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Counsel’s Corner: The Trouble With Completing Foreclosures

Rich Nielson cropped

Rich Nielson

Richard M. Nielson is the managing partner of Nielson & Sherry, PSC, and the Senior VP and Corporate Counsel for Agility Closing & Title Services, Inc. He is based out of the firm's Louisville, Kentucky office. In addition to managing both the law firm and title company operations and compliance, Nielson supervises all default legal services for the law firm, including bankruptcy, foreclosure, eviction, litigation, compliance, and loss mitigation services. He also supervises Agility's Louisville closing and title services, and handles commercial title and closing projects for Agility. Nielson recently talked with DS News about some of the obstacles involved with trying to compete a foreclosure filing in Kentucky.

You hear a lot about foreclosure activity in some states, like Florida, Nevada, New Jersey, and New York. We don't hear much about foreclosure activity in Kentucky. Why is that?

In my opinion, Kentucky is one of the toughest states to handle foreclosure work in; however, it's a lower volume. So it doesn't get the notoriety of some of the bigger states like California or Florida. It's certainly not the same degree of a New Jersey or a Florida or even a California, but it's very comparable and probably a little more difficult than Ohio, for example, because of the inconsistent nature of a lot of things that go on. In Kentucky, we have 120 counties and they're very individualistic in the way they operate. One of the articles I recently published was on some rules that the court has passed starting January 1. They are trying to make Kentucky a little more uniform. It succeeded on a couple of issues, but it has also created a lot of issues that we are still going to have to be addressing.

In Kentucky, the timeline for completing a foreclosure is about a year, so it's not the worst timeline. But in my opinion, a year is still too long. When I started doing this work 20 years ago, we could generally get a foreclosure completed in about 180 to 200 days. Now, our internal average is running an average of about 300 days, and the Fannie and Freddie guidelines are much higher than that. We see about a 100-day cushion that's built in there that's caused by a lot of these issues, and that makes Kentucky complex, along with the fact that they are very independent judicially. Each one of those 120 judges does things very differently, so that's been a big issue.

One of the unique things about Kentucky that a lot of people don't know is that we are one of the few states that doesn't have a regular in-session legislature. Up until about five years ago, the state legislature met only once every two years. Now they meet every year, but alternatively it's a short or a long session. The long session just finished in mid-April, and next year's session will only be a brief session to consider budgetary issues. My favorite famous quote is by Thomas Jefferson: "The most dangerous time for democracy is when the legislature is in session." In Kentucky, we don't get a lot of new legislation, but when we do, we get it all at once. There were a number of bills passed got passed this year that will have a pretty substantial impact on foreclosure work. It is going to be interesting to see how some of those are digested.

Why is it so hard to complete a foreclosure in Kentucky?

We have 120 counties. The judges in Kentucky are circuit court judges, and that truly means what it says—they ride a circuit. In the more urban counties, their circuit may be only one county. The judges in more rural counties can include up to four counties in their circuit, so they may be in a particular county only once a month to deal with routine motions. You may file a request for something with the court, and it may be four weeks or five weeks before the judge will even consider your request. So you're automatically on a time delay of at least 30 days if you're in one of those remote counties. You've got that issue, and then each county in Kentucky has what they call a master commissioner who is appointed by the judge to sell real estate, similar to a sheriff that sells the property in Ohio. Even though a circuit court judge may cover three or four counties, each county has its own master commissioner, so you have 120 of those, and each one of them has his or her own way of doing things. In Louisville, we have a master commissioner for Jefferson County who has 14 deputies that assist her in handling foreclosures. I can tell you that all 14 of those deputy masters have their own way of doing things, and they are not very good at streamlining or reconciling those discrepancies. We know, “Oh, with the deputy on this file, you're going to have a delay.” Whereas with another one, you would have breezed right through it.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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