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Legal Advice During This Changing Time Of The COVID-19 Pandemic With Franco Barile And Tracey Johnson-Kidd

GDNI 98 | Legal Advice During COVID-19

 

The COVID-19 Pandemic has disrupted almost every sector around the world, bringing with it sudden changes to processes and business models. The legal sector is no exemption to that. In this episode, we narrow down to look into the ongoing updates within the legal world in Indiana, Ohio, and some of the Midwest States based on the COVID-19 situation we are all currently facing. Guests, Franco Barile and Tracey Johnson-Kidd of Sottile & Barile aid in this discussion. Together, they talk about the state of foreclosures and evictions during this time, the eventual increase in bankruptcy filings, and the loan modification programs. Don’t miss out on good legal advice, especially during this time of uncertainty. Start thinking about how the COVID-19 Pandemic is going to affect you and how you can prepare for it.

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Legal Advice During This Changing Time Of The COVID-19 Pandemic With Franco Barile And Tracey Johnson-Kidd

I am here with Tracey Johnson-Kidd and Franco Barile from Sottile & Barile. What our purpose is to focus on Indiana, Ohio and some of the Midwest states, some of the ongoing updates from a legal perspective on what is going on based on the COVID-19 situation we’re faced with. Franco and Tracey, how are you doing?

We’re doing great.

If you guys want to mention and talk about Franco, your firm and Tracey can talk about what she does for you and stuff and then we can get rolling in it.

Chris, thanks for bringing us on. We appreciate it. With the changing times, we represent clients in five states. We have five different orders that we have to watch. We’re also in a lot of bankruptcy jurisdictions, so there are a lot of other areas of the law that we have to constantly monitor. We are 100% operational, so we are up to running. However, are some limitations to some courts in some states, in some counties. A lot of things are changing. I want to introduce Tracey Johnson-Kidd. She’s our Compliance Department Manager and she has been monitoring the situation daily, but it’s been mostly hourly because things change too much. She’s done a fabulous job for our firm and she’s kept us up to date. She’s kept us in the know and she’s made sure that we are compliant with what we’re doing in the firm. We appreciate having Tracey. She’s a great asset to the firm. She’s enabling us to continue to operate as a firm and watching our back, making sure we don’t jump into areas we’re not supposed to and hold off on certain areas that we can’t proceed. She’s done a great job.

Always operate on the side of caution. Click To Tweet

Chris, it’s great to join you. Everyone in the country is talking about COVID-19. Our particular to the session is COVID-19 and default. What I would like to start off with is as Franco alluded to. In Sottile & Barile, we practice in both state and federal courts in Kentucky, Ohio, Indiana, Michigan, and Illinois. We do federal bankruptcy courts in Colorado, Wisconsin and the District of Columbia. What I can tell you is things are constantly changing in Kentucky, Ohio, Indiana, Michigan, and Illinois. All of the states are under executive orders by their governor to where they’re shelter in place. We’re fortunate in Ohio because the order states that legal services are exempt. That’s why we’re here. Some of the other states, legal offices were not specifically listed, so those states are having difficulty. The American Bar Association is having to get involved and so forth. We’re very fortunate that Governor DeWine stated that we were exempt.

Tracey, one thing, this information is all based on information as of March 23rd, 2020? Some things happen and change. If people read this in the future, I just want to state what this is based on. If somebody says, “I read that you said this on this day.”

All of these orders, everything was uploaded as the end of the business. I did a double-check, all of the orders are still active as listed. All of the executive orders for these particular sites can be found on each of the state’s websites. If you go to Ohio.gov you’ll find the Executive Order lifted for Ohio and so forth for the other states. I do want to touch on the federal bankruptcy courts. Those are across the board. Each jurisdiction could be doing a little something different. That is logging into each jurisdiction and looking for the specific court.

That’s where I asked my attorney what’s going on.

As Franco can tell you, we’ll talk about something and in 45 minutes, we’re on the phone with each other again going, “Did you see this? This just came in.” Things are constantly changing because once the World Health Organization declared this a pandemic, lots of firms and the courts and so forth had disaster recovery plans. They may not specifically have had a pandemic plan. They’re doing things on the fly, seeing what works. They’re authoring things as they go along.

Tracey can send you an email with all the five state orders. They’re PDFs. They’re easily readable. Some of them are copy-paste from other states, but we’ll provide that.

The next thing, Chris, that I want to talk about here, the pandemic and what it means for us. We were fortunate. Ohio, Illinois, Indiana, Kentucky, they’re all under shelter in place order. One of the things that we did with our firm is with our business continuity plan, we do have a pandemic plan and we initiated that. We tested it, made sure everything was up and running and operational. We’ve been following all of the CDC protocol with social distancing, making sure that we have under five people in the office. We’re making sure that we keep our staff safe and also keeping constant communication with our clients. With that, our staff, we are all healthy and we’re all working.

GDNI 98 | Legal Advice During COVID-19
Legal Advice During COVID-19: The courts are not going to hold an eviction and kick someone out of their home during this time of the pandemic.

 

First and foremost, I’m glad everyone’s healthy.

That twenty-second handwash is very important.

Sing happy birthday is what my son told me.

With that, our staff, we are 100% operational. We’re here for all of our clients. We’re still accepting referrals, we’re answering questions, we’re still filing things with the courts. The biggest thing that I would say that we’ve seen happen was the President did state that there’s a halt to foreclosures and evictions. What does that mean? I’ve seen everybody stress on a lot of blogs, colleagues that I’ve talked with throughout the country. What that means is there are no foreclosure sales going to happen. The courts are not going to hold an eviction and kick someone out of their home during the pandemic.

A few questions because that is the proverbial million-dollar question of what that means. What if I had a borrower who hasn’t paid in six months and I was getting ready to send a demand letter? Can a demand letter still be sent? I know in Indiana, there has been discussions like you can’t do anything and stuff. I was curious, when they say you have to halt this, you mentioned you can still file documents and things like that with the court. I have a case for example that the sheriff or something was mailing out the service. If those types of stuff can happen and it’s that last piece of the foreclosure eviction or is it state by state? I’m curious to get some info.

From what I’ve seen on our states, you’ve got to take a look at it and see what each jurisdiction states. Indiana was the toughest where you can’t initiate, you can’t do anything. The Indiana attorney general said, “We have a form if you want to fill out, you borrower or tenant if somebody is prosecuting against you.” There are things you have to watch out for. We can’t say what to do on the front end but before the complaint files. I would almost recommend not doing it. I don’t know what state you’re looking at. Indiana is very scary, but the other states haven’t got into that portion of it. If you’re looking at a case that’s already filed, there are some states that don’t have any issues with evictions, but we’ve contacted sheriffs, they won’t go out. It’s a halt. Like Tracey mentioned, the President’s order is to halt the foreclosures and evictions. Whether the jurisdiction says yes or no, we’re not getting any sheriffs to go out, to begin with.

My biggest thing was if you’re looking to send a demand letter just to get that clock started or you recommend waiting until this subsides to even start that path. It sounds like it is what your recommendation was.

We will continue to update you as we go along. There are many different things happening. We are here to protect all of our clients’ interests. It’s hard to say, “Let’s do this,” and then you would find out what’s wrong. I know Chris, we had a lot of Ohio licensing, so we don’t know whether you need to be licensed and then we find out Ohio says you do. There are a lot of gray areas so it’s hard to do that recommendation, but we do know while we’re in court, there’s been a halt.

One of the things I’ll mention too is I know some people send their own demand letters and I also know some people use it through the servicers. My personal recommendation and the way I operate my business, I always operate on the side of caution. I’m pretty much probably stopping everything. I still have some services emailing me like, “We haven’t heard from this person. Do you want to send a demand letter?” I’ll definitely recommend for anybody out there to talk to your attorney about that before doing it and just not rely on the servicer. The last thing you want to do is, like in Indiana, have somebody fill out a form or complaint against you and be on the front page of the newspaper saying somebody who knows somebody gets their picture on there saying, “This person is trying to evict me.”

That’s the biggest thing is that policy reason. If you’re sending out demands and a borrower does get it and they say, “I thought we’re hating this.” Whether it’s the President or it’s a state order, they both say as a borrower, you have to pay your bills. How do you tell somebody, “We’re not going to prosecute, but by the way, you’ve got to pay your bills?” It’s very murky. Until we get something going on, maybe the stimulus bill passes and then we’ll go back to normal about a week or so. For now, he didn’t say to stop demand letters.

I’ve even read that in the stimulus bill that’s coming out, there wasn’t protection for people from foreclosures and evictions. I’ve also heard that and the President ordered it, but is it actually a law? Just because he says it and is it written, is it policy? There’s a lot of stuff going on that it’s crazy. For me, typically, I’ll err on the side of caution.

One of the things that I would say, Chris, in our next bullet point where we’re talking about the jurisdiction-specific, state versus federal, that’s a good point. Even though the President said this that there’s going to be a halt to foreclosures and evictions, it’s state-specific. When you go to that specific jurisdiction and you’re looking in that particular court, I am seeing where it says all foreclosure sales will be extended out to 60 days. Some of them were being very specific, but as we’ve said, it’s constantly changing. A lot of every day looking at our jurisdictions and seeing what it’s saying and so forth. As Franco said, the most direct observation we see is from the State of Indiana. Indiana said not to initiate, but somebody is going to come along and question that in Indiana. You can’t stop the legal process. You’re saying, “Everything is fine.” I don’t see that continuing in a long time. Leave the process. It has to keep moving.

I know it’s similar about what’s on here about loan modifications and things like that. The government is saying, “We’ll give them, but that’s only loans that are GSE-specific,” whether that falls under private investors. I’ll let you go through that and then I have a question on the timing of when we think things will get back to normal.

One of the questions everyone’s had that is, what does the future look like? We’re on unchartered territory right here. Right off the bat, one thing that we’re going to see is bankruptcy is going to increase. We’re going to see bankruptcy filings increase much more than what we see during the economic crisis of 2005, 2007. We’re going to see about the foreclosure and eviction cases. The courts are going to be backed up even with things continuing. Who knows how long it will take for specifically the jurisdictions to get through that backlog? That’s going to be very state-specific, depending on how hard the state was hit with the COVID-19. The other thing that I would highlight is loan modifications. Loan mods are going to go through the roof. I was reading about government-backed loans. You can get up to twelve months of no payments. They’re waiving a lot of the requirements as far as proof that you truly need this. They’re saying if you were affected by COVID-19, then qualify for this. We’re going to see that tighten up a little bit more because if not, you’re opening the door for everyone.

This COVID-19 situation is not a financial crisis. This is a health crisis. Click To Tweet

I wasn’t buying loans back in the days when HAMP came out, but I remember they said the same thing. You can go out and get a HAMP loan at 2% and this and that. When I started getting into this business, because there are still HAMP loans in states, but don’t bank on that, include it because it’s almost impossible to get. I almost get the sense that they’re promising things like this of twelve months. The reality is I don’t think it’s going to be as big as people think it is. The things I’ve read too, because I went back and I looked at what happened in the US Virgin Islands and Houston during those major events where Irma, Maria, and the flooding. A lot of them was you get the forbearance, but after that, it was almost like a bankruptcy plan. “You’ve got to pay it back in 36 months,” and interest is still accruing. If you’ve got twelve months on the loans without paying that interest is accruing, you’re never going to catch up. Most people won’t. I’m curious about your opinions on that.

You’re spot on with this. A lot of things are being discussed because it’s fear of the unknown and everyone wants to help out their fellow neighbor. They want to make sure people stay in their homes and so forth. It’s very open-ended. When it comes down to it, we’re going to have to be very specific. If I walk in and say, “Give me a loan mod,” I’m thinking, “I won’t have to pay anything for twelve months.” As Franco said, you’ve still got to pay your bills to stay in your home. How does that help anyone? Because they’re delaying payments, they’re not delaying interest rates and things like that. Franco, what would you think about this?

Something very interesting might happen. I read a little bit about that stimulus bill and what it’s going to provide. If all of the stuff that’s in the bill gets passed, I don’t know if any of these bullet points are going to matter because, in the bill, you’re giving people about $2,000 to $3,000. What’s most interesting is small businesses like our firm, they’re giving us capital for payroll so that we keep up on the books. You’ve got employees that are going to be getting a check and you’re going to be getting payroll. The unemployment numbers are going to stay down because of that. If we keep our people employed, that loan will be forgiven in 6 to 8 weeks. If we open our economy in 6 to 8 weeks and that loan is forgiven and these employees have an extra income, it washes away. Before this crisis, banks were well-capitalized. They have a good balance sheet. This is not a financial crisis. This is a health crisis. Hopefully, this ends quickly. If they get that bill passed, we can be back to where we were in several months. I don’t know what’s going to happen, what is in this bill and if it passes, I think we’ll be in better shape.

A question I’ll ask Franco as part of that is a lot of these loan modification programs and stuff is dictated based on GSE loans. As you know, readers, we’re private lenders and a lot of us also have contracts for deeds, which is a whole other animal. Most of us will probably follow soon because if somebody misses two payments, you’re still better off in the long run keeping them in a property versus not. Do you think they can force non-banks and private lenders to also fall under this? What’s your legal opinion and whether or not they can or can’t?

I don’t think so. This is going to be based on the standard run of the mill mortgages. We look at evictions. You’re looking at apartment complexes. You guys fall into that forfeitures. I don’t see them making that big of a ruling outside of the mortgage industry. They could, but I don’t know if we’re going to go that far, the private side there.

You mentioned, Franco, 4 to 5 months on this thing. Some of the people I’ve spoken with don’t see the caseload with these courts probably getting back to normal until the end of 2020. What are your thoughts on that, especially for people, if you’re looking at purchasing some assets. I personally don’t think it’s going to be a month or two. It’s going to be extended. What’s your opinion for people? I shy a little more conservative. I’m thinking things probably from a court system because of backlog and other things and the end of the year, the start of 2021 before any normalcy happens.

Conservatively, that’s probably pretty accurate. It’s all going to depend on how we reopen this government. If we’re looking at a couple of weeks, then maybe we’re several months down the road. If we’re looking at an extended period of time through May, absolutely we’ve got problems. You get to the state of Illinois, we still have our cases that are in there, but they’re moving these hearings months out. They are at least adjusting. They are taking some filings and moving some hearings around. It’s going to be that hearing load that they’re not going to get back to normal. I still have a belief, and this is just a personal opinion, that we get past this. We reopened some parts of the economy. The courts will follow suit. In Ohio, we’ve got a difference within twenty miles. We have a city court in Akron and a city court in Bedford. If Akron closed their doors, Bedford was open. If Akron accepts filings, Bedford is keeping their hearing load. We’re all over the place.

Though, semblance in any state, especially when it comes down to the lower courts, you have to constantly follow these little cities and find out what we’re doing. We also do debt collection. We’re trying to figure out, “Are we still able to file?” We are if these courts are open. A lot of them are eFiles so we’re able to do that. The ones that are mail, we send by mail. We’re getting in a little bit of a drag. As far as foreclosures or evictions, you’re right. Conservatively, you’re looking for a deeper period of when that’s going to start to go back to normal.

GDNI 98 | Legal Advice During COVID-19
Legal Advice During COVID-19: Loan mods are going to go through the roof during this time of COVID-19.

 

It mentions also some servicing changes. What are your thoughts on that?

With the service and changes, what I think is going to happen is this. If you look at a lot of our government-backed securities, everybody has, as you alluded to, Chris, they’ve been through hurricanes and they knew what to do. Now, they don’t know what to do. You’re seeing a lot of changes already come through. They’re simply asking, “Have you been affected with COVID-19?” They’re not requiring actual proof. One of the things, as we discussed a little bit more, we’re going to look at that and see how that impacts them. Also, a lot of the larger servicers, they could have picked up, they could have floated from a financial standpoint a couple of months. If we’re talking a bigger increase in that, some of these services they run the risk of them potentially themselves, I hate to say it, but maybe even going bankrupt. We’re going to see a lot of discussion from the servicer’s perspective as far as what they can do in situations like this. I would go as far as say I think the future of servicing is definitely going to change because of this.

That’s already been in ever-changing, business going. It seems like it keeps shifting a little bit from one to the other. You answered most of the questions I have. I don’t know if there are any last-minute thoughts. Anything else you wanted to add?

Chris, in my career as an attorney, I’ve been at different firms. In those firms, some had compliance management, some didn’t. I will say what we have here with Tracey is the best I’ve seen. The way we’ve been able to manage our states. I was used to Ohio and Michigan and we have five states to worry about. We have the whole nation to worry about it in federal court. She’s done massively, and having her on our team helps our clients. It helps our employees. Everybody knows what to do with the orders we have. While the orders are gray, we at least know what to do with them. Tracey has been a complete, unbelievable, great asset for our firm. Not only are we going to make it through this crisis, but we can also make it through COVID and we’re going to be better off for it later on in the future.

Chris, the only thing that I would say is everybody seems to be flexible. Things are constantly changing. If you have a question, reach out to your legal counsel. We’re still working. We’re still here. Send us your referrals. We’ll be more than happy to help you.

People got to realize too that the response time also probably is going to be a little longer than normal as well because there are people working remotely or in different locations. That’s one thing too, is setting that expectations with people. I always tell people when you start working with someone, that’s one of the first questions. You set up the expectations. You understand because I know a lot of people in this business always want things to go. I know somebody that will send you guys a reinstatement of payoff and all the collateral. It’s like, “Here, send a demand letter,” and then we’ll send it to you at 9:00 and if it’s not out by 1:00, I’m like, “What are they doing? How can they send it?” They are the only clients. Especially during these times, just remember the volume of people asking the questions. One of the things that I try and deal with stuff like this is we’ll broadcast and put it in our Facebook group too. It informs people. It also tries you to do your business and not just constantly get flooded with 1,000 phone calls of everyone asking the same question of, “Can I send this in the end?” The question is, we’ll know. I’m trying to help you in that instance as well, but I know you guys are always very user friendly and responsive, so thank you for that.

The future of servicing is definitely going to change because of the COVID-19 Pandemic. Click To Tweet

Thank you.

We’re free to come on again whenever you’d like us.

We’re rolling with the punches and as things change, we have to update things. If there are some major changes in things, I may want to say, “Can we spend another half hour just to go through it?” There are major changes on things because stuff is changing by the minute. Thank you for joining us. You’re helpful as always. Stay safe. Thanks for coming on.

You’re welcome.

Thanks.

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