Citing the potential health risk created by the displacement of individuals from their homes during the COVID-19 pandemic, Governor Wolf issued an Order on May 7, 2020 staying the issuance of statutorily required pre-foreclosure notices. Similarly, Governor Wolf’s Order extends time periods for notices required prior to the initiation of residential eviction proceedings.
At first blush, the Order would appear to impose a moratorium on all actions which may dispossess owners/tenants of residential real property. A more careful reading of the Order reveals that the stay relating to foreclosure actions is more limited in scope.
Foreclosure Notices. The Order provides that, commencing on May 11, 2020, the notice requirements mandated by Act 6 and Act 91 are stayed for 60 days, thereby tolling the ability to commence the timelines and necessary Act 6 and Act 91 compliance that must be satisfied prior to the initiation of foreclosure actions.
All foreclosures requiring compliance with Act 6 and Act 91 cannot commence for 60 days until July 10, 2020. All foreclosure timelines must be computed with a start date of July 10, 2020, at which point any previously delivered Act 6 and Act 91 notices will be deemed delivered and any foreclosure process may commence. The foreclosure actions requiring Act 6 and 91 compliance may proceed from that point forward in the normal course of action.
However, all residential foreclosure actions are not subject to Act 6/Act 91 notice requirements.
The Order does not address foreclosure actions which are not subject to Act 6/Act 91 notice requirements.
It is therefore our opinion that the Order does not stay foreclosures for which Act 6/Act 91 Notices are not required. Do not be surprised if Governor Wolf amends his Order to include all residential foreclosures.
Landlord-Tenant Notices. With regard to landlord-tenant actions, the Order provides that, commencing on May 11, 2020, the notice requirements mandated by the Landlord and Tenant Act of 1951 and the Manufactured Home Community Rights Act are stayed for 60 days, thereby tolling the ability to commence the timelines necessary for the initiation of eviction proceedings. All eviction proceedings requiring compliance with the Landlord and Tenant Act of 1951 and the Manufactured Home Community Rights Act cannot commence for 60 days until July 10, 2020. All eviction timelines must be computed with a start date of July 10, 2020, at which point any previously delivered Landlord and Tenant Act of 1951 and Manufactured Home Community Rights Act notices will be deemed delivered and any eviction proceedings may commence. The eviction proceedings requiring compliance with the Landlord and Tenant Act of 1951 and the Manufactured Home Community Rights Act may proceed from that point forward in the normal course of action.
Act 6/Act 91 Analysis. One might initially believe that Governor Wolf’s Order stays all foreclosure actions. It would certainly appear as such, as a clause in the background section states, “WHEREAS, Pennsylvania law, the Loan Interest and Protection Law, 41 P.S. §101 et. seq. (Act 6) and the Homeowners Emergency Assistance Act, 35 P.S. § 1680.41 et. seq. (Act 91) requires that notice be provided to debtors for each and every foreclosure action that is initiated…” [emphasis added]. If this were indeed the case, all foreclosures would be stayed by the Order.
Instead, only certain mortgage loans are subject to Act 6/Act 91 notice requirements. The notice required under 41 P.S. § 403 (Act 6 Notice) provides a mortgagor with notice of default and opportunity to cure. The Act 6 Notice is only required where there is a “residential mortgage obligation”. A “residential mortgage obligation” is defined in 41 P.S. §101 as, “an obligation to pay a sum of money in an original bona fide principal amount of the base figure or less, evidenced by a security document and secured by a lien upon real property located within this Commonwealth containing two or fewer residential units or on which two or fewer residential units are to be constructed and shall include such an obligation on a residential condominium unit.” The current base figure is $260,404.
Act 91 Notice is issued to provide notice of emergency mortgage assistance through the Pennsylvania Housing Finance Agency, and is mandated where… “Any mortgagee who desires to foreclose upon a mortgage…” 35 P.S. §1680.403c(a). The mortgaged property must be the principal residence of the mortgagor and an owner occupied one or two family residence. 35 P.S. §1680.401c(a). Act 91 Notice is not required where the aggregate amount of arrearages due a mortgagee pursuant to the terms of the mortgage, without regard to any acceleration under the mortgage, including, but not limited to, the amount of principal, interest, taxes, assessments, ground rents, hazard insurance, any mortgage insurance or credit insurance premiums, exceeds the sum of sixty thousand dollars ($60,000.00) to any mortgagor who is more than twenty-four (24) consecutive or nonconsecutive months in arrears on the residential mortgage in question, no matter what the reason therefor.
It is unclear whether Act 6/Act 91 Notice is required where the mortgage is on a “mixed use” property. Act 6 and Act 91 are silent on this issue, and the case law is inconsistent.
Ordinary “best practices,” as well as the current emergency, warrant sending the Act 6/Act 91 Notice where likely required. Of course, all such notices must be sent in compliance with Governor Wolf’s timeline per his May 7, 2020 Order.
By establishing July 10, 2020 as the earliest date for issuance of Act 6/Act 91 notices and as the “start date” for foreclosure timelines under Act 6/Act 91, Governor Wolf has likely prevented—or at least delayed–the mass displacement of moderate income homeowners from their residences in the midst of the pandemic. However, the Order does not address mortgages which are outside of the purview of Act 6/Act 91 (including mortgages on non-owner occupied residential real property securing loans in excess of the Act 6 base figure, mortgages on mixed use properties which may not fall within the definition of “residential property” under Act 6 and Act 91, or mortgage loans which are otherwise excepted from Act 6/Act 91 notice requirements). In any event, lenders and landlord should be mindful of the Order and the stay imposed thereunder.
Friedman Schuman, P.C. is prepared to serve our clients’ needs in this developing area, as well as in all aspects of loan work-outs, restructuring and insolvency.