DS News

28 U.S. DISTRICT COURT HANDS DOWN SERVICER FEE DECISION By Susan Reid, Robyn Katz, and Melody R. Jones, McCalla Raymer, LLC In Kevin Prescott v. Seterus, Inc., the court ruled that the defendant loan servicer, Seterus, violated § § 1692e(2) and 1692f(1) of Fair Debt Collection Practices Act (FDCPA), as well as the FCCPA (Florida Statute 559.55 et seq.) by includ- ing estimated attorney fees in a reinstatement quote to the borrower, Kevin Prescott. e court found that while the security agreement obligated Prescott to pay for attorney fees and other expens- es actually incurred by the loan servicer as a result of his default nothing in the security agreement explicitly stated that Prescott must pay estimated fees and costs for future legal services. e question before the court was whether the least sophisticated consumer would have nonetheless understood the security agreement to obligate Prescott to pay such fees the court held the answer to be no. e court further held the Defendant was not entitled to benefit from a bona fide error defense, as estimated fees/costs were not included as a result of an error. It is important to note that as a result of this decision, as well as two similar opinions in other jurisdictions, great care should be taken to include only incurred fees and costs in reinstate- ment or payoff quotes. Any other practice could expose servicers and law firms to liability. COMPLIANCE SUGGESTIONS FOR JUDICIAL STATES Law firms and servicers should be diligent to eliminate forecasted/esti- mated fees from their reinstatement and payoff quotes. Diligence should be exercised in provid- ing the borrower with the most accurate figures available in a timely manner. Due to the timing of the requests for the reinstatement or payoff quotes versus the timing of the actions taken in the mortgage foreclosure cases, there may be fees or costs incurred during the time period between when the quote is provided and when the funds are due to be tendered (the "good through" date.) is may result in fees or costs not being included in the amounts tendered by the borrowers. Servicers should consider significantly reduc- ing the length of time payoff and reinstatement quotes are viable (shorten the good through date.) Servicers may want to require borrowers to contact the foreclosure law firm by email or phone at least two business days prior to tender of funds in order to update the quote. is will reduce the likelihood of additional fees and costs being incurred in the interim. In Florida, if there is a foreclosure case filed, the foreclosure firm must take the necessary steps to dismiss the fore- closure action once the loan has been reinstated or paid off. e attorney's fees to dismiss the case, which may be construed as forecasted prior to the tender of funds, should not be included in reinstatement or payoff quotes. It is the expec- tation that the fees and costs related to filing the dismissal will be incurred and paid by the servicer. COMPLIANCE SUGGESTIONS FOR NONJUDICIAL STATES As previously stated, law firms and servicers should be diligent to eliminate forecasted/estimated fees from their reinstatement and payoff quotes. Care should be exercised in providing the borrower with the most accurate figures available in a timely man- ner. Actions in non-judicial states move much more rapidly than judicial states. As such, fees and costs are usually incurred over short time frames. For example, publication costs are in- curred the four weeks leading up to the sale date in some non-judicial states. Each week when a new publication runs, the cost increases. Often figures will be requested with-good through-dates leading up to just prior to sale or even 30 days or more in the future. It is also notable that the requests often are for "estimated" amounts. Providing estimates of potential future fees/costs is simply no longer advisable in light of Prescott. In order to reduce potential liability, consideration should be given to shortening the time frame of reinstatement and payoff quotes provided to borrowers from seven to 10 days. Further, when the fees and costs are requested in the client systems, it is recommended that only incurred fees and costs be requested. Servicers should strongly shy from providing quotes of long duration and any estimates to borrowers. PARDON THE INTERRUPTION . . . BANKRUPTCY FILINGS RESUME THEIR DECLINE After experiencing an uncharacteristic year- over-year increase in November, bankruptcy filings took another customary tumble in December 2015, falling by about 15 percent from the previous December, according to December 2015 AACER bankruptcy data reported by Epiq Systems. e 53,806 bankruptcy filings nationwide reported for December 2015 represented a decline of 9,396 from the previous December's total of 63,202. e number of filings has dropped year-over-year every December since 2010. Monthly, bankruptcy filings fell by about 18 percent from November's total of 65,511. December's total of nearly 54,000 filings represented a decline of about 54 percent from December 2009's peak total of 117,193. In 22 filing days in December 2015, bankruptcy filings averaged 2,446 per day—the lowest daily average recorded for any one month in 2015, beating the previous low of 2,955 in January. e total number of filings for the calendar year 2015 was 819,240, an average of 68,270 per month and 3,264 per day over 251 filing days. California topped all states for total bankruptcy filings in 2015 with 80,382 for the whole year (including 5,027 in December, also tops among states for the month, though it was way down from California's November total of 6,471). Illinois was second with 56,004 filings in 2015, and Florida was a close third with 54,267. Georgia (49,334) and Ohio (36,959) were fourth and fifth, respectively for the most cumulative filings in 2015. e state with the fewest cumulative filings was Alaska with 441 after experiencing just 24 bankruptcy filings in December. Tennessee and Alabama ranked first and second among states in filings per capita for December with 5.73 and 5.36 filings for every 10,000 people, respectively. ese states finished first and second in bankruptcy filings per capita for every month in 2015. Both totals represented slight declines from the 5.80 and 5.41 totals reported for November. December's national average in bankruptcy filings per capita (2.63) was down from November's total of 2.69 after remaining flat from October to November. 2009 DEC 117,193 53,806 114,812 2010 DEC 96,595 2011 DEC 75,702 2012 DEC 66,540 2013 DEC 63,202 2014 DEC 2015 DEC 120,000 100,000 80,000 60,000 40,000 20,000 0 DEC. 2015 BANKRUPTCY FILING STATISTICS YEAR OVER YEAR

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