Simple Foreclosure No More - Lexington | Louisville · This article is a general overview of a new complicated statute. A more detailed memorandum with citations, best-practice ...

In this Issue

Simple Foreclosure No More

Medicare Secondary Payer (MSP) Statute and Medicare, Medicaid, and SCHIP Extension Act (MMSEA)

Client Spotlight:Ecostratum

Workers’ Comp Premium Reform - Help is on the Way for Ohio Employers

Firm News

Summer Issue 2009

Despite the heightened attention from the government, the courts and various interest groups, foreclosure filings continue to rise in Ohio. According to

Policy Matters Ohio, which publishes reports on foreclosure growth in Ohio, the number of foreclosure filings in Ohio rose approximately 1.2 percent in 2008 as compared to 2007. This represents a 70 percent increase from 10 years ago. There was a 4.9 percent increase in filings in Counties with populations below 50,000.

According to the Ohio Supreme Court, in 2008 there were a total of 85,773 new foreclosure cases filed in Ohio marking the 13th consecutive annual increase. For the first seven months of 2009, there where at total of 52,340 foreclosure cases filed, compared to 51,972 for the first 7 months of 2008. Out of Ohio’s 88 counties, the top 5 counties for filings thus far in 2009 are Cuyahoga (7,809), Franklin (5,611), Hamilton (4,035), Montgomery (2,849), and Summit (2,927). This represents 23,231 or 44.4 percent of the filings.

With increased public awareness of the problems surrounding most of our nation’s lending and loan servicing industries, the number of contested foreclosure cases, in which defendant borrowers are asserting defenses and counterclaims against lenders and loan servicers, is likewise on the rise. The Ohio Supreme Court has taken an active role to address the foreclosure issue including a direct appeal to Ohio attorneys to assist individuals facing foreclosure. Additionally, the Court is involved with the Save the Dream program, an Ohio multi-agency foreclosure assistance program which consolidates numerous state resources and programs related to foreclosure into one program for citizens to access for assistance. Finally,

Simple Foreclosure No MoreBy: Benjamin M. Maraan II

the Court has established a model foreclosure mediation program, encouraging state courts to incorporate mediation into the foreclosure case process as an alternative to active litigation. The complexion of what was once a straightforward foreclosure has changed dramatically. More attorneys are taking up the call to represent borrowers, and in so doing, they have raised the stakes for the lenders and servicers. For example, while failure to prosecute an action in the name of the real party in interest is raised routinely as an affirmative defense, courts, at least in foreclosure cases, are requiring plaintiffs to prove they owned

or held the note and mortgage that secures the note, BEFORE a lawsuit is filed. Jurisdictions are split on this issue, and some appellate districts require proof of a Plaintiff’s ownership, in the form of a recorded assignment of mortgage, prior to filing the lawsuit, or face dismissal.

Borrowers and their counsel are increasingly citing to guidelines established by the federal government regarding the way lenders or loan servicers handle FHA, HUD and VA loans and using alleged violations of these guidelines as a basis in which to assert counterclaims against lenders and loan servicers. Additionally, borrowers and their attorneys are asserting claims involving alleged violations of the Consumer Sales Practices Act (CSPA) and Retail Installment Sales Act (RISA).

While the facts often establish that these claims have no legal basis, the time and expense in dealing with them offer borrowers another means in which to complicate a foreclosure case, thus buying a little more time in which to stay in ones’ home. In some cases these claims open up the door to possible damages awards to the borrower as well as an award of attorney fees.

VALUECREATING

Client Alert From RFK&D

"The complexion of what was once a straightforward foreclosure has changed dramatically"

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Rendigs, Fry, Kiely & Dennis, L.L.P.

While the basic facts of what was once a simple foreclosure complaint are usually undisputed and in favor of the lender, the manner and means used to resolve a case have drastically changed. Lenders, loan servicers and investors need to decide early on, how best to handle a loan in default. This includes determining the value of the property, the likelihood of recovering the principal amount owed after a sheriff’s sale and subsequent sale by the bank’s real estate department (REO) versus the borrower’s ability to continue to pay, the possibility of modifying the loan such that the borrower stays in the property.

Once the decision to move forward on the foreclosure is made, lenders and servicers must realize that there is an increasing chance that the foreclosure is going to be contested, if nothing other than to drag the process out a little longer for the borrower. However, with an increase in counterclaims, comes an increase in exposure to liability for the lender, servicer and investor, who must choose wisely in deciding how and with whom they proceed in an effort to resolve what was once a simple foreclosure.

The Medicare Secondary Payer (“MSP”) statute requires certain primary liability insurance plans be the primary payer for items and services furnished to Medicare beneficiaries. Although Medicare makes payments when a primary plan cannot reasonably make its payments promptly,

any such payments are “conditioned” upon reimbursement.

Historically, however, Medicare has not been fully reimbursed when other plans should be primary. Therefore, the MSP provisions were amended in 2007 by Section 111 of the Medicare, Medicaid and SCHIP Extension Act (“MMSEA”). The purpose of the MMSEA is to increase the transparency in reviewing significant amounts of previously difficult to collect primary payer data on liability settlements, judgments, or other payments to determine if Medicare interests were adequately protected.

Under this new law, whenever there is a settlement, judgment, or other payment, applicable Responsible Reporting Entities (“RREs”) will need to: (i) determine whether a claimant is entitled to Medicare benefits; and (ii) if so entitled, submit certain information to the administrator of the Medicare program, the Centers for Medicare and Medicaid Services (“CMS”).

RREs were required to register by September 30, 2009 and should be testing currently. The CMS has offered guidance to define who is a RRE and offers other technical assistance. RREs will submit their first Section 111 production files after January 1, 2010.

All liability cases from now on should be approached with the understanding that if payments are made to a potential Medicare recipient, all RREs must report. RREs should report settlements from July 1, 2009 going forward, but they must report from January 1, 2010 going forward.

At the outset of a personal injury action involving a Medicare beneficiary, the liability carrier, and attorneys, should immediately

contact CMS’s Coordination of Benefits Contractor (“COBC”) to initiate the opening of a MSP potential recovery case. The COBC then transmits the information to CMS’s recovery contractor. Once there is a settlement, judgment, or award, the contractor must be notified and will calculate the recovery claim amount.

If not reimbursed for its conditional payments, the statute authorizes Medicare to seek double damages plus interest from the liability insurer, plaintiff’s counsel and/or the plaintiff as well as $1,000 per day, per claim, for failing to report. Medicare may also refuse future benefits to the claimant.

Medicare Set Aside’s (“MSA’s”) are one of the most contentious issues being debated. Under a MSA, an allocation of settlement proceeds would be set aside to pay for future medical expenses. The MSP provisions, in general, require that Medicare always be secondary to workers’ compensation and other insurance but no regulations exist specifically addressing liability settlements. Section 111 only requires reporting but RREs might anticipate that MSAs will become the recommended method of protecting Medicare’s interest when settling certain liability cases.

In conclusion, while the costs of settling cases will go up, liability carriers can reduce some of this cost by adopting protocols that allow for a quick analysis and thorough investigation as early as possible. RREs and counsel must continue to establish and refine MSP compliance guidelines. And, standard settlement terms and practices will need to be significantly revised with regard to indemnity, confidentiality, and even how settlement checks are issued to avoid numerous foreseeable pitfalls.

This article is a general overview of a new complicated statute. A more detailed memorandum with citations, best-practice recommendations, and exhibits is available upon request.

Medicare Secondary Payer (MSP) Statute and Medicare, Medicaid, and SCHIP Extension Act (MMSEA) By: Michael J. Chapman

State authorities have been busy this year taking long-overdue steps to bring greater fairness and equity to the calculation of workers’ comp premiums paid by private employers, whether as part of a group rating plan or non-group employers. In January of this

year, Governor Strickland signed into law Amended Substitute House Bill 79. HB 79 directed the BWC to examine group experience rating program and make a plan to address the equity and adequacy of workers’ compensation premiums for all Ohio employers.

In March of this year, the BWC approved a comprehensive rate reform plan the impact of which employers should have seen in the premium statements received this summer. The measures adopted are aimed at avoiding the dramatic disparity that has historically been present between certain group-rated employers and non-group employers. Specifically, group-rated employers without significant claims histories have in the past enjoyed artificially low premium rates while employers who have a claims history - perhaps only one claim, have found themselves kicked out of their group-rating plan or have been permitted to remain in the group, but pay markedly higher premiums than they had been paying before.

CLIENT SPOTLIGHT

Ecostratum, located in Cincinnati, is an experienced consulting firm with expertise in industrial hygiene (occupation safety and health), environmental, and building sciences. Ecostratum and the services it provides helps to keep workers, their families, and the community healthy and safe.

Ecostratum’s services include hazardous materials inspections, assessment, and management services, which include testing for dangerous conditions such as PCBs, mercury, mold, bacteria, lead-based paint, asbestos, etc. They also offer professional services such as indoor air quality testing, workplace exposure and compliance, construction safety, and healthcare controls. Specialized measurement services include microscopic fibers, micro-organisms, allergens, thermal imaging, and moisture testing.

Rendigs and co-founders of Ecostratum, Steve Rucker and Joe Tussey, have worked together as business partners in matters pertaining to contracts, human resources, and company structure. We are proud to have become a trusted business partner as Ecostratum continues to be the preferred, trusted, and recognized leader in the industry. Their excellent business practice, strong dedication, and superior service have contributed to their success. For more information about Ecostratum, please contact Steve Rucker, Founder, directly at (513) 526-7391 or by email at [email protected].

The essence of the new reform measures is to change the amount of permissible discounts and penalties given to employers based on their claims experience. Where group rated employers with good claims experience used to get up to 85% premium discounts, now they will only be permitted up to 77% discounts. Where non-group employers could have been penalty rated at a 59% rate, the new measures protect them from being hit with as dramatic a percentage. As part of this, the BWC has put into effect measures that will increase group rated employers’ premiums by an overall average of 9.6%. Employers not in a group - so-called “base rated” employers, should see on average a 25.3% reduction in rates.

Group-rating and group-rated discounts will still be available to Ohio employers. The era of deep discounts is probably over. While that may appear to be bad for Ohio businesses, the fact of the matter is that the BWC was not collecting enough premiums to cover expected losses and the effect of this was falling disproportionately on base-rated employers. The reforms should then have the beneficial effect of reducing premium disparities and volatilities which have plagued the system in recent years. The fix, while in, will need to be fine-tuned over the next several years. Equity in premium levels will take further study and will probably never be achieved in a perfect sense. Nevertheless, more a more fair system is at hand - something all Ohio employers should applaud.

Workers Comp Premium Reform - Help is on the Way for Ohio EmployersBy: Arthur (“Ted”) E. Phelps, Jr.

A Higher Level of Thinking

Rendigs, Fry, Kiely & Dennis, L.L.P.One West Fourth Street, Suite 900Cincinnati, OH 45202-3688

Creating Value is published for the clients of Rendigs, Fry, Kiely & Dennis, L.L.P. The contents are intended to provide information of general interest and should not be construed as legal advice. Your comments and address corrections are appreciated. Please contact Jenny Davenport, Director of Client Service, at [email protected].

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Benjamin M. Maraan II has recently joined the financial services litigation team. Ben represents financial services companies and financial institutions in both commercial and consumer litigation throughout the state of Ohio. Ben also represents loan servicing companies,

lenders, and financial institutions in general litigation matters. Additionally, Ben has practiced in the area of personal injury, premises liability, wrongful death, and probate.

Firm News

Wilson Weisenfelder and Lynne Longtin, received a favorable ruling in the Court of Common Pleas, Warren County, Ohio on September 30, 2009 on an issue never decided by an Ohio Court. Hamilton Township adopted a resolution implementing the collection of impact fees to ensure that impact-generating developments bear a proportionate share of the costs of improvements to the Township’s roadway facilities, fire and police protection and park system. The fee was challenged by various home builders in Warren County, Ohio.

However, the court rejected the home builders’ challenges and determined there is no statutory prohibition for collecting impact fees and the fee is not a tax.

New Rendigs Website is LiveThe new website is up and running. To learn more about our complete service offering and to get access to our upcoming events and most recent news, please visit us online at www.rendigs.com.