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Our law firm is headquartered in
We concur with the well-founded
The Proposed Rule is Unconstitutional on Several Grounds
Moratoria on debt collection activities and secured asset recovery have been implemented only sparingly in this country as an economic stabilization tool during national crises. See
In Blaisdell, while the
Moreover, homeowners in the early 1930s did not have the benefit of social programs such as welfare, Medicaid, Medicare, unemployment insurance, supplemental unemployment insurance created by the CARES Act/2 and extended through
Second, the Proposed Rule constitutes a reimposition of the foreclosure moratorium contained in Section 4022(c)(2) of the CARES Act.
The Proposed Rule is a
The Proposed Rule creates a number of moral hazards. First, mortgagors who are current on their mortgage payments, and otherwise receiving no reward or benefit for their efforts in making mortgage payments timely (often, outright struggling to make these payments timely), may consider strategically defaulting as they would not be subjected to foreclosure until next year. Moreover, once they are subjected to foreclosure, foreclosure defense attorneys are well aware that, even with strategic defaults, they can always contest the foreclosures with frivolous claims and defenses in judicial states (such as
Second, anecdotally, the undersigned is aware that a portion of mortgagors are not spending any of their government benefits or stimulus funds on housing-related expenses (or saving for such housing-related expenses), but rather, are spending those funds on unnecessary consumer goods, entertainment, leisure, and travel. Such conspicuous spending cannot be dismissed as poor financial planning, it unequivocally indicates that such persons are knowingly and deliberately taking advantage of a situation to the detriment of their creditors. As a utilitarian matter, this conspicuous and irresponsible spending on the part of mortgagors should not be permitted to continue.
Third, there are mortgagors currently subject to federal foreclosure moratoria who defaulted well before the COVID-19 pandemic and whose defaults are absolutely not attributable directly or indirectly to the COVID-19 pandemic. RMS estimates that about 20% of its foreclosures currently on moratorium hold fall within such category. These mortgagors have received the benefit of foreclosure moratoria for over one year with no payment or other obligations imposed upon them, which raises a separate constitutional issue as discussed supra. For these mortgagors, servicers have likely made, in some instances, several years of escrow and other advances with no clear indication on when they can expect to recover some or all of their losses.
In some or all of these cases, we may advise servicers to immediately cease making any further tax advances on mortgages subject to foreclosure moratoria and, thus, allow such collateral to be listed for county tax sales at which servicers can always purchase the collateral (as an alternative means of acquiring title to the collateral).
The Proposed Rule is Unnecessary as There is No Longer An Economic Crisis
Clearly, the foregoing statistics evidence a rebounding national economy. Given this favorable job outlook, the Proposed Rule is unjustified.
For the foregoing reasons, any further moratorium on foreclosures is unwarranted. Alternatively, if the Proposed Rule is promulgated in some form, the sound recommendations of the American Legal & Financial Network should be adopted.
View attachment at: https://downloads.regulations.gov/CFPB-2021-0006-0144/attachment_1.pdf
Very truly yours,
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1/ As shown infra., federal statistics reflect that the
2/ Public Law No. 116-136, H.R. 748, 116th
3/ Public Law No. 117-2, H.R. 1319, 117th
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The proposed rule can be viewed at: https://www.regulations.gov/document/CFPB-2021-0006-0001
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