Marlon L. Bates has been a Partner with Salt Lake City, Utah-based firm Scalley Reading Bates Hansen & Rasmussen since 1991. He represents a wide variety of clients including banks, mortgage companies, credit unions, loan servicing companies, title insurance companies, property managers, developers, landlords, real estate brokers, and many other businesses. The largest segment of Marlon's practice concentrates on foreclosures and creditor bankruptcy law. He has handled thousands of foreclosures and bankruptcies for the nation's biggest banks and credit unions. Scalley Reading Bates Hansen & Rasmussen is a member of the Legal League 100. Marlon recently spoke with DS News about the state of the default servicing industry in Utah.
Utah has had one of the largest declines in foreclosure inventory year-over-year. What is your firm doing to adjust as the numbers head back toward their pre-recession levels?
Utah’s economy is one of the best in the nation. Unfortunately, this means that foreclosures have dropped substantially. As a result of this decrease, we have seen foreclosure firms go out of business after several decades in the industry. Our firm is a full service law firm. Although our default work is the largest single segment of our firm’s work, we practice in most areas of the law. During the peak of the Great Recession, the default section of the firm helped carry the firm when mergers and acquisitions, contracts, loan documentation, construction defects, transactional real estate and estate planning were down. Now, these other segments of the firm have increased as the foreclosure and bankruptcy work have decreased. This balance is helping us remain strong financially while we aggressively pursue new default clients. This balance also helps us keep our experienced default team busy when the default work is light. Our most valuable asset is our highly experienced team of default lawyers and paralegals. By having them help with other areas of the law, we keep them available as we work on adding additional default clients. Keeping this experience at our firm has been extremely helpful in maintaining a competitive advantage over those with whom we compete in Utah.
Where do you see this issue in a year or two—do you see it the same, better, or worse, and why?
We believe foreclosure and bankruptcy filings have reached their pre-recession levels in Utah. We do not anticipate that they will drop further over the next year or two. Nor do we believe foreclosures and bankruptcies will increase measurably over this period of time. Economic indicators in Utah point to a continuance of the current robust economy for the next few years. Perhaps HELOC loan defaults will increase as these loans move from interest only payments to amortizing payments. But these products were not extensively used by borrowers in Utah, so this may not add measurably to the level of foreclosures or bankruptcies. It is our ability to compete favorably for the existing work which will allow us to continue to grow in a strong economy.
What other pressing issues is the default servicing industry facing in Utah right now, or has there been one specific type of case you've handled a lot of that has been a trend?
The Utah legislature needs to clean up some of the legislative remnants of the Great Recession. A Utah statute requires that certain Notices of Trustee Sale incorporate the rights afforded in the federal Protecting Tenants at Foreclosure Act, which is no longer in place. Another Utah statute permits dual tracking so long as certain conditions are followed, although federal regulations prohibit dual tracking. But these are relatively minor inconveniences which will be fixed eventually. Utah has always been a good place for lenders to lend. Utah courts have always been very supportive of loan contracts and have been reluctant to create equitable rights for borrowers outside of the contract. As a result, those who attack mortgage loans in Utah have gained very little traction in the courts. Utah has always been, and will continue to remain, a well-balanced state in which to do mortgage lending and enforce mortgage-related contracts.