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Real Property Preservation

The Receiver Group offers Real Property Preservation and Protection Services to creditors with secured interests (lenders, first deeds of trusts, etc.) wishing to protect and maximize the value of assets that are in default – typically real properties.  The Receiver Group’s Real Property Preservation and Protection Services provide a proper analysis that help creditors understand whether a property is being protected and ensure it is not going to further waste while workout remedies are put in place.

  • Fast and affordable solutions
  • Preserving and protecting assets
  • Winterization of properties
  • Securing assets and providing access
  • Repairs and remediation

A mortgagee’s authority to enter mortgaged property for the purpose of property preservation primarily derives from mortgage agreements and state statutes. Mortgage insurance requirements and mortgage-backed security pooling and servicing agreements also create obligations for mortgagees or their assignees to maintain distressed property.

Rights Under Mortgage Loan Agreements

A mortgagee’s authority to enter mortgaged property originates from the mortgage loan agreement between the mortgagor and mortgagee. For example, the Fannie Mae/Freddie Mac Uniform Instrument for single-family residential mortgage loans in Colorado provides:

  1. Protection of Lender’s Interest in the Property and Rights Under this Security Instrument. If (a) Borrower fails to perform the covenants and agreements contained in this Security Instrument, (b) there is a legal proceeding that might significantly affect Lender’s interest in the Property and/or rights under this Security Instrument (such as a proceeding in bankruptcy, probate, for condemnation or forfeiture, for enforcement of a lien which may attain priority over this Security Instrument or to enforce laws or regulations), or (c) Borrower has abandoned the Property, then Lender may do and pay for whatever is reasonable or appropriate to protect Lender’s interest in the Property and rights under this Security Instrument, including protecting and/or assessing the value of the Property, and securing and/or repairing the Property.  Lender’s actions can include, but are not limited to: (a) paying any sums secured by a lien which has priority over this Security Instrument; (b) appearing in court; and (c) paying reasonable attorneys’ fees to protect its interest in the Property and/or rights under this Security Instrument, including its secured position in a bankruptcy proceeding.  Securing the Property includes, but is not limited to, entering the Property to make repairs, change locks, replace or board up doors and windows, drain water from pipes, eliminate building or other code violations or dangerous conditions, and have utilities turned on or off.  Although Lender may take action under this Section 9, Lender does not have to do so and is not under any duty or obligation to do so.  It is agreed that Lender incurs no liability for not taking any or all actions authorized under this Section 9.

Any amounts disbursed by Lender under this Section 9 shall become additional debt of Borrower secured by this Security Instrument.  These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment.

If this Security Instrument is on a leasehold, Borrower shall comply with all the provisions of the lease.  If Borrower acquires fee title to the Property, the leasehold and the fee title shall not merge unless Lender agrees to the merger in writing.

The Fannie Mae/Freddie Mac Uniform Security Instruments for all States and United States Territories, including mortgages, security deeds, and deeds of trust, contain identical or substantially comparable language.

Federal and state courts have acknowledged both the validity of these rights and an  assignee’s ability to exercise them on behalf of the mortgagee. In the February 2012 case of Farinacci v. City of Garfield Heights, No. 10-3516, 2012 WL 386368 at *1 (6th Cir. Feb. 7, 2012), for example, the United States Court of Appeals for the Sixth Circuit considered the constitutional and tort claims that a borrower who had defaulted on her mortgage loan and was not living in her property brought against the City for entering the property and removing several cats from the premises. In affirming the district court’s ruling in favor of the City, the Sixth Circuit explained that the employees of the City had the authority to enter the property because they acted on the instruction of a property preservation services company indirectly authorized (by the Mortgagee) to “‘do and pay for whatever is necessary to protect the value of the Property and Lender’s rights in the Property’ . . . includ[ing] ‘entering onto the property to make repairs’” under the terms of the borrower’s mortgage agreement. The Sixth Circuit endorsed the district court’s conclusion that “‘[w]hen [the borrower] signed her mortgage, which included the property preservation provisions, she expressly assumed the risk that, if it became necessary to preserve the property, the bank might permit its agents and others to enter the house to effectuate that purpose.’”