A&B Abstract:
On March 24, 2020, Delaware Governor, John Carney, issued a Sixth Modification (the “Order”) to the Declaration of a State of Emergency (the “State of Emergency”) initially issued on March 12, 2020. The Order addresses a number of issues that impact residential mortgage loan servicers, including restrictions on residential foreclosures and evictions and certain fees or charges.
Restrictions on Late Fees and Excess Interest for Missed Payments
The Order provides that with respect to any missed payment on a residential mortgage occurring during the State of Emergency, no late fee or excess interest may be charged or accrue on the account for such residential mortgage during the State of Emergency. One could interpret this language to mean that while no late fees or additional interest may be charged or accrued with respect to a missed payment, regularly scheduled interest due on the missed payment may be charged. While not free from doubt, arguably this provision applies only to owner-occupied 1- to 4-family primary residential property, as this provision immediately follows the below restriction on the commencement of a foreclosure action, which is so limited.
Foreclosure Restrictions
The Order imposes restrictions on a mortgage servicer’s ability to initiate or complete a foreclosure action or sale and to charge certain fees or interest. Specifically, until the State of Emergency is terminated and the public health emergency is rescinded, the provisions of the Delaware Code relating to residential mortgage foreclosures, including Subchapter XI, Chapter 49 of Title 10, are modified in the following respects:
- A servicer may not commence a residential mortgage foreclosure action with respect to any owner-occupied 1- to 4-family primary residential property that is subject to a mortgage; the Order excludes from this restriction any mortgage that is held by the seller of the subject property who does not hold more than five such mortgages;
- For any residential mortgage foreclosure action initiated prior to the declaration of the State of Emergency, all deadlines in that action, including those related to the Automatic Residential Mortgage Foreclosure Mediation Program established pursuant to § 5062C of Title 10 of the Delaware Code, are extended until 31 days following the termination of the State of Emergency and the rescission of the public health emergency and no late fees or interest may be charged to or accrued on the balance due on the mortgage that is the subject of the residential mortgage foreclosure action during this time period;
- No residential property that is the subject of a residential mortgage foreclosure action, for which a judgment of foreclosure was issued prior to the declaration of the State of Emergency, may proceed to sheriff’s sale until 31 days following the termination of the State of Emergency and the rescission of the public health emergency; and
- No residential property that was the subject of a residential mortgage foreclosure action, and which was sold at sheriff’s sale, may be subject to action of ejectment or writ of possession until 31 days following the termination of the State of Emergency and the rescission of the public health emergency.
Except as otherwise provided above, nothing in the Order is intended to relieve any individual of the obligation to make mortgage payments or to comply with any other obligation that an individual may have under a residential mortgage. Note that Delaware is a judicial foreclosure state requiring a notice of intent to foreclose be sent to the borrower 45 days prior to the commencing foreclosure. One could read the Order as prohibiting a servicer from sending such notices during the State of Emergency.
Restrictions on Evictions
Similarly, with respect to evictions, the Order provides that, until the State of Emergency is terminated and the public health emergency is rescinded, the provisions of Chapter 57, Title 25 of the Delaware Code (governing summary possession of residential rental units) are modified in the following respects:
- No action for summary possession may be brought with respect to any residential rental unit located within Delaware;
- With respect to any past due balance for a residential rental unit, no late fee or interest may be charged or accrue on the account for the residential rental unit during the State of Emergency;
- For any action for summary possession for a residential rental unit located within Delaware, commenced prior to the declaration of the State of Emergency, all deadlines in that action are extended until at least 31 days after the termination of the State of Emergency and the rescission of the public health emergency;
- No late fee or interest may be charged or accrue on the balance due on the account for the residential rental unit that is the subject of the action for summary possession during this time period; and
- For any residential rental unit that was the subject of an action for summary possession, for which a final judgment was issued prior to the declaration of the State of Emergency, no writ of possession may be executed until the seventh day following the termination of the State of Emergency and the rescission of the public health emergency.
The foregoing restrictions do not apply to actions for summary possession based upon a claim that continued tenancy will cause or is threatened to cause irreparable harm to person or property. Moreover, except as modified above, all other provisions of the Landlord Tenant Code (Chapters 51-59 of Title 25 of the Delaware Code) remain in effect in accordance with their terms and nothing in the Order is to be construed as relieving any individual of the obligation to pay rent or to comply with any other obligation that an individual may have under their tenancy.
Takeaway
As discussed above, the Order imposes a number of restrictions that impact a residential mortgage loan servicer’s ability to initiate or complete foreclosure actions and eviction proceedings as well as limitation on certain fees and charges. Accordingly, mortgage servicers should carefully review the Order to determine their obligations with respect to impacted borrowers.
