place to ensure that property taxes are timely paid. But if a tax sale does occur, a lender should immediately seek advice from the lender’s attorney about the tax sale redemption process. This legal consultation should occur prior to taking any action to redeem the property or communicating in any way with a tax sale purchaser.
Balch & Bingham attorneys M. Lee Johnsey and Paul H. Greenwood represent banks and other institutions in litigation and transactional matters, including real estate sold for delinquent taxes.