BANKING LAW - Law LAW V. Nicole (Nici) Comer, Esq. SVP/Corporate Counsel, South State Bank Lindsey C. Livingston, Esq. Adams and Reese LLP

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  • BANKING LAW

    V. Nicole (Nici) Comer, Esq. SVP/Corporate Counsel, South State Bank

    Lindsey C. Livingston, Esq. Adams and Reese LLP

  • Overview

    Forums As to Disputes

    Lending Commercial & Consumer

    Consumer Issues

    Banking Operations

    Bankruptcy Overview

  • Jurisdiction/Forums As to Disputes

    Magistrates Courts Local Counties up to

    $7,500.00

    Circuit Court Criminal and Civil

    Master in Equity Foreclosures

    Special Referee

    Federal Court

    Diversity of Parties (Citizenship/principal place of

    business)

    Amount in controversy exceeds $75,000

    Bankruptcy Courts Chapters 7, 9, 11, 12 & 13

  • Lending Commercial and Consumer

    Rights of parties statutes, contracts or

    case law

    Articles 3, 4, and 9 Uniform

    Commercial Code (UCC)

    Article 3: deals with negotiable instruments

    (checks)

    Article 4: banking transactions

    Article 9: secured transactions

  • Lending Commercial and Consumer

    (cont.)

    Contracts

    Note Contract

    Checking Accounts Signature Card

    Merchant Accounts Merchant Agreement

    Remote Deposit Agreement

    Online Banking

    ACH Agreement

  • Lending Commercial and Consumer

    (cont.)

    Unsecured/Secured

    Note

    Security Agreement (UCC)

    What constitutes a security interest?

    Written security agreement signed by debtor

    (exceptions) describing the collateral,

    Value given, and

    Debtor has right in the collateral.

  • Lending Commercial and Consumer

    (cont.)

    Security Agreement (cont.) What is perfection? Purpose is to give notice to the

    work of a potential security interest; prior competing claims.

    Adverse Claimants Other security interests

    Levy on a judgment

    Purchasers

    Debtor in bankruptcy Trustee

    Methods Possession/Control

    Actual

    Control Agreements

  • Lending Commercial and Consumer

    (cont.)

    Security Agreement (cont.)

    What is perfection? (cont.)

    Titles Vehicles, mobile homes, boats

    Filing financial statements (UCC)

    County where collateral located fixtures and as extracted collateral or timber to be cut.

    Location of Debtor Everything else furniture, fixtures, equipment, accounts receivables, etc.

    Definition Location of Debtor

    State of formation for entities that must register to come into exists corporations, LLC, LLP, LP, etc. (SC Secretary of State, www.scsos.com)

    Other entities Place of chief executive office

    Foreign Debtor Washington, D.C.

    Individual Principal residence

  • Lending Commercial and Consumer

    (cont.)

    Key Points to Remember UCC Statement is not a substitute for a

    security agreement

    Good for 5 years Must be continued in last 6

    months.

    Relates back do not lend on verbal

    representation that debt has been paid have

    prior filing terminated.

    File UCC within 10 days or lose in bankruptcy

  • UCC Financing Statement Example

  • Lending Commercial and Consumer

    (cont.)

    Recovery Liquidation

    Voluntary Surrender

    Peaceful repossession allowed in S.C. must be without breach of peace

    Claim and delivery

    Commercially reasonable sale

    Private/public sale

    Receivership

    Maintain

    Taxes and Insurance

    Collect Income

  • Lending Commercial and Consumer

    (cont.)

    Mortgage Real estate closings Unauthorized Practice of Law

    Wachovia v. Coffey

    Recording procedure County where property located

    Title priority Opinion letter, insurance

    How is a title insurance claim processed?

    Mortgage loan modification

    Foreclosure Judicial sale state

    Appraisal rights

    Owner occupied foreclosures

    Deeds-in-lieu of foreclosure

    1099 Debt Forgiveness (Loan Balance Appraised Value)

    Mortgage Fraud At Closing Appraisals, deposits, flipping, etc.

  • Foreclosure Process in SC

    1) Title Exam. A title exam must be performed to determine what parties may have mortgages, liens or other claims on the property. These other parties are then named as defendants in the foreclosure action.

    2) Lis Pendens. The party foreclosing on a mortgage lien must file a lis pendens. The lis pendens gives constructive notice of the foreclosure action to any subsequent purchasers or creditors. A lis pendens must be filed no more than 20 days before the filing of the complaint and no less than 20 days prior to the entry of a foreclosure decree. If filed more than 20 days before the filing of the complaint, the lis pendens is automatically invalid. Service of the lis pendens must be made within 60 days after the date of its filing or it will be rendered invalid.

    3) Summons and Complaint. A Summons and Complaint is filed detailing the legal grounds under which the Lender is entitled to foreclose its mortgage lien against the real property. Once filed, the Summons and Complaint is served on all defendants. Once served, the defendants have 30 days to respond to the Summons and Complaint. Responses to the Complaint may contest the amount due to Lender or the priority of its lien. Responses may also assert affirmative claims against the Lender.

  • Foreclosure Process in SC

    4) Receiver. In some foreclosure actions it may be prudent to seek appointment of a receiver to collect rents, etc., from the property during the pendency of the action. Once appointed, the Receiver files monthly reports with the Court detailing its activities during the preceding month, particularly the income received and the expenses paid, as well as any repairs or other significant events during the month. The Receiver's appointment runs through the conclusion of the Foreclosure Action, and it is relieved of its duties following the issuance of a deed from the Court. During the Foreclosure Action, the Receiver is responsible for handling the real property, while the court is responsible for managing the foreclosure process and determining the rights of the parties.

    5) Reference. Following the receipt of any responses to the Complaint, the Foreclosure Action is referred to the Master in Equity, a division of the Circuit Court specifically designated to hear real estate mortgage lien foreclosures. Generally, a reference is made upon consent by all parties not in default. However, should a party not consent to the reference, a motion for mandatory reference is proper in that a mortgage foreclosure action is equitable in nature.

  • Foreclosure Process in SC

    6) Foreclosure Hearing. All defendants are given notice of the scheduled foreclosure hearing. At the hearing, the Master in Equity determines lien priorities and orders the foreclosure sale of the real property on a day certain.

    7) Deficiency Judgment. In order to request a deficiency judgment against the borrower, the Lender specifically requests it in the Summons and Complaint and other pleadings filed with the court.

    If a deficiency is waived, the foreclosure order will not be a personal

    judgment against the borrower.

    Absent such a waiver, the decree of foreclosure establishes a personal judgment against the borrower. There are two ways this personal judgment may be entered. First, the court may enter a personal judgment for the total debt after the hearing. The net proceeds of the sale are then applied to reduce the balance due on the judgment debt. Alternatively, the court can order that a deficiency judgment be granted after the sale. After the sale, the court determines the amount of the deficiency and enters a personal judgment for that amount. Under either procedure, the borrower or other proper defendants may demand that the property be appraised to determine if the high bid at sale was a fair price for the property.

  • Foreclosure Process in SC

    8) Notice and Sale of the Property. Prior to the property being sold at a public foreclosure sale, a Notice of Sale must be advertised once a week for three weeks prior to the sale date in the local newspaper of general circulation.

    Bidding: Lender determines the amount that it will bid at the foreclosure sale, typically either the lower of the amount of the indebtedness owed to it or the value of the real property. At the foreclosure sale, if the Lender waives its deficiency claim, the Lender may bid more than once at the sale and the sale is concluded that day with the property being sold to the highest bidder. If the Lender has specifically requested a deficiency, then the Lender may only bid once at the sale, and the bidding must remain open for a period of 30 days to allow for additional bids. In either case, a successful bidder must place a 5% deposit and has 20 days to comply with their bid. The Lender may credit bid at the sale.

    9) Deed. Once the high bidder has complied with his or her bid, the Master in Equity executes a deed to the purchaser. Thereafter, title to the real property vests in the winning bidder and the Receiver is discharged of their duties.

    The entire foreclosure process typically runs 120-260 days depending on a variety of factors, including: the number of parties to be served with the Summons and Complaint; issues with obtaining proper service of the Summons and Complaint on defendants; the responses received to the Complaint; the number of responses filed to the Summons and Complaint; and the Cour