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» VISIT US ONLINE @ DSNEWS.COM 9 ELEVENTH CIRCUIT COURT STOPS "ABUSE OF THE BANKRUPTCY PROCESS" is week the 11th Circuit Court of Appeals ruled in Failla v. CitiBank that debtors who file a statement of intention to surrender property in bankruptcy cannot later contest a foreclosure action, and bankruptcy courts have broad power and authority to sanction violations. e U.S. Court of Appeals for the 11th Circuit's ruling eases foreclosures in that circuit because, first, it means that a debtor who discharges mortgage debt by surrendering property can't oppose creditors who then try to foreclose in state court, and second, it speeds that process. Specifically, bankruptcy courts can order debtors who surrender property to drop their opposition to foreclosure. According to a report from Bloomberg BNA, this case involved husband and wife David and Donna Failla, who defaulted on their mortgage in 2009 and subsequently filed for bankruptcy in 2011. e couple then agreed to surrender their house to discharge the mortgage debt, but fought Citibank's foreclosure proceeding in state court. e bankruptcy court, on Citibank's motion, ordered the Faillas to surrender the property, and, likewise, a district court affirmed. One of the points the Faillas argued was that they only needed to surrender to the bankruptcy trustee, but the 11th Circuit did not agree and thus upheld both lower courts' decisions. e Court said that indeed the Faillas have to surrender the property and drop their efforts to stop foreclosure. e Court also said that a "debtor who promises to surrender property in bankruptcy court and then, once his debts are discharged, breaks that promise by opposing a foreclosure action in state court has abused the bankruptcy process." Furthermore, the Court noted that bankruptcy courts may compel debtors not to fight foreclosure. According to a release from CitiBank's representation, John R. Chiles and Jonathan M. Sykes of Burr & Forman, the 11th Circuit's opinion in Failla affirms a rapidly developing line of cases in bankruptcy and state courts in Florida holding that a debtor who surrenders real property in bankruptcy cannot defend foreclosure in state court. Debtors who wish to discharge the personal liability for mortgage debt will also lose the right to contest a foreclosure action, and bankruptcy courts are authorized to sanction debtors who fail to comply. FITCH: MARKET DICTATES VARIED STAFFING LEVELS AMONG SERVICERS Depository institutions appear to be reducing mortgage servicing staff at a faster rate than non-bank servicers as portfolio sizes decline and loan performance improves, according to Fitch Ratings' latest quarterly U.S. RMBS Servicer Handbook. is installment of the Servicer Handbook (the sixth that Fitch has published) contains data on key indicators through Q2 of 2016 that, when taken together, can give insight into the overall health of the mortgage market. e glaring statistic associated with the report is that banks have reduced their mortgage servicing staff by nearly half on average in the past two years. Two years ago, the average depository institution employed approximately 8,000 employees devoted to mortgage servicing. at number has dipped down to just north of 4,000. In contrast, the report says that non-bank servicers do not appear to be in any hurry to reduce staffing levels, the number of servicing employees at these institutions has remained fairly constant on average at approximately 2,000 employees. Fitch attributes the steadiness in staffing levels to the focus these non-bank institutions are putting on growing their servicing portfolios. Further, historically speaking, the company argues that the need for more robust staffing levels is also buoyed by the requirement that non-bank customers have for more frequent interaction. "In addition to lower mortgage delinquencies, high credit quality portfolio additions mostly brought on by origination activity are also contributing to reduced staff among bank servicers," the ratings agency said while previewing the release. "In fact, bank servicers now manage more than twice as many mortgage loans per employee compared to nonbank servicers, a comparison not likely to change to any great degree anytime soon." e handbook also dives into the difference in loss mitigation strategies between the two types of servicing institutions

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