When the Loan File Changes Hands: Avoiding Gaps in Tennessee Foreclosure Documentation

Mortgage loans don’t always remain with the same lender or servicer from loan origination through payoff. Loans can be assigned, transferred to new servicers, acquired by investors, or a successor trustee may be appointed before foreclosure is on the table. While these changes don’t necessarily stop a foreclosure from moving forward, each transition leaves room for important records to become incomplete or inconsistent.

As a creditor pursuing foreclosure in Tennessee, it’s crucial that you review the loan file before starting the process to identify potential issues and address them. Crawford & von Keller helps lenders, servicers, and investors with foreclosures. Call us at 615-807-0939 to schedule a consultation now.

Why Loan Transfers Can Create Foreclosure Documentation Problems

When a loan changes hands, issues can arise when the documents reflecting those changes do not line up with the rest of the foreclosure file or are missing altogether. A file may include incomplete transfer records, missing assignments, missing prior notices, or conflicting entity names.

If the documentation available does not support the actions being taken at each stage of the foreclosure, the process may be affected, and may also have an impact on the validity of a foreclosure sale.

Confirming the Authority of the Substitute Trustee

Trustee documentation needs particular attention in Tennessee. Under Tennessee law, a beneficiary typically may appoint a successor trustee unless the deed of trust provides otherwise. The substitution of trustee must also be recorded before the foreclosure sale.

State law also addresses what happens when a substitution is not recorded before the substitute trustee’s first publication of the foreclosure notice. In these situations, the statute permits the beneficiary to include specified ratification language in the later-recorded substitution, so long as the statutory requirements are satisfied.

Before moving forward, creditors should confirm that the correct trustee has been appointed, the substitution documents identify the right beneficiary, and required recording requirements have been met.

Making Sure Notice Documents Match the Foreclosure File

Changes in ownership or servicing may also lead to problems when information in the foreclosure notice does not match the supporting file. Tennessee law requires foreclosure advertisements to appear at least twice in a newspaper in the county where the sale will occur and to be posted online by a third-party Internet posting company for at least 20 continuous days. However, it’s important that creditors also comply with specific terms of the deed of trust, which could require additional publications beyond state law.

The trustee or another selling party must send the debtor and any co-debtors a copy of the required foreclosure notice by registered or certified mail with return receipt requested.

There may also be additional notice requirements when the substitute trustee’s name was not included in the first publication. It’s important to confirm exactly when the trustee changed and what notices were sent afterward.

Before proceeding with foreclosure, your foreclosure attorney should do a file review to confirm that party names, property information, deed-of-trust information, and mailing records are consistent and complete.

Resolve File Gaps Before the Foreclosure Moves Forward

Documentation issues are typically easier to address before a foreclosure sale is underway. Reviewing a transferred file early can highlight missing records, real estate title issues, inconsistent dates and names, trustee appointment issues, and potential notice problems.

Depending on the issue, we may need to obtain, correct, record, or otherwise fix additional documents before proceeding.

Again, while these issues may not completely stop a foreclosure, they can delay it and require you to go through extra steps. This results in lost time and money.

Crawford & von Keller Helps Creditors Keep Foreclosures on Track 

We represent creditors in Tennessee foreclosures and other creditor-rights matters. We’re here to review transferred loan files, identify potential documentation concerns, confirm foreclosure authority, and customize the documents or steps needed to successfully complete the foreclosure process.

Contact us now to discuss documentation issues or problems that have already affected an ongoing foreclosure. Call us at 615-807-0939 or contact us online to schedule a consultation.