DS News - Bank of America

90 Special Legal Report WHO CARES ABOUT SOL ISSUES ANYMORE? By Andrew Boylan, Brandon Hakari, Holly R. Shilliday As the mortgage default industry continues to deal with the lasting effects of the COVID-19 pandemic, many of our pre- existing worries and troubles have fallen by the wayside. However, statute of limitations (SOL) issues are as important as they ever have been, if not more. The Great Recession Let's quickly rewind to the last major subprime mortgage default crisis. For entirely different reasons, we saw the real estate market collapse and mortgage defaults skyrocket. e aftermath of that brought sweeping changes to the mortgage industry, along with new programs designed to provide homeowners in need with different types of financial assistance. It wasn't long before acronyms like HAMP, HARP, TARP, MHA, and CFPB became part of daily conversations. e industry saw unprecedented levels of holds being placed on files where borrowers had requested assistance under these federal programs to either avoid further default or stop pending foreclosure actions. However, one acronym that was missing from our daily vocabulary back then—or at least temporarily forgotten—was SOL. For the most part, the post-crisis holds were connected to borrower-initiated foreclosure prevention alternatives, where they acknowledged in writing that they were in default, that they were experiencing a financial hardship, and that they were requesting assistance. Although the legal concepts of tolling and resetting an SOL differ state-by-state, in many jurisdictions, the loss mitigation scenario described above would either stop or potentially even reset the SOL clock. But as we came to see, not all post-crisis loss mitigation activity was tollable and as a result the industry saw SOL issues arise in certain jurisdictions. COVID-19 and the CARES Act Currently, we've seen federal, state, and local governments enact a multitude of moratoriums and relief programs in an attempt to provide much needed assistance to homeowners and renters. At the national level, H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was passed and signed into law by President Donald Trump. e sizeable relief package included foreclosure and eviction moratoriums and a consumer right to request forbearance for qualifying federally-backed mortgage loans. Many private investors have either followed- suit or provided similar protections for their portfolios of defaulted loans. As the industry continues to navigate these unchartered waters, it will be important to consider and track the underlying reason(s) behind any holds that are placed as a result of the COVID-19 pandemic. ere are many different scenarios that are triggering holds, but not all of them will be tollable. Mortgage servicers and investors should work closely with local counsel to track any loans that are approaching SOL deadlines. If a loan is placed on hold unilaterally by the

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