Couple Sues Bank of New York Mellon, NewRez to Halt Georgia Foreclosure

Why It Matters

The case underscores how non‑compliance with federal servicing rules can expose banks and trustees to litigation and potentially halt foreclosure sales, affecting both lenders and distressed borrowers.

Key Takeaways

• Couple alleges servicer ignored 37‑day hardship rule before foreclosure
• Lawsuit challenges trust’s authority to foreclose after 2010 assignment
• Plaintiffs seek emergency order to block May 5 sale and damages
• Case highlights potential liability for banks under Regulation X and 2011 settlement

Pulse Analysis

Regulation X sets a strict 37‑day window for mortgage servicers to act on a borrower’s complete hardship application before a foreclosure can proceed. In the Littleton case, the couple alleges that NewRez received their paperwork in early February, yet a foreclosure notice was issued on March 4, well within the prohibited period. This alleged breach not only jeopardizes the borrowers’ right to a fair review but also puts the servicer at risk of violating the Real Estate Settlement Procedures Act, which could trigger federal penalties and civil damages.

The lawsuit also questions the legal standing of the CWALT, Inc. Alternative Loan Trust 2005‑60T1, which holds the mortgage after a 2010 assignment transferred the security deed into a trust that allegedly closed years earlier. By invoking the 2011 Countrywide settlement—where trustees of similar trusts paid $8.5 billion for defective loans—the plaintiffs argue the trust cannot double‑dip by enforcing foreclosure on a loan already subject to settlement claims. This challenge could force a re‑examination of trust structures used in mortgage‑backed securities, potentially reshaping how lenders package and enforce loans.

Beyond this single filing, the case signals heightened scrutiny of mortgage‑servicing practices nationwide. Lenders and trustees may need to tighten internal compliance, ensuring hardship applications are fully processed before any foreclosure action. For borrowers, the lawsuit highlights the importance of documenting all communications and leveraging federal protections. As courts increasingly enforce Regulation X, the industry could see a rise in emergency injunctions that delay or cancel foreclosure sales, prompting a shift toward more proactive loss‑mitigation strategies.