Under Alabama law, the statute of limitations for an “open account” is shorter (3 years) than for an “account stated” or breach of contract claim (6 years). In Cadence Bank, N.A. v. Robertson, No. 1190997, 2021 WL 1230165 (Ala. Apr. 2, 2021), the Alabama Supreme Court reversed a trial court for granting summary judgment in a collection action by a bank against a homeowner because the longer statute of limitations may apply even if the written loan agreement may no longer be in effect. In 2003, the Robertsons executed a loan agreement with a lender to obtain a home-equity line of credit, and granted the lender a mortgage on their house as security. In 2005, the Robertsons delivered payment to the lender on the remaining balance of the loan along with a “kill letter” which instructed the lender to release the mortgage and cancel their line of credit. Yet, later that year, the Robertsons began borrowing additional funds against the line of credit and continued to do so until 2013. In the interim, Cadence Bank acquired the lender and all of its assets and liabilities.
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Mortgage Rules
Alabama Court of Civil Appeals Doubles Down on “Strict Compliance” with Notice Provisions of Standard Mortgage’s Paragraph 22
This past June, in Barnes v. U.S. National Bank, No. 2180699, the Alabama Court of Civil Appeals held that a mortgagee’s notice of acceleration failed to strictly comply with the notice provisions contained in Paragraph 22 (“Paragraph 22”) of the Fannie Mae/Freddie Mac Uniform Mortgage. As a result, the Court held that the foreclosure sale was void.
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You’re on Notice: Alabama Court of Civil Appeals Bears Down on Foreclosure “Strict Compliance” in Barnes v. U.S. National Bank, No. 2180699.
Recently the Alabama Court of Civil Appeals held that a mortgagee’s notice of acceleration failed to strictly comply with the mortgage’s notice provisions when it informed the borrower only that she “may” have right to assert defenses against foreclosure, rather than apprising her that she had an affirmative right to bring an action against the mortgagee. This case serves as a cautionary tale for lenders and mortgage servicers who are considering foreclosure.
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Continue Reading You’re on Notice: Alabama Court of Civil Appeals Bears Down on Foreclosure “Strict Compliance” in Barnes v. U.S. National Bank, No. 2180699.
Credit Reporting and COVID-19: CFPB Provides Flexibility to Financial Institutions
On April 1st, the Consumer Financial Protection Bureau (“CFPB”) released a policy statement setting forth financial institutions’ obligations during the COVID-19 pandemic. In addition to providing clarity regarding the recently-enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the CFPB’s pronouncement outlines a flexible approach towards credit reporting agencies and furnishers who, despite good-faith efforts, have had difficulty complying with Fair Credit Reporting Act (“FCRA”) requirements during the crisis.
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MERS Procedure Not Violation of Alabama Law – Alabama Supreme Court Looks Beyond Punctuation in Interpreting Recording Statute
In its recent opinion in Deutsche Bank National Trust Company v. Walker County, the Alabama Supreme Court held Alabama Code § 35-4-50 does not impose a mandatory duty to record assignments of beneficial interests in residential mortgages. In the underlying action, Walker County brought suit against Deutsche Bank National Trust Company, Mortgage Electronic Registration Systems, Inc. (“MERS”), and CIS Financial Services, Inc., after the Bank allegedly relied on Walker County’s real property recording system, but used MERS to record subsequent transfers of the beneficial interests in residential mortgages.
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Eleventh Circuit: Motion to Reschedule a Foreclosure Sale Not Barred by Regulation X
In an important victory for mortgage servicers, the Eleventh Circuit rejected a RESPA claim based on a motion to reschedule a foreclosure sale in Landau v. Roundpoint Mortgage Servicing Corp.
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Eleventh Circuit allows Miami’s predatory lending suit for lost tax revenues to proceed
According to the Eleventh Circuit, a municipalities’ lawsuit alleging lost tax revenue and increased costs for services case proceed against several large lenders. In City of Miami v. Wells Fargo & Co., 2019 WL 1966943 (11th Cir. 2019), Miami alleged that several large banks violated the Fair Housing Act by engaging in predatory lending that targeted racial minorities. These practices allegedly led to a higher rate of home foreclosures, which directly caused lost tax revenue and increased costs for services.
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Alabama Supreme Court changes course on validity of future-advance mortgages
In September 2018, the Alabama Supreme Court issued an opinion in GHB Constr. and Dev. Co., Inc. v. West Alabama Bank and Trust, No. 1170484, that caused considerable concern for Alabama lenders. The Court held that future-advance mortgages do not come into existence until funds are actually advanced regardless of when the mortgage was recorded. Last Friday, the Alabama Supreme Court reversed its September 2018 opinion and held that the priority of a future-advance mortgage is based on the date of recording, not when the lender advances funds. A link to the March 2019 decision can be located here. This decision should ease the uncertainty created by the Court’s September 2018 decision.
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Eleventh Circuit: Mortgages not covered by bankruptcy discharge
In In re Dukes, No. 16-16513 (11th Cir. Dec. 6, 2018), the Eleventh Circuit held that a debtor’s mortgage obligation was not discharged, despite a proof of claim not being filed, because the mortgage was not provided for by the debtor’s plan and because of the anti-modification provision of Section 1322(b)(2).
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Alabama Court of Civil Appeals Clarifies The Requirements (and limitations periods) for Fraudulent Transfer Action
The Alabama Civil Court of Appeals recently issued a decision, International Management Group, Inc. v. Bryant Bank, No. 2170744, which, among other things, limits the potential for summary judgment in fraudulent transfer cases, especially where actual fraud must be proven.
In this case, Bryant Bank sued International Management Group (“IMG”) following its alleged insolvency, seeking to void a series of insider transfers of mortgages securing promissory notes to Bryant Bank. IMG’s principal, Michael Carter had personally guaranteed the promissory notes prior to filing personal bankruptcy. Ultimately, IMG and Mr. Carter defaulted on the promissory notes, and Bryant Bank obtained a default judgment against both IMG and Mr. Carter. Prior to the default judgment, however, Mr. Carter, through a series of insider transactions, transferred the mortgages to his parents, who subsequently passed away. Mr. Carter, as executor of his mother’s estate, then transferred the mortgages to himself following his bankruptcy. Bryant Bank claimed that IMG’s first transfer to another Carter-controlled company in 2010 was without any consideration and rendered IMG insolvent, thus rendering the transfers constructively fraudulent and void under the Alabama Uniform Fraudulent Transfer Act (“AUFTA”). If Bryant Bank could not void the transfers, its judgments against IMG and Mr. Carter were likely worthless, as neither party had sufficient assets to satisfy the judgments. Following discovery, the trial court granted Bryant Bank’s motion for summary judgment and voided the transactions, which had the effect of voiding the transfers without the need for trial and made IMG no longer judgment-proof.…