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Foreclosure in Virginia: Same as it ever was

It’s not just a refrain from a Talking Heads song. It’s also the latest account of what the law says about how foreclosure works in Virginia. 

In March, we reported on a legal challenge to how foreclosures are conducted in Virginia, in the wake of the housing market collapse.

Alexandria lawyer Chris Brown argued in Horvath v. Bank of New York that the note and deed of trust are “separate agreements” that are “governed by separate rules of enforcement.” Brown said the defendant bank in his case, which came into possession of the 2006 note on John Horvath’s property in 2009, had no claim under the deed of trust and no right to foreclose.

Yesterday, the 4th U.S. Circuit Court of Appeals rejected Brown’s argument. The panel said the theory that only the original lender has authority to foreclose on a property “runs counter to centuries of Virginia law.” The panel upheld the trial court decision for the bank.

Horvath’s briefs were “filled with allegations of fraud in the mortgage industry and discussions of the financial crisis that has plagued the country of late,” wrote Judge J. Harvie Wilkinson III.

“But these seem interposed mainly to distract attention from what in reality is a straightforward commercial case,” the court said. “Myriad sources” confirmed the bank’s authority to pursue foreclosure, from the text of the note and deed of trust, to the Virginia Code, to the “centuries of Virginia case law protecting the negotiability of commercial instruments.”

By Deborah Elkins

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