Vukmam Decision Stands: Problematic Act 91 Notices Remain A Concern in Pennsylvania Foreclosure Cases
Weltman issued an advisory on March 16, 2012, concerning the recent Pennsylvania Superior Court decision in the case of Beneficial Consumer Discount Company v. Pamela Vukmam 2012 PA Super 18 (PA Superior Ct. 2012). In Vukmam, the Superior Court affirmed a trial court Order vacating a Sheriff sale, based on what the Court found to be a defective Act 91 Notice, which had been issued by the lender to the borrowers prior to the commencement of the foreclosure. We previously advised that a request was made for an en banc panel of 9 judges to review the decision. However, the Petition for Reargument was denied by the Court on April 14, 2012. As a result, the Superior Court’s decision will stand, unless the Pennsylvania Supreme Court chooses to accept the case.
In summation, the Superior Court determined that the Act 91 notice, which was created by the Pennsylvania Housing Finance Agency in 1999, explicitly to be used by lenders in conjunction with the Act, and utilized through September 8, 2008, did not in fact meet the requirements of the Act. The Court found that the lender’s foreclosure, which was filed in reliance on the defective notice, deprived the court of jurisdiction to render a judgment.
Consequently, following the Vukmam decision, trial courts do not have jurisdiction to issue judgments in foreclosure cases falling into this class, and any judgment rendered in such a case is void. The Vukmam decision has a far reaching affect on many foreclosure cases that have already gone to judgment and sale, and on properties that are a now part of lenders’ REO portfolios.
If the Pennsylvania Supreme Court chooses to review the Vukmam case, it is unlikely that a decision will be issued by the Court any time soon, and there is also no guaranty that the Supreme Court will reverse the Vukmam decision.
In the meantime, many judgments which were previously rendered in foreclosure cases falling into this class will remain in limbo and subject to reversal. Because it is uncertain that the status of these judgments will change, it may be prudent for lenders to choose at this time to voluntarily vacate those judgments, and re-serve a new compliant Act notice to the borrowers so that corrective actions can be taken immediately. New cases may need to be filed in most instances, but in some cases there may be loss mitigation alternatives available to the lender, such as short sale or deed in lieu, subject to a review of title, and willingness of the prior owner to participate in the loss mitigation efforts. Cases falling into this class should be immediately reviewed by lenders in order to determine the best possible resolution for each case.
Additionally, the Vukmam decision may impede the lender’s ability to transfer REO properties which fall into this class, because title underwriters may take the position that title is not insurable for transfer. A title opinion from the underwriter should be obtained before seeking to transfer any REO property which falls into this class.
Weltman will communicate with clients who currently have cases with our firm that fall into this class, and will work with our clients to ensure that they take the necessary corrective actions in light of the Vukmam decision.
If you have any questions related to this advisory, please do not hesitate to contact Ben Hoen or Tom Woodman.
