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NCCUSL UNIFORM RESIDENTIAL MORTGAGE SATISFACTION ACT UMSA September 2004

Rationale. Variety of states with varying penalties, forms28 states have

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NCCUSL UNIFORM RESIDENTIAL MORTGAGE SATISFACTION ACT UMSA September 2004

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    1. NCCUSL UNIFORM RESIDENTIAL MORTGAGE SATISFACTION ACT (UMSA) September 2004 Nancy Short Ferguson Board Certified Specialist in Real Estate Transactions and V.P./Senior State Counsel Chicago Title Insurance Company Greensboro, NC 800-445-9983 www.northcarolina.ctt.com R. Wilson Freyermuth Reporter for the NCCUSL URMSA committee and John D. Lawson Professor of Law University of Missouri-Columbia School of Law Columbia, MO

    2. Rationale Variety of states with varying penalties, forms 28 states have “self-help” 23 require add’l notice, 5 are “1-touch” Many states have nominal penalties for failure to cancel Many states have NO penalties or self-help Lenders “cherry-picking” states in which to focus cancellation efforts High rejection rates

    3. NCCUSL Drafting Committee Attorneys in private practice Technology companies (MERS & Orion) Lenders (Wachovia, Bank of America, Countrywide, ABN-AMRO) Title insurance companies Professors (Advisors, Executive Officers & Reporter) Geographically from CT to AL to HI

    4. COMPROMISE!! Compromise between interested parties: Attorneys Title Companies Lenders Technology groups Servicing organizations Registers of Deeds CONSUMERS!!

    5. The UMSA -- Articles I Definitions, Notification, Rescission II Mandatory Reliable Payoff & Mandatory Lender Satisfaction (Form) III “Self-Help” or “Satisfaction Agent” Satisfaction (Form) IV Miscellaneous Provisions

    6. PAYOFFS (Art. 2) Address for request & notification Information (waived if payoff sent n/w/s defect in request): Specified payoff date, no more than 30 days after notification Entitled person’s name Name & authority of person making request (“safe harbor” for lender on privacy issues) Where payoff statement to be sent (agent or entitled person and address) Information to identify obligation and property

    7. PAYOFFS (Art. 2) (cont’d) Time frame (within 10 days) Payoff Statement: Date, payoff amount, incl all fees, charges, sums required to satisfy Info reasonably necessary to calculate per diem Payment cutoff time, place where payment must be made & method of payment required (if any) “Conditions” only if means of verifying on payoff date or immediately preceding date

    8. PAYOFFS (Art. 2) (cont’d) Assignee name & address must be provided Fees Automatic penalty, o/w attorneys’ fees & costs

    9. CORRECTIONS & ERRONEOUS PAYOFF STATEMENTS () Corrections: only if actual “receipt” and “reas opportunity to act” (202) Discharges lien not personal liability if correction not timely Lender may not deny accuracy as against any “person” that “reasonably & detrimentally relied”

    10. Mandatory Lender Satisfaction (203) “Full payment or performance” If not canc within 30 days, nondiscretionary “actual loss” If not canc within 30 days after follow up notice, nondiscretionary “actual loss” plus penalties, court costs & attorneys’ fees (for post-Act payoffs) NO req’t of update disputed payoff: lender may incur penalties/loss/costs if not cancel & court finds not entitled to disputed amount

    11. EXC: “Reasonable procedure” & “Circumstances beyond its control” Burden on lender to appear and prove Servicer is w/in defn of “secured creditor” & has liability, even if holder does not NOT a defense: that computer system crashed on last day too busy & understaffed to handle volume IS a defense: entire northeastern blackout PO shut down for anthrax Fed Ex plane crashed

    12. Mandatory Lender Satisfaction (203) (cont’d) Standardized Form “SATISFACTION” (204) -- streamlined / simple / few “fill-ins” no requirement of copy of deed of trust like our current statute Equity line of credit “full performance” definition

    13. “Self-Help” Satisfaction (Art. 3) Satisfaction agent (SA): title insurance company or licensed attorney State agency (Banking, Insurance, Bar) may set regulations - registration, bonding, etc. -- [bracketed item] “Residential” limitation Not require Article 2 payoff or post-Act

    14. “Self-Help” Satisfaction (Art. 3) (cont’d) Requires 30-day notification on behalf of “landowner” (may be subsequent purchaser other than borrower) & full performance Lender responses: No response: SA may cancel Assigned: SA give 30-day notif. to assignee Not satisfied: SA not cancel SA / borrower follow up on outstanding balance (as now)

    15. “Self-Help” Satisfaction (Art. 3) (cont’d) SA not required to cancel - depends on contract with landowner Form “AFFIDAVIT OF SATISFACTION” (304) Personal liability of obligor remains even if satisfaction recorded (305(b)) Registry must record unless $$ or execution / acknowledgment inappropriate

    16. “Self-Help” Satisfaction (Art. 3) (cont’d) Liability of SA who records satisfaction: Erroneous but lender did not respond to 30-day notice: No liability Erroneous (other than above) or knowingly false: Actual loss Knowledge that false: May be subject to litigation by lender for actual loss, punitive damages or even criminal sanctions Section 306

    17. Some “Self-Help” statutes Arizona California Colorado Connecticut Delaware Georgia Hawaii Idaho Indiana Kansas Massachusetts Nevada One-touch: Illinois Minnesota South Dakota North Dakota South Carolina

    18. RESCISSION OF SATISFACTION (104) “Reinstatement” of lien under some case law If satisfaction was erroneous, amount still outstanding & security instrument remains in force Can be done by person who erroneously recorded the satisfaction

    19. RESCISSION OF SATISFACTION (104) (cont’d) No effect on rights of third parties who acquired an interest and are protected under recording priority statutes Liability for erroneous or wrongful rescission of satisfaction (reinstatement): Actual loss, attorneys’ fees and costs

    20. WHAT’S TO COME? Proposal for “One-Touch” Lender vs. SA controlled? Max. amounts / types of property limitations? Reviewing the Minnesota & Illinois models & practices

    21. Overall issues to address UETA conformity Agency authority (for attorney or title co) Authority of & lender responsibility to “entitled person” (borrower, guarantor, etc.) or landowner (if clearing old title) Bracketed items: Penalties -- State Legislature sets amount Oversight agency for “self-help” Uniform notary acknowledgments (outside scope of UMSA but possibly not URPERA)

    22. Overall issues to address (cont’d) Standard forms (other than notary acknowledgments) Reliability / enforceability of recorded cancellation or satisfaction is still subject to review / analysis by person certifying title “Residential” determination -- timing & verification

    23. Overall issues to address (cont’d) Is drafting a statutory form the “practice of law”? Privacy: Obtaining information from lender when “borrower” is back in chain of title. Effective dates: Penalties not retroactive Self-help applies to all, retroactive but requires post-Act notification

    24. Overall issues to address (cont’d) Nonexclusivity: Cancellation forms existing & add new ones Penalties & damages -- Deceptive trade practices, RESPA, contract law, consumer protection Equity line “freeze” provisions

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