Relief from Inequitable Mortgage Foreclosures Act
as applied to victims of Hurricane Katrina.
On October 4, 2005, Mississippi Governor Haley Barbour released a proclamation
invoking the provisions of this act (Relief from Inequitable Mortgage Foreclosures, Execution Sales and the Like After Declared
Emergency or Disaster) Miss. Code Ann. sections 89-1-301, et seq. Basically, if a mortgagor suffers property damage from
a disaster declared by the governor, that mortgagor may delay foreclosure against his property for a period of up to two years.
To qualify, the mortgagor must file a sworn petition and ultimately prove 1) that the mortgagor is unable to pay the arrears
on the debt; 2) that the mortgagor has been unable to refinance the debt after diligent efforts to do so; and 3) that the
disaster has reduced the fair market value of the subject property by at least 15%, or the income from the subject property
has been decreased by at least 15% of the average annual income derived over the three years preceding the disaster.
This statute contemplates that mortgagees will file judicial foreclosures to enforce their liens in areas affected
by the disaster and that the mortgagor may assert the foregoing defenses to extend repayment over the two-year term. However,
this act contains a savings provision, which allows a mortgagee to proceed with a typical power of sale foreclosure. If the
mortgagor wishes, he may seek and obtain an injunction against the power of sale foreclosure, without bond, by establishing
the foregoing criteria. This injunction could remain in effect over the entire two-year repayment period. If an injunction
is issued, the mortgagee may recover reasonable attorney's fees only if the injunction is subsequently dissolved based upon
a finding that the injunction was obtained without reasonable cause and solely to hinder or delay collection of the mortgaged
debt. However, if the mortgagor fails to enjoin the power of sale foreclosure, and it is otherwise valid, a concluded foreclosure
will not later be set aside, even if the property was damaged by the disaster.
If an order is entered allowing relief
under the act, the mortgagor will be required to pay taxes, insurance and interest on the mortgaged property, along with a
reasonable sum for upkeep of the property. The time and manner of these payments shall be determined by the Chancery Court.
Upon passage of 30 days after default in any of these payments, the mortgagee may have the right to foreclose and may then
apply to the court for a final decree establishing a sale date.
Given the savings provision in the statute, it is
likely that most mortgagees will continue to move forward with customary power of sale foreclosures. If an injunction is
obtained prior to sale, the mortgagee can seek to have the injunction dissolved using the same criteria set forth in the relief
act. It is also likely that agreed orders will be negotiated along statutory criteria in many cases involving mortgagors
who wish to rebuild their homes and need close to the full two years to do so.
Click this link to access an article
by John C. Underwood, Jr. in the USFN Report regarding the impact of Hurricane Katrina. USFN Report