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44 COUNSEL'S CORNER Challenges that Keep Foreclosures Stuck in the Pipeline Larry Buckley is a managing shareholder with Buckley Madole, PC, and works out of the firm's Dal- las, Texas, office. He received his JD from Pepperdine University and is a member of the state bars in Califor- nia, Texas, and Arizona. He focuses his practice on bankruptcy, foreclosure, and litigation. Adam Womack is a shareholder with Buckley Madole, PC, and works out of the firm's Dallas, Texas, office. He received his JD from the Texas Tech Univer- sity School of Law and is a member of the state bars in Texas and Florida. His practice focuses on bankruptcy, litigation, foreclosure, probate, and real estate. What are some of the things that can delay the completion of foreclosures or bank- ruptcy filings and keep them stuck in the pipeline? Buckley: Document impediments have been a historical and a continuing challenge. Basic legal documents are required for filings in court, whether it's in foreclosure or in bankruptcy, and it really doesn't matter whether it's a judicial or a non-judicial foreclosure jurisdiction. Bankruptcy has a more universal set of rules, but in general the baseline documents, including the note, the endorsement to a note, recorded deed of trust, and one of the most critical documents that is frequently missing is an assignment of mortgage. Breaks in the chain of title make it difficult if not impossible to establish legal standing to take an action on behalf of a mortgage creditor. Frequent- ly, the referral of those documents is incomplete, and that creates delays in either the first legal action or other actions that are part of the timeline for any legal proceeding, whether it's a foreclosure or a bankruptcy action. What happens to the deed of trust or assign- ment of mortgage? How do they get lost? Buckley: It's something in the servicer world, because there are so many transfers in servicing over the last several years. e documentation from servicer to servicer is not always complete, so that documentation has to be located from a cus- todian of records, or in the case of an assignment of mortgage, frequently has to be created to fill in the gap in title. When those documents are not available, then legal proceedings come to a halt and it puts a lot of pressure on law firms that have timeline requirements and it creates challenges for servicers with investors who are also pressed on a timeline to move these cases forward. At our firm, we create impediment reporting that we submit to clients. While there are proac- tive efforts to get those documents, it takes time, and sometimes, particularly with assignments of mortgage, it's difficult to find all the appropriate parties that can duly execute those documents under oath for recording in the public records. Does loss mitigation delay foreclosure proceedings? Buckley: In a foreclosure proceeding today, based upon various rules and regulations, when a borrower requests loss mitigation, there is no dual track—that is, foreclosure and loss mitigation are not proceeding simultaneously. e loss mitiga- tion process for a modification, a deed-in-lieu of sale, or a short sale requires documentation from the borrower. So, there is a process that takes place over a period of time, even if all the documentation is submitted. If the customer preliminarily qualifies for a loan modification, there often is a trial period in which the borrower needs to perform. On average, I would say from the date of an initial request for loss mitigation to a completed successful conclusion is somewhere in the neighborhood of 120 to 150 days. During that time, those foreclosure files are stuck. For law firms, it creates challenges in that those files remain open in our case management systems. We have requirements by both investors and servicers to update those files through various systems, and to, at some level, have responsibility for oversight on the file. But the loss mitigation process is generally happening, for the most part, outside of our visible line of sight. It creates a lot of inventory. ose files don't generate fees for law firms, but they do create management responsibility, which creates a challenge. Womack: A challenge and a good issue for any law firm to review with a servicer is how to best postpone or suspend foreclosures in states to save the most money against the loans. e chal- lenge is that how you postpone a foreclosure in California for loss mitigation is very different from how you do it in Texas, even though they are both similar non-judicial foreclosure states. In other places, maybe you would have to republish the sale notice, and that could cost thousands of dollars in some of the northeastern states. Just acknowl- edging that there is an ongoing challenge with servicers and with law firms to keep costs low, but also afford the right opportunities for borrows to suspend their foreclosures when they are evaluat- ing loss mitigation options. LARRY BUCKLEY: MANAGING SHAREHOLDER, BUCKLEY MADOLE, PC (Left) ADAM WOMACK: SHAREHOLDER, BUCKLEY MADOLE, PC

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