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A Review of Contested Foreclosure Appeals in Pennsylvania

This piece originally appeared in the February 2023 edition of DS News magazine, online now.

As we move into 2023, questions abound about what foreclosure volumes will look like in 2023. In Pennsylvania, the volume of foreclosures increased in 2022 over 2021, and the number of contested foreclosure cases likewise also increased. However, the number of cases decided on appeal by the Superior Court of Pennsylvania in foreclosure matters has continued to decline since the time of COVID-19.

This article examines several legal issues decided on the appellate level, as well as an outlook for the new year as to what issues are likely to make their way to the appellate courts in 2023.

In Pennsylvania, mortgage foreclosure appeals in 2022 declined from 2021. In 2022, there were only 15 opinions issued by the Superior Court of Pennsylvania about mortgage foreclosure issues, and of the 15 opinions, only two were deemed “precedential.” This stands in contrast to pre-COVID-19, when the appellate court routinely issued between 30-40 foreclosure opinions per year. Between September and December of 2022, zero appellate opinions were issued by the Superior Court relating to foreclosures.

Amongst the issues that continued to arise in 2022, contested foreclosures are standard defenses related to standing or issues on motion for summary judgment, where there are allegations that questions of fact exist. This article touches on a few other issues of note.

There has been continuing discussion in various cases on the effect of a prior open mortgage foreclosure under the same mortgage. Based upon this developing area of case law, a lender must ensure that any prior open foreclosure cases on the docket are dismissed prior to initiation of a new case, as a trial court may hold that it lacks the jurisdiction to hear the new case.

There was a key case relating to collection of claimed sale costs by a Sheriff from an executing creditor before the Sheriff would issue the deed to the lender. The Sheriff collected these funds in error, and the funds should not have been paid out by the Sheriff to the junior third-party creditor, the Commonwealth of Pennsylvania.

This case dealt with the ability of the bank (the executing creditor) to recover those funds that were erroneously paid over to the state. In Bank of New York Mellon v. Cabrera, 412 EDA 2021 (Pa. Super. 2022), decided April 5, 2022, the appellate court ruled that the trial court in the foreclosure lacked the subject-matter jurisdiction over the bank’s attempt to recoup the funds. A significant published case was related to a reverse mortgage and the applicability of various FHA regulations and loss mitigation options. The case known as Bank of America v. Scott, 2022 Pa. Super. 39 (2022), was decided on March 3, 2022, and it dealt with some significant issues in trial practice related to trial motions in limine, as well as the overall effect of the federal regulations that guide FHA reverse mortgages.

While the foreclosure volume in 2022 is still below that of the pre-COVID-19 level, it appears that the level will continue to rise in 2023, though not yet achieve the pre-COVID-19 level. With more foreclosures, there is a likelihood of more contested matters and more appeals. It would appear that there should be more decisions rendered by the appellate courts affecting mortgage foreclosures in 2023. Issues that are expected to arise relate to: further evidentiary issues, business record issues, continual standing issues, and a further discussion of the effects of prior open foreclosures. Cases may focus on the effects of federal regulation and loss mitigation requirements prior to the initiation of foreclosure cases.

About Author: Stephen M. Hladik

Stephen M. Hladik, Esquire, is a principal in Hladik, Onorato & Federman, LLP. Formerly the youngest Deputy Attorney General in charge of the Harrisburg office of the Pennsylvania Bureau of Consumer Protection, Hladik brings a broad range of experience to his mortgage foreclosure, bankruptcy, tax sale, and UDAP legal practice.

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