SC Chief Justice Issues TRO Regarding Mortgage Foreclosures

On motion of the Federal National Mortgage Association (Fannie Mae), the Chief Justice of the Supreme Court of South Carolina issued a temporary restraining order regarding foreclosure actions that involve loans that are potentially subject to modification under the Home Affordable Modification Program (HMP).

By MEG KINNARD, Associated Press Writer

COLUMBIA, S.C. (AP) – South Carolina’s highest court on Tuesday temporarily stopped thousands of pending foreclosure sales in the state to give homeowners more time to take advantage of a new federal program to help them refinance mortgages.

The injunction – which mortgage experts said appeared to be the nation’s first court-ordered stop for an entire state – prevents judges in South Carolina from finalizing foreclosure sales on properties guaranteed by Freddie Mac, Fannie Mae or any other mortgage company that has signed on to a federal assistance program.? RealtyTrac Inc., a foreclosure listing firm, says the ruling could affect 5,000 South Carolina homes facing foreclosure.? The ruling was in response to a request from a Columbia attorney representing Fannie Mae, who had argued that it was necessary to keep homeowners who might be eligible for federal assistance from being shut out of the process.

“Absent the injunction, mortgagors eligible for relief under the HMP program could be denied their right to participate because their property was sold at the foreclosure sale,” Ronald Scott wrote in his three-page motion. “This qualifies as irreparable injury for which the court should provide redress in the form of a temporary injunction.”? The Obama administration announced a plan in March to provide $75 billion in incentives for the mortgage industry to modify loans to help borrowers avoid foreclosure. Freddie and Fannie also rolled out a flexible refinancing program for homeowners with an application deadline of June 2010.

Scott had asked the court to address about 1,000 South Carolina homes facing foreclosure and backed by Fannie Mae loans. But in her order, state Supreme Court Chief Justice Jean Toal expanded the stoppage to foreclosures backed either by Fannie or Freddie – together, the government-controlled companies own or guarantee almost 31 million mortgages, more than half of all U.S. home loans – or any other lender who has agreed to participate under the Obama administration’s plan.? Toal also set a May 15 deadline for plaintiffs in foreclosure actions to notify other parties if the loan is subject to modification under the federal program. If it is, those foreclosure proceedings will remain on hold. But if not, the sale can go forward.

Officials for Fannie Mae did not immediately return calls for comment on the ruling.? Fannie Mae and Freddie Mac have announced their own plans to wait on foreclosure sales that could be affected by the Obama program, notifying servicers not to complete foreclosure sales on eligible loans unless the borrower either didn’t respond or didn’t want to participate in the program.? But a spokesman for Freddie Mac, Brad German, said Tuesday the South Carolina ruling was the first he’d heard of in the country by a court with statewide jurisdiction.
“We’re not aware of anything like this, anywhere else,” German said.

Nationally, the number of homes facing foreclosure grew 24 percent in the first three months of this year from a year earlier. The total in 2008 was 2.3 million households that received foreclosure filings.? RealtyTrac has reported that in South Carolina, more than 13,700 homes are in some stage of foreclosure.? RealtyTrak spokesman Daren Blomquist also said the ruling appeared to be a first.? “There have been some piecemeal things, but nothing that broad statewide,” Blomquist said.

This may become the way other states make time for federal refinance programs to work.? Brian