VOLUMe 26, NUMBer 1 • FALL 2010 THE A DV · PDF filethe deed in lieu of foreclosure...
Transcript of VOLUMe 26, NUMBer 1 • FALL 2010 THE A DV · PDF filethe deed in lieu of foreclosure...
Deeds in Lieu of ForeclosureBy Francie Cohen Spahn, Esq.
I. Introduction
Deeds in lieu of foreclosure tend to be discussed from two differ-ent perspectives the lenders perspective and the borrowers per-spective. The lenders focus, for example, is on whether it can obtaingood and marketable title upon conveyance, whether it can preservethe priority of its mortgage lien against junior lienholders andinchoate mechanics liens, or whether the deed in lieu of foreclosureprocess may be preferable to the costs and delays often associatedwith the foreclosure process. The borrowers concerns include thatthe deed in lieu of foreclosure process is preferable to a foreclosurebecause it allows the borrower to avoid the public embarrass-ment of a foreclosure proceeding. This article explains some
of the significant elements ofthe deed in lieu of foreclosureprocess from both the lenders andborrowers perspectives.
II.What exactly is a deed in lieu of foreclosure?
A deed in lieu of foreclosure is a process. It commenceswhen the borrower is no longer able to continue makingpayments to its lender. Having defaulted under its loan, theborrower (or mortgagor) might approach its lender with anoffer to surrender the property in exchange for the lendernot foreclosing on the property, but rather accepting it asconsideration for and in discharge of the borrowers debt.See In re Anderson, No. 95-15419, 1997 WL 1102027, 6
(Bankr. E.D. Va. August 29, 1997). The lender will then determine whether it will accept theborrowers offer and, if so, under what terms. The parties will negotiate the terms of the sur-render, which will be memorialized in a settlement agreement at closing. Prior to closing, thelender will engage in a traditional due diligence process, including, among other things,reviewing the status of leases and contracts affecting the property and seeking title insurancefrom its title company. If all goes well, the parties proceed with closing, at which time theborrower transfers the deed to the lender and the lender arguably holds absolute title (ver-sus only a security interest in) the property.
III.What is the process for effectuating a deed in lieu of foreclosure?
A. Drafting the Settlement Agreement
The deed in lieu of foreclosure process should begin with a written offer from the bor-rower to convey the property to the lender. This step evidences that the transaction is vol-
THE ADVOCATEy o u n g l a w y e r s s e c t i o n m a ry l a n d s tat e b a r a s s o c i at i o n
V O L U M e 2 6 , N U M B e r 1 F A L L 2 0 1 0
Whats Inside
2 From the Chair
3 The 2010 Women
in Law Leadership
Academy: Take
Charge of Your
Own Career
5 The Courts
Perspective: Tips
and Observations
from Past and
Present Judicial
Clerks
6 Solo and Small
Firm Conference
7 What We Do,
And How to
Join Us
8 Harford Habitat for
Humanity
9 MSBA Annual
Meeting Wrap Up
courts may construe a deed inlieu of foreclosureaccompanied by []reserved rights asa security instru-ment instead of
an absolute conveyance
continued on page 10
THE ADVOCATEyoung lawyers section
maryland state bar association
EDITORSHeather r. Pruger
William N. Sinclair
ASSOCIATE EDITORSesther D. Coleman
Andrea Padley
Michael Palisano
Purvi Patel
rachel Smith
OFFICERSMarla Zide, Chair
erek L. Barron, Chair-Elect
Wendy Sare Meadows, Secretary
Wm. Carl Isler, Treasurer
elizabeth Morris, Member-At-Large
Jason Hessler, Immediate Past Chair
Gwendolyn Tate, ABA Delegate
STANDING COMMITTEESActivities Co-Chairs
Kimberly Neal and Sandy Popp
Disaster Relief Chairrob erdman
Education Co-ChairsSidney Butcher and Dolores Dorsainvil
Membership Co-ChairsThomas M. Weschler and regine Francois
Nominating ChairTamara Goorevitz
Policy ChairClaude de Vastey Jones
Pro Bono Co-ChairsMike Hudak and Meredith Martin
Public Service Co-ChairsGwendolyn S. Tate and Michael W. Siri
Publications Co-ChairsHeather r. Pruger and William N. Sinclair
Resolutions Co-ChairsGreg Kirby and Matthew S. Tidball
Annual Meeting ChairLaurie Wasserman
Diversity Initiative Co-ChairsLaKeecia r. Allen, Arielle Harry-Bess, & esther D. Coleman
Legislative Liaison ChairJulia Carolan
Historian ChairOmolade r. Akinbolaji
Technology ChairTaren N. Stanton
SPECIAL PROJECTS COMMITTEESWe the Jury / I Had A Dream Too Co-Chairs
LaKeecia r. Allen, Arielle Harry-Bess, & esther D. Coleman
Awards ChairBeverly Winstead
Wills for Heroes / Children's Law Library Co-ChairsMelody Tagliaferri Cronin and Jessica Barnes
CIRCUIT REPRESENTATIVES1stVacant (Dorchester, Somerset, Wicomico, Worcester)
2ndVacant (Caroline, Cecil, Kent, Queen Anne's, Talbot)
3rdChristine Britton (Harford, Baltimore County)
4thVacant (Alleghany, Garrett, Washington)
5thSarah Cline and richard H. Gibson, Jr.
(Anne Arundel, Carroll, Howard)
6thAndrew Schwartz and Caryn G. Seigel
(Montgomery, Frederick)
7thMonise Stephenson and Lisa Hall Johnson
(Calvert, Prince George's, St. Mary's, Charles)
8thI. DeAndrei Drummond (Baltimore City)
BOG REPRESENTATIVESelizabeth Morris
erek Baron
Jason Hessler
To get in touch with any of the individuals listed above, contact MSBA
Headquarters at 410-685-7878 or 800-492-1964; or log on to the Young
Lawyers Section website at www.msba.org/sec_comm/yls.
The Advocate is published quarterly by the Section of Young Lawyers of the
Maryland State Bar Association, 520 West Fayette Street, Baltimore, Md.
21201, 410-685-7878, 800-492-1964.
The opinions exercised in this publication are those of the authors and
should not be construed to represent the opinions or policies of the Section
of Young Lawyers or Maryland State Bar Association.
2008 Maryland State Bar Association, Inc.
2 | THE ADVOCATEFall 2010
This article is being written as we are enjoying one of the hottest sum-mers in the history of Baltimore. Our country continues to be in an eco-nomic crisis and young lawyers are having difficult times finding jobs.Although times are hard, the young lawyers in our Maryland communitiescontinue to dedicate time and energy to volunteering providing not onlylegal services, but also community service.
As my year begins, I would be remiss not to thank Jason Hessler, whoseshoes I dont think I will ever be able to fully fill. Jason has been an incred-ible leader, not only in the MSBA, but also within our Maryland commu-nities. Jason, his wife Shreya, and their two daughters have readied me andmy family for the experience of serving as Section Chair. I look forward tocontinuing to work closely with Jason on the executive committee and theBoard of Governors.
We are looking forward to an amazing year in the Young LawyersSection. The Public Service Committee is already hard at work planningevents at the SPCA, blood drives, and Habitat for Humanity events.Michael Siri has reminded us that, just because its hot, it is not too earlyto plan for the Polar Bear Plunge in January. Our education and resolutioncommittees are working hard to plan events for the upcoming bar year.The membership committee, our most industrious committee of 2009-2010, has held several events over the Summer and looks forward to wel-
coming new admittees and judi-cial clerks in the Fall. Ouractivity committee is busy at
work planning the 2011Spring Fling. All of our
committees welcome newfaces, new ideas, and assis-
tance with planning. Please do not hesitateto contact us if you are interested in getting
involved.While I look forward to being the face of the Young
Lawyers Section this bar year, I know I am not the only voice. I want toensure all of our voices are heard, and I therefore look forward to hearingfrom you!
Sincerely,
Marla Zide
From the Chair
THE ADVOCATE: Vol. 26.1 | 3
When asked for his secret to success,
Wayne Gretzky replied, I skate where
the puck is going; others wait for the
puck to come to them. While some
might not expect a sports figure to be the
source of a quote at a womens confer-
ence, it aptly summed up the focus of the
American Bar Associations 2010
Women in Law Leadership Academy.
The WILL Academya two day confer-
ence in Philadelphiafocused on giving
women the tools to take charge of their
careers. Sessions addressed topics includ-
ing Attributes of a Leader,
Alternatives to Law Firm Practice,
Navigating to Partnership,
Rainmaking, and Succession Planning,
Developing Your Personal Strategic
Plan, Advice from the Bench, Best
Practices and Advice from General
Counsel, Negotiation Skills for
Attorneys, and Restructuring Law
Firms in a Down Market: Alternative
Models and Work/Life Flexibility as Part
of the Solution. The conference also
included informal and moderated net-
working opportunities.
The sessions each addressed different
situations and provided specific guidance
tailored to those situations, but some
common themes emerged: (1) know
yourself; (2) know your audience; (3)
plan ahead; and (4) work hard. This arti-
cle focuses on those themes, which are
equally applicable to male and female
lawyers working to develop their careers.
Know Yourself. Stereotypes aboundconcerning women: women are nurtur-
ers; women are managers; women are
emotional; women