Pennsylvania Foreclosure Update – New Act 91 Notice

Last year, the Pennsylvania Housing Finance Agency (“PHFA”) promulgated a new
Notice of Intention to Foreclose (“New NOI”) that complies with the two (2) Pennsylvania
statutes applicable to such notice: Act 91 (35 P.S. §1680.401 et seq.) and Act 6 (41
P.S. §401 et seq.). The New NOI, published in the April 30, 2016 Pennsylvania Bulletin
(Vol. 46, No. 18), took effect on September 1, 2016 and can be found at
http://www.phfa.org/forms/hemap/AppendixA.pdf.

The New NOI is a shorter and simpler document than the previous NOI. The first page
of the New NOI describes the procedures of the Homeowner’s Emergency Mortgage
Assistance Program (“HEMAP”) as well as borrower’s/homeowner’s rights under Act 6.
The New NOI includes an “Account Summary” section, which contains a series of tables
in which the mortgagee is to display information relating to the mortgage account, the
nature of the default, as well as borrower/homeowner and mortgagee information.
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Notably, in the section titled “How to Contact Your Lender,” the required fields now
indicate that the sender must list the lender or servicer, but does not require the sender
to list the original mortgagee. The New NOI introduces an additional option for
responding to the question of whether the mortgage is assumable, allowing the
mortgagee to state “[n]o, but please contact your Lender to discuss your options,” in the
event that assumption is not permitted under the terms of the mortgage, but the
mortgagee wants to make the option available. Mortgagees/servicers may not use any
variation of the form. Font type, font size, and contents thereof must be observed.

Mortgagees/servicers are required to continue submitting to PHFA information
regarding all New NOIs sent to borrowers/homeowners. This submission can take the
form of sending a physical copy of the New NOI to PHFA or may be completed via an
electronic report in lieu of physical copies of the New NOIs. This electronic report, to be

sent via e-mail to Act91@phfa.org, must be formatted according to the following field
requirements: (i) the date of the New NOI; (ii) the name of the mortgagee/servicer as
listed in the New NOI, (iii) the street address of the subject property, divided between
Address Line 1 and Address Line 2 (Address Line 2 may be left blank when not used in
the New NOI); (iv) the city, state, and zip code of the subject property (including the 4-
digit zip code extension, if available).

PHFA provides versions of the New NOI in Spanish, Chinese, Russian, Vietnamese,
and Cambodian; and “encourages,” but does not require, mortgagees/servicers to send
the New NOI in one (or more) of these additional languages if the mortgagee/servicer is
aware that the borrower/homeowner is “likely” to communicate in one of the additional
languages listed above.

For ease of update purposes, PHFA is moving the information about the parameters
regarding reimbursement of fees and costs to the PHFA website. PHFA also states that
it intends to publish an annual schedule in order to provide alerts as to when updates to
the list of qualified consumer credit counseling agencies will be made available on the
PHFA website. Mortgagees are expected to update the list of consumer credit
counseling agencies mailed with the New NOI in accordance with the schedule as
published on the PHFA website.

PHFA continues to emphasize that the New NOI should be distributed liberally. When in
doubt about whether and if a mortgage is subject to Act 91, PHFA strongly encourages
mortgagees to err on the side of sending the New NOI. Furthermore, in the event that
there is a discrepancy between the date printed on the New NOI and the postmark on
the envelope in which the New NOI is mailed, PHFA will consider the later of the two
dates in determining the timeliness of a face-to- face meeting with a consumer credit
counseling agency. To avoid such discrepancy and to ensure that your systems will
accurately reflect the expiration date of the New NOI, it is recommended that the New
NOI be mailed and postmarked on the date it is generated.

One aspect of the New NOI that may be problematic for mortgagees and servicers is
the omission of language warning borrowers/homeowners that failure to cure the default
can result in acceleration of the Mortgage. The former Act 91 Notice contained this
warning. It is unclear whether this omission was deliberate or an oversight.

Why is this warning important?

The contemporary Fannie Mae and Freddie Mac template Mortgages specify in the
“Acceleration; Remedies” section the following: “Lender shall notify Borrower of, among
other things: (a) the default; (b) the action required to cure the default; (c) when the
default must be cured; and (d) that failure to cure the default as specified may result
in acceleration of the sums secured by this Security Instrument, foreclosure by
judicial proceeding and sale of the Property.  Some FHA template Mortgages also
contain similar language.

Thus, the required acceleration warning stems from part (d) of the above provision.
Because the New NOI does not contain this precise acceleration warning, it is
recommended that a separate notice be sent, simultaneously with the New NOI,
containing such a warning in order to be compliant with the “Acceleration; Remedies”
section of the Mortgage and mitigate the risk of litigation over such issue.
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Because the published materials do not specify the penalties to be imposed for non-
compliance, the Pennsylvania Courts of Common Pleas will be left with the task of
fashioning an appropriate sanction in the event of non-compliance, which might entail
dismissal of the foreclosure.