MD2010007

Dear Associates:

Recently there have been numerous articles disseminated concerning the validity of foreclosures in Maryland. The concern has been over certain affidavits and averments filed in connection with foreclosures handled by the law firms of Bierman, Geesing, Ward and Wood, LLC (Bierman), Covahey, Boozer, Devan and Dore, P.A. (Dore) and Buonassissi, Henning & Lash, P.C. (Buonassissi). These claims involve allegedly fraudulent or forged affidavits executed by parties representing the foreclosing lenders and trustees. Additionally, new legal developments (described below) have changed the foreclosure landscape and the way in which title insurance can be offered. As such, we require all issuing agents to be extremely vigilant when reviewing title at or after a foreclosure (including any foreclosure appearing in the chain of title within the last three years from the date of your current vesting deed). Despite the new requirements listed below, you must continue to follow all underwriting requirements outlined in any Stewart Bulletins.

On October 19, 2010, the Maryland Court of Appeals approved emergency rules to allow the hiring of part-time examiners to scrutinize affidavits and other documents submitted in a foreclosure case. The rules also clarify the discretion given to Circuit Court judges to require attorneys or trustees in each foreclosure suit to appear to explain any anomalies in the affidavits submitted as part of the foreclosure suit and defend a possible cause for dismissal.

Additionally, on October 13, 2010, a class action lawsuit was filed in the U.S. District Court for Maryland against the law firm of Bierman, Geesing, Ward & Wood, LLC (BGW) alleging a variety of deficiencies with respect to foreclosures handled by BGW as Trustee. The case reference is 8:10-cv-02822 (Greenbelt Division). The class action plaintiffs allege that certain affidavits filed in BGW foreclosures were false because the affidavits were not actually executed by the trustees, themselves. The plaintiffs also allege that, from 2004 to the present, BGW executed foreclosure Trustees’ Deeds through use of clerical employees rather than the Trustees, themselves, and that such signatures and accompanying notary acknowledgements are false. The class action suit includes a request for declaratory relief, including a determination that a foreclosure filed “by other than a trustee or attorney is void and confers no jurisdiction on the court” and that a trustees’ deed “actually executed by a person(s) other than a trustee is void … and transfers no interest in real property.”

Another suit was recently filed in U.S. District Court, Reginald Jones v. HSBC Bank, N.A. et al., case number 09-2904 alleges that the Defendants (including employees of Buonassissi) “knowingly and willfully filed false, fabricated, and counterfeit documents in support of the Order to Docket in every, or virtually every, foreclosure docketed… .” Plaintiffs are asking for similar relief as stated in the Bierman case above including releasing the foreclosed borrowers from their obligations under the deeds of trust.

Mandatory requirements when insuring title from or after a foreclosure in Maryland:

1.) Insuring at the foreclosure (i.e. investor purchaser at the courthouse steps or offering new owner’s title policy to a lender after repurchasing the property):

a.) Do not insure a purchaser or lender at the foreclosure, unless you secure Underwriter approval.

2.) Insuring after a foreclosure has been finally ratified by the court (i.e. a final order ratifying the auditor’s report or final order granting possession) or it is an REO sale to a purchaser for value and securing an institutional lender:

a.) If the current foreclosure was filed by Bierman, Dore or Buonassissi offices, do not insure unless:

i.) Stewart’s state counsel reviews the entire foreclosure file. You must copy state counsel on all pleadings including all affidavits, corrective affidavits, docket entries, etc., and you must run judgments on the foreclosed borrower(s) as plaintiffs(s) to be certain that they have not filed a lawsuit against the foreclosing lender, Bierman, Dore or Buonassissi, excepted or objected to the foreclosure, or filed a lis pendens against the property; and

b.) On any foreclosure file that discloses that a corrective affidavit has been filed AFTER the foreclosure sale has been ratified, we will not agree to insure without a signed indemnity agreement from the foreclosing lender (see form attached). We will only accept an indemnity from an institutional lender that you are familiar with. Do not insure any foreclosures whereby the lender involved is a private (hard money) non-institutional lender without first securing approval from state counsel. The indemnity must be executed by an authorized representative of the lender.

c.) If foreclosure was filed by law firm other than Bierman, Dore or Buonassissi, review foreclosure file to determine that all affidavits appear signed by the proper attesting party, they are sufficiently notarized where applicable and no corrective affidavits or exceptions have been filed in the matter.

3.) You may continue to insure titles without review of the foreclosure documents listed above where the property is held in the name of a bona fide purchaser who purchased from a purchaser following an REO foreclosure sale, the property is owner occupied/principal residence and the ratification of the foreclosure sale occurred at least three years back in the chain of title. You must continue to follow all Stewart search guidelines and judgment parameters as previously issued.

Please note that foreclosures in general may continue to be attacked and you must be vigilant when reviewing these matters. Please be sure to keep informed of all new developments and communications concerning this ongoing dilemma and contact state counsel for any updates.

STRUCTURING THE COMMITMENT ON MARYLAND FORECLOSURES

Review the Deed of Trust/Mortgage to confirm that the foreclosure complied with its terms, and then ADD the following requirements to Schedule B-1 of the Commitment:

Foreclosure action filed in Circuit Court for ___________ County, Maryland Case No. _______________ against _______________ in regard to that certain deed of trust recorded in liber ______ at folio ___________ TO BE DISMISSED WITH PREJUDICE or, if the property is to be conveyed pursuant to the foreclosure case, verification of compliance with Maryland Real Property Code Sections 7-105 et seq., Maryland Rules 14-201 et seq., and Maryland Rules 14-301 et seq. including review of the following:

• Order to Docket containing the following items:

1. Affidavit of default;

2. Notice of intent to foreclose;

3. The original or a certified copy of the deed of trust;

4. A statement of the debt remaining due and payable supported by an affidavit of the plaintiff or the secured party or the agent or attorney of the plaintiff or secured party;

5. A copy of the debt instrument accompanied by an affidavit certifying ownership of the debt instrument; and

6. A copy of the deed of appointment of a substitute trustee.

• If Order to Docket filed on or after July 1, 2010, copy of the Final Loss Mitigation Affidavit filed and served with the Order to Docket, or if not so filed and served, filed at least 30 days before the sale, but not sooner than 28 days after filing Order to Docket.
• Affidavit of mailing of notice of intent to foreclose (Must have been sent no sooner than 45 days after default under the note and at least 45 days prior to the filing of the Order to Docket).
• Proof of personal service of Order to Docket (including all other papers filed) on owner/borrower in accordance with the provisions of Maryland Rule 14-209.
• If Mediation requested by borrower, report from Office of Administrative Hearings showing outcome of Mediation.
• Proof of Publication of Advertisement of Sale (must be published once a week for 3 weeks; first publication must not be less than 15 days prior to the foreclosure/last publication not more than one week prior to foreclosure sale. (NOTE: A sale may not be advertised until 20 days after the Final Loss Mitigation affidavit is filed, but if a request for Mediation is filed within that time and not stricken, a sale may not be advertised until the report from the Office of Administrative Hearings is filed with the court).
• Verification that the foreclosure sale was made at least 45 days after personal service on mortgagor and owner of Order to Docket.
• Proof of Notice of Sale on all junior or subordinate lien holders in accordance with the provisions of Maryland Rule 14-206(b)(2) and (3).
• Proof of bond filed prior to sale.
• Report of Sale filed within 30 days following the sale. (NOTE: Report must contain an affirmation of the fairness of the sale and the truth of the report.)
• Affidavit of Purchaser.
• Clerk’s notice following sale (order nisi) stating that the sale will be ratified unless cause to the contrary is shown within 30 days. A copy of such notice shall be published at least once a week in each of three successive weeks before the expiration of the 30-day period.
• Final Order of Ratification.
• If objections to sale filed, time to appeal must have expired (i.e. 30 days from entry of order of final ratification).
• Receipt of adequate proof that the borrowers/property owners are not currently under the protection of the Bankruptcy Court and/or were not in bankruptcy before or during the foreclosure process. If bankruptcy filed by owner/borrower, Order of bankruptcy court lifting the automatic stay as to foreclosed deed of trust.
• Receipt of adequate proof that the property owners are not currently on active duty in the U.S. Military.
• Receipt of adequate proof of proper notice to the IRS of its subordinate lien, if applicable.
  Evidence that 120 days have passed since the date of foreclosure sale OR receipt of waiver from the IRS of their right to redeem the foreclosed property, if applicable.
• Proof that the borrower/foreclosed owner has vacated the property and that it is not occupied by anyone claiming rights under or through such person.

Further underwriting considerations:

• Did all record owners sign the deed of trust foreclosed on?
• Was a trustee listed on the deed of trust?
• Was the legal description correct?
• Was there a substituted purchaser? Was that purchaser approved by the court in the foreclosure case?
• Were all subordinate lienholders notified prior to sale? See Affidavit of Compliance.
• Was the Appointment of Substitution of Trustee dated and recorded prior to the filing of the foreclosure?
• Review the foreclosure docket carefully. Has an independent auditor or special master been appointed by the court to review the case file and is the court awaiting a determination from that auditor? Was a Show Cause order issued to the trustee/attorney to report to the court the sufficiency of the affidavits?
• Is the foreclosed deed of trust an indemnity deed of trust (IDOT)? If so, make certain that you have collected sufficient recordation taxes to cover the cost to record the trustee’s deed to the re-purchasing lender.
• All powers of attorney utilized by REO lender must be recorded or submitted for review prior to closing.
• If you have any questions relating to this or other bulletins, please contact your local underwriting personnel or Stewart Legal Services.

EXHIBIT – INDEMNITY AGREEMENT

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