DS News

DS News Jan 2023

DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.

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Page 45 of 83

44 Feature By: T. Robert Finlay, Esq. and the Team of Wright, Finlay & Zak, LLP DID YOU EVER WONDER WHAT IT TAKES TO ENJOIN A FORECLOSURE SALE? Here's what lenders/servicers should know about TROs and Injunctions. With inflation on the rise and the economy slowing, foreclosures are unfortunately likely to increase. With more foreclosures, there will likely be a rise in borrowers' suing at the last minute to stop the foreclo- sure. In fact, our firm has already started to see a substantial uptick in requests for the court to issue a Temporary Restraining Order (TRO) to stop an impending foreclosure sale. Since the requirements to obtain a TRO differ in every state, this article will help loan servicers and in- vestors (collectively, "lenders") understand the varying TRO processes. TROs are rarely issued in judicial foreclosure states because the court is already involved and controls the foreclosure process. Nonjudicial fore- closures, on the other hand, do not involve the court system. As a result, borrowers trying to stop the foreclosure sale must file a separate lawsuit and then ask the court to enjoin the foreclosure. In some instances, like in California, the borrower can file suit on Monday and get a TRO hearing on Tuesday. is gives lenders very little time to hire counsel, let alone substantively oppose the request for a TRO. Understanding the TRO process is essential to defeating a TRO or limiting its impact. Below is an explanation of the TRO process in some of the key nonjudicial states out west. CALIFORNIA Basic Requirements: To obtain a TRO en- joining a foreclosure sale in California, borrowers (or junior lienholder) must: • Establish the: » Likelihood of success on the merits; » Possibility of irreparable harm if the relief not granted; » Balance of hardships in their favor; • Give oral or written notice to the lender or foreclosing trustee by 10:00 a.m. on the day before the TRO hearing. • Practice Tip—Leaving a message for the SPOC or the foreclosing trustee is often sufficient notice. is simple (and short) way of giving notice severely limits the time in which a lender can hire counsel and oppose the TRO. Adding to the lender's challenge is that most foreclosure firms are not truly litigation firms, i.e., they may not be equipped to handle the TRO or the related new lawsuit. What happens if the TRO is granted? By definition, a TRO is temporary and, generally, only enjoins the foreclosure for 20-25 days. e TRO will set a date for an Order to Show Cause as to why the Preliminary Injunction (OSC re PI), along with a deadline to file a written opposition to the OSC re PI. is is the big hearing and where the Lender should definitely bring in its legal department and a litigation firm. If a PI is granted, it will enjoin the foreclosure sale for the duration of the litigation, which could be 1-2 years. Moreover, a granted PI disincen- tivizes borrowers from discussing settlement or exploring loss mitigation. Borrowers know that they have tons of time. On the other hand, if the lender prevails at the OSC re PI, the TRO will

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