In re 804 Congress: Fifth Circuit Affirms Section 506(b) Reasonableness Standard Applies to Oversecured Lender's Legal Fees in Non-judicial Foreclosure Sale | Practical Law
The US Court of Appeals for the Fifth Circuit in Wells Fargo Bank, N.A. v. 804 Congress, LLC (In re 804 Congress, LLC) held that an oversecured lender's recovery of its legal fees from the proceeds of its collateral at a court-ordered non-judicial foreclosure sale was subject to the reasonableness standard of section 506(b) of the Bankruptcy Code. Further, because the lender did not substantiate these fees, the Fifth Circuit found they were unreasonable and therefore not allowable as a secured claim, but remanded the case to the bankruptcy court to determine whether they could be treated as an unsecured claim under section 502 of the Bankruptcy Code.