Identity theft ??

California Penal Code 530.5
(a) Every person who willfully obtains personal identifying
information, as defined in subdivision (b) of Section 530.55, of
another person, and uses that information for any unlawful purpose,
including to obtain, or attempt to obtain, credit, goods, services,
real property, or medical information without the consent of that
person, is guilty of a public offense, and upon conviction therefor,
shall be punished by a fine, by imprisonment in a county jail not to
exceed one year, or by both a fine and imprisonment, or by
imprisonment in the state prison.

Note that the law was modified in 2001 to include with consent and also to make this violation a felony (important later).

In my opinion this law alone makes nearly every single unlawful act in the origination, servicing, securitization and foreclosure of a California homeowners loan a FELONY. This is because in almost all cases the homeowners personally identifiable information is used – such as on an ASSIGNMENT. This could also be applied directly to the FDCPA and the RFDCPA which usually involves a consumer, their address, their account information, etc.

For instance, after receiving the Notice of Default, we sent back a letter to NDEx West in which we disputed the validity the debt in a manner consistent with the requirements of the Fair Debt Collection Practices Act, 15 U.S.C. 1692 et seq. (“FDCPA”), and the
Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code 1788 et seq. (“RFDCPA”). By doing this, we imposed a duty on NDEx West to establish that the NDEx West was attempting to collect on a debt actually owed and that the amount demanded was proper before making further attempts to collect the alleged debt. NDEx West ignored this legal duty by never establishing that there a debt was owed, or that the amount of the demand was accurate, and instead chose to violate both federal and state law by continuing to attempt to collect on the alleged debt.

NDEx West used our personally identifiable information to violate federal and state law. NDEx West willfully obtained our personal identifying information, as defined in California Penal Code subdivision (b) of Section 530.55, and used that information for unlawful purposes (violation of FDCPA and RFDCPA), including to obtain, or attempt to obtain, credit, goods, services, real property, or medical information without our consent (or even with consent assuming it is determined that our initial consent at loan origination applies).

Think about it. If a debt collector violates the FDCPA, they are usually using the consumers personally identifiable information to commit the violation.

State of Washington

RCW 9.35.020
Identity theft.
(1) No person may knowingly obtain, possess, use, or transfer a means of identification or financial information of another person, living or dead, with the intent to commit, or to aid or abet, any crime.

What about Federal law?
The Department of Justice prosecutes cases of identity theft and fraud under a variety of federal statutes. In the fall of 1998, for example, Congress passed the Identity Theft and Assumption Deterrence Act. This legislation created a new offense of identity theft, which prohibits knowingly transfer[ring] or us[ing], without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, any unlawful activity that constitutes a violation of Federal law, or that constitutes a felony under any applicable State or local law. 18 U.S.C. § 1028(a)(7): This offense, in most circumstances, carries a maximum term of 15 years’ imprisonment, a fine, and criminal forfeiture of any personal property used or intended to be used to commit the offense.

What is a “means of identification”?
(7) the term “means of identification” means any name or number that may be used, alone or in conjunction with any other information, to identify a specific individual, including any-
(A) name, social security number, date of birth, official State or government issued driver’s license or identification number, alien registration number, government passport number, employer or taxpayer identification number;
(B) unique biometric data, such as fingerprint, voice print, retina or iris image, or other unique physical representation;
(C) unique electronic identification number, address, or routing code; or
(D) telecommunication identifying information or access device (as defined in section 1029 (e));

These are huge issues. If you are not in California, Arizona or Washington, consult the identity theft laws for your state!

From Beth Findsen, Attorney in Scottsdale, AZ, she comments that ID Theft may just be the heart of the matter in seeking damages. The logic is simple: they used every borrower’s signature for selling a pool of loans that included OTHER borrowers and a huge undisclosed profit was generated by using the borrower’s signature. Without that signature there would have been no deal. This is especially true if the person was one of the top tier tranche borrowers with 800 FICO scores etc. Without them making the pool look pretty there would have been no sale. Those people were neither compensated nor informed of the use of their very personal information.

The elements are pretty clear. Use of a person’s ID without their consent. Loss to another person. This is another connection between the interests of the borrower and interests of investors.
The essence of securitization of loans has been the unauthorized use of the borrower’s ID to create a collection of loans that were sold as more valuable than any single loan would have been priced, based upon the presence of multiple parties who had no idea that their name and identifying information was being passed around the world like a “whiskey bottle at a frat party” as reported by MSNBC.
Privacy is a commodity. It is constitutionally and statutorily protected. It can be waived or it can be bought, if the person is willing to sell it or waive it. But it cannot be taken by a “lender” (pretender or otherwise) to use for their own profit. That profit belongs to the person or persons whose identity and privacy have been violated — along with punitive damages if it can be applied.

Quoted from Beth:
is it “consent” if it’s based upon a fraudulent misrepresentation or failure to disclose?
in AZ
13-2008. Taking identity of another person or entity; knowingly accepting identity of another person; classification
A. A person commits taking the identity of another person or entity if the person knowingly takes, purchases, manufactures, records, possesses or uses any personal identifying information or entity identifying information of another person or entity, including a real or fictitious person or entity, without the consent of that other person or entity, with the intent to obtain or use the other person’s or entity’s identity for any unlawful purpose or to cause loss to a person or entity whether or not the person or entity actually suffers any economic loss as a result of the offense, or with the intent to obtain or continue employment.

No Default The Servicer is making the payments !!!

In the sercuritization game there are many co-obligors and you may not be in default after all. In the pooling agreement the servicer must agree to advance payment in the event of a missed payment by debtor.

Who is the obligor? Is there a default? Remember – this is financial engineering at its best. This is the American way to be creative and inventful. These guys are so good that homeowners can stop paying their loan and the creditors get paid anyway. They just forgot to tell the homeowners – and the courts. Some people call this forgetfulness fraud upon the court.

When they added the loans into the pool they attached numerous conditions to them. What might some of those conditions be? One of them is a condition for the servicer (making them an obligor). If the servicer doesn’t receive the homeowners payment, they MUST advance the payment (principal and interest) to keep the flow of revenue to the creditors (read this in the SEC filings). Don’t believe me? Think it can’t be proven? Read on …

The following is in regards to the IndyMac INDX 2005-AR7 trust …

Let’s look at the April 2010 loan level files. Look at the these specific fields (for loan #120600243):

523275.38 939.51 0 0 522335.87 939.51 2956.3 0.04625 2016.79 0.00375 163.52 0.0425 1853.27 0.000055 2.4 0 0 165.92 0.0424451 1850.87

Now look at the March 2010 loan level files. Look at these same specific fields (again for loan #120600243).

524211.28 935.9 0 0 523275.38 935.9 2956.3 0.04625 2020.4 0.00375 163.82 0.0425 1856.58 0.000055 2.4 0 0 166.22 0.042445 1854.18

(Note the ending balance for March 2010 is 523275.38 – how come the balance is going DOWN?). On the March 2010 loan level files the servicer is also reporting the account is 90+ days delinquent. The homeowner is not and has not been making payments.

Beginning balance is 523,275.38 and ending balance is 522,335.87!!!

Scheduled Principal is 939.51 and the total principal is 939.51

523,275.38 – 939.51 = 522,335.87 (they show the principle has been reduced!)

Scheduled payment is 2956.30

Scheduled Interest is 2016.79 and net interest is 1853.27

939.51 + 2016.79 = 2956.30 (the scheduled payment)

Servicing fee = 163.52

2016.79 – 163.52 = 1853.27 (net interest)

Total PTR Interest is 1850.87 (Trustee fee is 2.40 so 1850.87 + 2.40 = 1853.27 which is the net interest)

The reason they have to ADVANCE the fees is because the fees are still paid and (apparently) come out of the interest portion of the payment.

This homeowner “might” owe the money to somebody, but not the creditor as the creditor has received the payment in full. Remember – this is a STATEMENT to the investors describing what they were PAID. The party foreclosing is not entitled to power of sale as they are not the creditor. The creditor has received all payments and the homeowner has not defaulted.

The method used seems to be inconsistent between deals. I checked for another homeowner in another IndyMac Trust (IndyMac RAST 2007-A5) and the homeowner had interest only payments (so the principal didn’t go down) however, the interest looks like it is being paid. For other homeowners in this deal they are using the “curtailment” field and the ending principal balance is RISING.

This is just the statement to the certifiateholders. You can BET the sub-servicer and the master servicer are keeping full accounting records that they are NOT reporting to the homeowner, the investors or the courts.

reg z checklist used by regulators

Reg. Z – Closed-end Credit Worksheet

Yes No N/A Comment
  1. Is the loan covered under Reg. Z closed-end disclosure requirements? If not, skip this section.
  1. The required disclosures are clearly and conspicuously in writing, in a form that the consumer may keep. (12 CFR 226.17(a)(1))
  1. The disclosures were made prior to consummation. (12 CFR 226.17(b))
  1. The TIL reflects the terms of the legal obligation. (12 CFR 226.17(c)(1))
  1. The identity of the creditor making the disclosures was disclosed. (12 CFR 226.18(a))
  1. Amount financed, using that term, and a brief description such as the amount of credit provided to you or on your behalf, was accurately calculated and disclosed. (12 CFR 226.18(b))
  1. A separate written itemization of the amount financed was provided, unless the loan was subject to RESPA. (12 CFR 226.18(c))
  1. Finance charge, using that term, and a brief description such as “the dollar amount the credit will cost you” was accurately calculated and disclosed (12 CFR 226.18(d))
  1. The annual percentage rate, using that term, and a brief description such as “the cost of your credit as a yearly rate” was accurately calculated and disclosed. (12 CFR 226.18(e))
10.  Payment schedule: amount, timing, and number of payments. 1(2 CFR 226.18(g))
11.  Total of payments accurate. (12 CFR 226.18(h))
12.  Demand feature, if applicable. (12 CFR 262.18(i))
13.  Prepayment (12 CFR 262.18(k))
14.  Late payment (12 CFR 262.18(l))
15.  Security interest (12 CFR 262.18(m))
16.  Insurance & debt cancellation ((12 CFR 262.18(n)) (see 226.4(d) for specifics)
17.  Security interest charges (12 CFR 262.18(o))
18.  Contract reference (12 CFR 262.18(p))
19.  Assumption policy (12 CFR 262.18(q))
20.  Required deposit (12 CFR 262.18(r))
21.  If a RMT and subject to RESPA, the following disclosures were provided, as applicable (12 CFR 226.19(a))
a) TIL was provided in a timely manner. (12 CFR 226.19(a)(1))
b) If the APR at the time of consummation varied from the initially disclosed APR by more than1/8 of 1 percentage point in a regular transaction or more than 1/4 of 1 percentage point in an irregular transaction, all of the changed terms were disclosed no later than consummation or settlement. (12 CFR 226.19(a)(2))
22.  If the APR may increase after consummation and secured by a dwelling, maximum interest rate disclosed within the contract. (12 CFR 226.30(a))

Variable Rate Transactions

23.  If the annual percentage rate may increase after consummation in a transaction not secured by the consumer’s principal dwelling or in a transaction secured by the consumer’s principal dwelling with a term of one year or less, the following disclosures were provided (12 CFR 226.18(f)(1):
a) Variable rate feature disclosed.
b) The circumstances under which the rate may increase.
c) Any limitations on the increase.
d) The effect of an increase.
e) An example of the payment terms that would result from an increase.
24.  If the annual percentage rate may increase after consummation in a transaction secured by the consumer’s principal dwelling with a term greater than one year, the following disclosures were provided (12 CFR 226.18(f)(2)):
a) The fact that the transaction contains a variable-rate feature
b) A statement that variable-rate disclosures have been provided earlier. (see ARM loans below)

Adjustable Rate Mortgages

25.  If the APR may increase after consummation in a transaction secured by the consumer’s principal dwelling with a term greater than one year, the following disclosures were provided at the time an application form is provided or before the consumer pays a non-refundable fee, whichever is earlier (12 CFR 226.19(b)):
a) The booklet titled Consumer Handbook on Adjustable Rate Mortgages published by the Board and the Federal Home Loan Bank Board, or a suitable substitute.
b) A loan program disclosure for each variable-rate program in which the consumer expresses an interest.

High Rate High Fee Loans (Sec. 32)

Complete HOEPA worksheet for all potential loans
26.  If the loan is subject to section 32, verify that:
a) Section 32 disclosures were made. (12 CFR 226.32(c))
b) There are no impermissible balloon payments. (12 CFR 226.32(d)(1))
c) There is no negative amortization. (12 CFR 226.32(d)(2))
d) There are no advance payments of more than two periodic payments. (12 CFR 226.32(d)(3))
e) The interest rate is not increased after default. (12 CFR 226.32(d)(4))
f)  There are no prepayment penalties. (includes Rule of 78s refunds). (12 CFR 226.32(d)(6))
g) Contract does not contain a due-on-demand clause (12 CFR 226.32(d)(8))

Right of Rescission

27.  If a rescindable transaction, verify the following:
a) Notice contained the required information. (12 CFR 226.23(b)(1)&(2))
b) Two copies of the notice and material disclosures were provided to each person entitled to rescind. (12 CFR 226.23(b)(1))
c) Funding delayed until rescission period has expired. 12 CFR 226.23(c))
Real Estate Settlement Procedures Act Worksheet (24 CFR 3500) Yes No N/A Comment
  1. Is the loan covered under RESPA (Reg. X)? If not, skip this section.

Special Information Booklet

  1. If secured by a first lien and for the initial purchase of a 1-4 family residential property, the HUD booklet was provided in a timely manner. (24 CFR 3500.6)

Servicing Disclosure Statement

  1. If secured by a first lien:
a)   SDS was delivered at the time of application in a face-to face interview or no later than the 3rd business day
b)   Accurate and acknowledged by all applicants. (24 CFR 3500.21(b) & (c))

Good Faith Estimate

  1. Good faith estimate reasonable, complete, and delivered in a  timely manner.( 24 CFR 3500.7(a) and (c))
  1. Name, address, and phone number of required providers disclosed. (24 CFR 3500.7(e)(1)(ii))
  1. Statement describing the nature of any relationship between required providers and the bank. (24 CFR 3500.7(e)(1)(iii))

Affiliated Business Arrangement Disclosure

  1. If applicable, the AfBA disclosure was provided in a timely manner and contained the required information. (24 CFR 3500.15)

Settlement Statements

  1. HUD-1 charges itemized and accurate. 24 CFR 3500.8(b)

Escrow Accounts

  1. If an escrow account is established:
Complete Escrow worksheet for all applicable loans
a)   Bank provided initial statement at closing or not later than 45 days after settlement. 24 CFR 3500.17(g)(1)
b)   Initial statement is accurate. 24 CFR 3500.17(c)(1)
c)   Initial statement includes monthly mortgage and escrow payments, itemizes estimated taxes, insurance premiums, anticipated disbursement dates, and other charges to be paid in year after account is established, indicates the cushion amount and a running trial balance. 24 CFR 3500.17(g)(1)(i)

Notice of Servicing Transfer

  1. If the loan was sold subsequent to closing, the bank provided the required notices in a timely manner. (24 CFR 3500.21(d))
Flood Disaster Protection Act Worksheet (12 CFR 22) Yes No N/A Comment
  1. Is the loan secured by improved real property? If not, skip this section.

Initial Determination

  1. Bank used the current “Standard Flood Hazard Determination Form”. (12 CFR 22.6)
  1. If the bank requires the escrow of taxes, insurance, etc. on the loan, flood insurance premiums are also escrowed. (12 CFR 22.5)
  1. Fees charged for determining whether the property is in a flood hazard area are reasonable. (12 CFR 22.8)

Flood Notice

  1. Notification is accurate and furnished in a timely manner (12 CFR 22.9)

Flood Insurance

  1. Evidence of flood insurance was obtained prior to consummation. (12 CFR 22.3; Force placed, if necessary. 12 CFR 22.7)
  1. Property has sufficient coverage. (12 CFR 22.3)
  1. Bank listed as mortgagee?
Reg. B (12 CFR 202) Yes No N/A Comment

Appraisal Rules

  1. If secured by a 1-4 dwelling, bank provided the customer with either a copy of any appraisal used to determine the value of the property or a notice of the customer’s right to receive a copy. (12 CFR 202.14)

Written Application

  1. If for the purchase or permanent construction or refinancing of the borrower’s principal residence, a written application was obtained. (12 CFR 202.4(c)(

Monitoring Information

  1. Monitoring information was not recorded unless so required. (12 CFR 202.13)

Evidence of Intent

  1. If there were multiple applicants, each person’s intent to be a joint applicant was evidenced at the time of application. (12 CFR 202.7(d)(1))
Reg. C (12 CFR 203) Yes No N/A Complete HMDA worksheet for all applicable loans
  1. If applicable, the bank obtained the required monitoring information.
  1. The application was correctly recorded on the LAR within 30 days of the end of the calendar quarter in which the action was taken.
Fair Housing Home Loan Data Worksheet (12 CFR 27) Yes No N/A Comment – Applies only to OCC regulated banks.
  1. Did the bank obtain all of the required information on a written application? (12 CFR 27.3(b))
Reg. V (12 CFR 222) Yes No N/A Comment
  1. If a consumer loan, did the institution provide a clear and conspicuous notice about furnishing negative information, in writing, to the customer? (Appendix B)
  1. Was medical information obtained and/or used only within the restrictions? (12 CFR 222.30)
Fair Credit Reporting Act Yes No N/A Comment

Home Loan Notice

  1. If the transaction was secured by the consumer’s principal residence and a credit score was obtained, were the required disclosures provided in a timely manner? (Section 609(g)(1))

Fraud Alerts

  1. If a credit report was obtained and the report reflected a fraud or active duty alert, did the lender take steps to form a reasonable belief that the identity of the person making the request is known? (Section 605A(h)(1)(B))
Consumer Protection in the Sales of Insurance (12 CFR 14) Yes No N/A Comment
  1. Was the required disclosure made orally and in writing at the time the consumer applied for the extension of credit in connection with which an insurance product or annuity is solicited, offered, or sold? (12 CFR 14.40(b))
  1. Was the required disclosure provided at consummation? (12 CFR 14.40(a))

the foreclosure process law an otherwise unconstitional private sale

A. Context of Duties
Despite the name, a “trustee” under a deed of trust has not been held to the high fiduciary duties imposed on a trustee under an express trust.
The trustee has obligations to the trustor, and those obligations emerge in two contexts — the foreclosure process and reconveyance following discharge of the underlying obligation. Foreclosure may proceed either judicially or nonjudicially. [See Passanisi v. Merit McBride Realtors, Inc., supra, 190 Cal.App.3d 1496, 1502-03.] Although judicial foreclosures still occur, most foreclosures involving residential property proceed non judicially. The following discussion focuses on the trustee’s duties toward the trustor during the nonjudicial foreclosure process.
B. Nonjudicial Foreclosure
1. The Notice of Default and Intent to Foreclose
Following the trustor’s default, the beneficiary or the trustee must comply with certain statutory requirements prior to exercising the power of sale under the deed of trust. (Civ. Code § 2924 et seq.) To initiate nonjudicial foreclosure, the beneficiary or trustee must file a notice of default with the county recorder in the county in which the property or some part thereof is situated. (Civ. Code § 2924.) Usually the trustee files the notice at the request of the beneficiary. If there is more than one beneficiary, any beneficiary can instruct the trustee to record the notice of default. [See Perkins v. Chad Development Corp. (1979) 95 Cal.App.3d 645; 157 Cal.Rptr. 201.] Although the statute does not specify who may sign the notice of default, the trustee is authorized to sign it. Williams v. Koenia (1934) 219 Cal. 656, 659; 28 P.2d 351; Hopkins v. J.D. Millar Realty Co. (1930) 106 Cal.App. 409, 414; 289 P. 221.]
Federal law does not require the beneficiary to follow any foreclosure avoidance guidelines suggested by the Federal Department of Housing and Urban Development (HUD) or the Veterans Administration (VA) before recording a notice of default on a government-backed loan. (See Rank v. Nimmo (9th Cir. 1982) 677 F.2d 692, 698-99.) Several courts, however, have concluded that a lender’s failure to follow federal regulations governing mortgage servicing creates a valid equitable defense under state law to a foreclosure. [See Federal Nat. Mto. Assn. v. Moore (N.D. 111. 1985) 609 F.Supp. 194; Cross v. Federal Nat. Mtq. Assn. (Fla. App. 1978) 359 So.2d 464; Bankers Life Co. v. Denton (111.App. 1983) 458 N.E.2d 203; Heritage Bank, N.A. v. Ruh (N.J. Super. 1983) 465 A.2d 547; Associated East Mtg. v. Young (N.J. Super. 1978) 394 A.2d 899; Federal Nat. Mtg. Assn. v. Ricks (N.Y. Sup. Ct. 1975) 372 N.Y.S.2d 485; Federal Land Bank of St. Paul v. Overboe (N.D. 1987) 404 N.W.2d 445; but see Manufacturers Hanover Mortgage Corp. v. Snell (Mich.App. 1985) 307 N.W.2d 401; Federal Nat. Mtg. Assn. v. Prior (Wis.App. 1985) 381 N.W.2d 558.]
a. Content of the Notice of Default
(1) Required Contents
The only requirements for the notice of default are set forth in the trust deed and the statute. (See Lupertino v. Carbahal (1973) 35 Cal.App.3d 742, 747-48; 111 Cal.Rptr. 112.) The notice of default must name the trustors, state either the book and page in which the deed of trust is recorded or a description of the secured property, contain a statement that a breach of the obligation has occurred, set forth the nature of the breach and the election to sell the property to satisfy the obligation, and provide the notice prescribed in Civil Code § 2924c(b)(1) of the right to cure the default and reinstate the obligation if reinstatement is possible. (Civ. Code § 2924.)
An additional requirement is imposed on the trustee if the trustor’s obligation arose for goods or services subject to the Unruh Act. The trustee is required to send an additional notice to the trustor if the default is not cured within 30 days of the recordation of the notice of default. [Civ. Code § 2924f(c).]
(2) Statement of Nature of Breach
One of the most crucial aspects of the notice of default is the statement of the nature of the breach. Soon after this requirement was adopted, the Supreme Court concluded that a general statement of the breach was satisfactory: “a substantial compliance in accord with the spirit and purpose of the statute is sufficient.” Williams v. Koenig. supra, 219 Cal. 656.] If an item of default is not included in the notice of default, payment of the excluded item cannot be demanded to cure the particular default declared, Anderson v. Heart Fed. Sav. & Loan Assn. (1989) 1989 Cal.App. LEXIS 141; Little v. Harbor Pac. Mortgage Investors (1985) 175 Cal.App.3d 717, 720; 221 Cal.Rptr. 59; Miller v. Cote (1982) 127 Cal.App.3d 888, 894; 179 Cal.Rptr. 753; System Inv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 152-53; 98 Cal.Rptr. 725; Tomczak v. Ortega (1966) 240 Cal.App.2d 902, 904; 50 Cal.Rptr. 20; Bisno v. Sax (1959) 175 Cal.App.2d 714, 720; 364 P.2d 814; Hayward Lumber & Inv. Co. v. Corbertt (1934) 138 Cal.App. 644, 650; 33 P.2d 41.]
The question is how clear the statement of the nature of the default must be. In Enqelbertson v. Loan & Blda. Assn. (1936) 6 Cal.2d 477, 478-79; 58 P.2d 647, the court approved a statement of a breach indicating, in part, that a particular installment of interest was due together with subsequent installments and unspecified sums advanced or expended under the trust deed with interest thereon. The court held that, “There is nothing in this section which warrants the construction that a statement of the amount of the items is required.” (Id. at 479.) [See Middlebrook-Anderson v. Southwest Sav. & Loan Assn. (1971) 18 Cal.App.3d 1023, 1038; 96 Cal.Rptr. 338.]
In Birkhofer v. Krumm (1938) 27 Cal.App.2d 513, 522-24; 81 P.2d 609, the notice of default claimed more money than in fact was due. However, the Court of Appeal did not find the notice fatally deficient because the substantial nature of the breach authorized the acceleration of the entire balance due. The court did not consider the effect of the exaggerated size of the default on the trustor’s exercise of the right to reinstate, but the reinstatement right may not have existed since the trust deed predated the adoption of Civil Code § 2924c.
In Little v. Harbor Pac. Mortgage Investors, supra, 175 Cal.App.3d 717, 721 n.6, the court stated in dicta in a footnote that the purpose of the statement of the nature of the default “is to put the debtor on notice as to which breaches the lienholder wishes cured•” (Emphasis in original.) The court indicated that a notice of default containing “a reference to delinquent payments, if any, on the first” (id.) would be sufficient to cover the trustor’s default in paying a senior encumbrance even though the foreclosing junior lienholder was unaware of the default at the time the notice was recorded. Thus, under Little, a foreclosing creditor could demand that the trustor cure delinquent taxes, payments to senior lienholders, and other defaults discovered after the notice of default was recorded as long as every default, “if any,” was listed in the notice of default. The court did not consider the effect of the requirement in Civil Code § 2924c(b)(l), discussed below, that the notice of default state the amount which must be paid to effect reinstatement.
Recent cases and a change in Civil Code § 2924c militate for a more precise statement of the nature of default to enable the trustor to cure the default. Indeed, the dicta in the Little case has been specifically rejected. Anderson v. Heart Fed. Sav. & Loan Assn., supra, 1989 Cal.App. LEXIS 141.] The courts have recognized that:
A purpose of the required statement in the notice of default is to afford the debtor an opportunity to cure the default and obtain reinstatement of the obligation within three months after the notice of default as provided in § 2924c of the Civil Code. System Inv. Corp. v. Union Bank, supra, 21 Cal.App.3d 137, 153; 98 Cal.Rptr. 735.
(Accord, Miller v. Cote, supra, 127 Cal.App.3d 888, 894; 179 Cal.Rptr. 753; see Tomczak v. Ortega, supra, 240 Cal.App.2d 902, 904; 50 Cal.Rptr. 20.) The rationale that the disclosure of the nature of the default is designed to facilitate reinstatement is buttressed by Civil Code § 2924c(b)(1) which requires a statement in the notice of default of the amount due as of a specified date. (Civ. Code § 2924.) As a result, the modern view is that the notice of default will be strictly construed and must correctly set forth the amounts required to cure the default. Sweatt v. The Foreclosure Co. (1985) 166 Cal.App.3d 273, 278; 212 Cal.Rptr. 350.] The purpose of Civil Code § 2924c(b)(1) would be subverted if a beneficiary could set forth in the notice of default a litany of possible defaults, specify that payment of a particular dollar amount by a specified date would cure the default, and then refuse to accept a tender of that sum because the beneficiary learned of an additional delinquency, especially a delinquency that occurred before the notice of default was recorded. Accordingly, the Court of Appeal in Heart rejected predicating a foreclosure on an “if any” qualifier which states a potential ground of default: the notice may state only breaches that have occurred, and the power of sale cannot be exercised until the proper notice requirements have been satisfied.
(3) Spanish Language Considerations
In some situations, the notice of default or the statutorily prescribed statement of the right of reinstatement may have to be written in the Spanish language. Prior to 1989, Civil Code § 1632(a) required that a Spanish translation of certain contracts, loans and other agreements be provided upon the request of a party to the agreement if the transaction was negotiated primarily in Spanish. Under current law, the Spanish translation must be given. A sign advising the parties of their right to a translation must be conspicuously displayed on the business premises. [Civ. Code § 1632(c).]
Beginning in 1989, a Spanish language translation of the disclosures required under Regulation Z and, if applicable, under the industrial loan, consumer finance lender, or personal property brokers’ laws may be given in lieu of the translation of the original contract by supervised financial organizations. A “supervised financial organization” means a bank, savings association, credit union, real estate broker, industrial loan company, consumer finance lender, or personal property broker. [Civ. Code § 1632(b).]
A Spanish language translation does not have to be given to borrowers who negotiate through their own interpreter if the interpreter can read and speak English and Spanish fluently and is not employed or made available through the creditor. Beginning in 1989, the interpreter must be 18 years of age or older. [Civ. Code § 1632(e).]
In Reves v. Superior Court (1981) 118 Cal.App.3d 159; 173 Cal.Rptr. 267, the Court of Appeal held that a notice of repossession and deficiency used under the Rees-Levering Act was covered by Civil Code § 1632. The court further held that in the absence of evidence showing compliance with this section, a deficiency judgment based on an English language notice against a solely Spanish-speaking debtor could not stand. (Id. at 162.) Since Civil Code § 1632 applies to loans subject to the provisions regulating mortgage brokers, industrial loan companies, personal property makers and consumer finance lenders, Reves can perhaps be applied to require Spanish translations of the notice of default if the requirements for the invocation of Civil Code § 1632 are satisfied.
Moreover, the notice of the right to cure contained in the trust deed must be in Spanish if (1) the obligation is a retail installment contract governed by the Unruh Act or a loan for personal, family or household purposes made by a mortgage broker, industrial loan company, personal property broker or consumer finance lender, and (2) the trustor requested a Spanish language translation of the agreement pursuant to Civil Code § 1632. In addition, if the obligation is contained in a home improvement contract subject to the Unruh Act, the seller is required to specify on the contract whether or not the contract was principally negotiated in Spanish, and, if so, the prescribed notice advising of the right to cure the default must be in Spanish. However, the trustee has no liability for failing to provide a Spanish language notice of the right to cure unless Spanish is specified in the home improvement contract or the trustee has actual notice that the obligation was principally negotiated in Spanish.
2. Adequacy of Notice to Trustor
The notice of default must be recorded. (Civ. Code § 2924.) Within ten days of its recordation, the trustee or beneficiary must send the notice of default, by registered or certified mail, to the trustor at the trustor’s last known address. [Civ. Code § 924b(b)(l); see Lupertino v. Carbahal, supra, 35 Cal.App.3d 742, 749.] A notice must also be sent by first-class mail. [Civ. Code § 2924b(e).] Although notice by certified or registered mail is required, notice sent by regular mail and actually received is considered valid notice. [See Crummer v. Whitehead (1964) 230 Cal.App.2d 264, 268; 40 Cal.Rptr. 826.] Publication or personal service is not required. In the very rare instances in which the trust deed does not contain the trustor’s address and the trustor has not recorded a request for notice, the notice of default may be published or personally served in lieu of mailing [Civ. Code § 2924b(4)].
The trustee has no duty to assure that the trustor actually receives notice even though the trustee may know that the trustor actually does not receive notice. The rule developed that “[t]he only requirements of notice of sale essential to the validity of a sale under a power contained in a deed of trust are those expressly and specifically prescribed by the terms of the instrument and by the provisions of the applicable statutes.;/ Lancaster Security Inv. Corp. v. Kessler (1958) 159 Cal.App.2d 649, 652; 324 P.2d 634 (notice of sale); see e.g., I. E. Associates v. Safeco Title Ins. Co. (1985) 39 Cal.3d 281; 216 Cal.Rptr. 438 (notices of default and sale); Sargent v. Shumaker (1924) 193 Cal. 122, 130; 223 P. 464 (notice of sale); McClatchev v. Rudd (1966) 239 Cal.App.2d 605, 608; 223 P. 464 (notice of default); Lopez v. Bell (1962) 207 Cal.App.2d 394, 397-98; 24 Cal.Rptr. 626 (notices of default and sale).] In McClatchev, for example, the envelope containing the notice of default was returned to the trustee marked “Deceased,” and although the beneficiary and trustee allegedly knew of the trustor’s death and the identity of the administrator of the decedent’s estate, the failure to notify the administrator did not invalidate the sale. (See 239 Cal.App.2d at 607-08.) Since a trustee’s sale has been held valid if the statutory notice requirements were met even though no notice was actually received, the “named trustee in a deed of trust, by virtue of that position alone, is ordinarily under no duty to give different or more specific notices than those prescribed by statute in order to exercise a power of sale.” Lupertino v. Carbahal. supra, 35 Cal.App.3d 742 (notice of default).] However, if the trustee dealt with the trustor at an address other than the address specified in the trust deed, the trustee might be estopped to use the invalid address. [See Lupertino v. Carbahal, supra, 35 Cal.App.2d 742, 748-49.]
Current law requires that the notices of default and sale be sent to the trustor at the trustor’s “last known address.” [Civ. Code § 2924b(b)(l) and (2).] The “last known address” is the last business or residence address actually known by the trustee or beneficiary. [Civ. Code § 2924b(b)(3).] The beneficiary must inform the trustee of the trustor’s last address actually known by the beneficiary. (Id.) The trustee incurs no liability for failing to send any notice to the last address unless the trustee has actual notice of it. (Id.) Constructive knowledge of the correct address is irrelevant, and the trustee has no duty of inquiry. [See I. E. Associates v. Safeco Title Ins. Co. supra, 39 Cal.3d 281, 285.]
Although the trustee’s compliance with statutory notice requirements has been deemed sufficient, no appellate case has considered whether the statutory provision for registered or certified mail requires that the mailed notice be received. In Dept. of Forestry v. Terry (1981) 124 Cal.App.3d 140; 177 Cal.Rptr. 92, the California Department of Forestry brought an action to foreclose a statutory lien for costs incurred in correcting certain violations of law. The costs were incurred after the defendant failed to respond to a notice to take corrective action sent by the state by certified mail as required by statute. The statute did not expressly require that the defendant receive the notice, but the Court of Appeal held that the process of certified or registered mail requires that the receiver sign for the mail, and therefore service is complete when the mail is received, not when the notice is deposited for mail collection. (Id. at 147.) Civil Code § 2924b which requires certified or registered mail may be similarly interpreted.
A court, however, could conclude that receipt of the certified mailing was unnecessary because the notices must also be sent by first-class mail. [Civ. Code § 2924b(e).] In the absence of fraud, an affidavit of mailing is conclusive proof that the notice was mailed. (Id.) A properly addressed and mailed letter is presumed to have been received. [Evid. Code § 641.] Accordingly, compliance with the certified and first-class mailing requirements may be sufficient even if receipt of the certified mailing is not

signed for.
In contrast to the procedure authorized for nonjudicial foreclosures, forced sales involving the government require scrupulous adherence to due process standards. [See Mennonite Board of Missions v. Adams (1983) 462 U.S. 791; 103 S.Ct 2706.] For example, in Barras v. Transamerica Title Ins. Co. (1982) 133 Cal.App.3d 845, 849-52; 184 Cal.Rptr. 262, the Court of Appeal required the government to go beyond the statutory notice requirements for tax sales which provide for publication, posting in a public place, and mailing notice to the last known address of the last assessee; to protect the rights of equitable owners in possession, the government was constitutionally compelled to post notice on the property. [See e.g., Atkins v. Kessler (1979) 97 Cal.App.3d 784; 159 Cal.Rptr. 231 holding the notice requirements of the Improvements Act of 1911 unconstitutional.] Since state action is not involved in nonjudicial foreclosure proceedings, the constitutional due process safeguards do not apply to the process. [See Garfinkle v. Superior Court (1978) 21 Cal.3d 268; 145 Cal.Rptr. 208.] Moreover, foreclosure by a private lender under a federally-guaranteed mortgage program does not constitute governmental action sufficient to invoke due process requirements even though the private parties are subject to extensive federal regulation. [See Rank v. Nimmo, supra, 677 F.2d 692, 702.]
3. The Right to Reinstatement
The trustor and junior lienholders have the right to cure the default and reinstate the obligation as though no default had occurred if a monetary default has occurred prior to the maturity date fixed in the obligation. [Civ. Code § 2924c(a)(1) . ] To reinstate, the trustor or junior lienholder must pay the beneficiary the amount of the default (i.e., arrearages, advances, taxes, etc.) plus allowable costs and expenses and trustee’s fees. (Id. ) The beneficiary may also be entitled to attorney’s fees. (See discussion in Chapter I B 3 h “Attorney’s Fees”, supra. ) The amount of the default plus attorney’s fees, if any, must be paid at any time within the period beginning on the date the notice of default was recorded until five business days before the date of sale stated in the initial recorded notice of sale. [Civ. Code § 2924c(e).] No right of reinstatement exists during the five business days preceding the sale. (JEd.; see Civ. Code § 9 for definition of “business day.”) However, if the sale is postponed or a new notice of sale is recorded, the right of reinstatement is revived until five business days before the newly scheduled date. (.Id. ) Again, no reinstatement right exists during the five business day period preceding the continued sale date. (Id.)
The filing of a bankruptcy petition does not toll or suspend the reinstatement period for the trustor or junior lienholders.
Napue v. Gor-Mev West, Inc. (1985) 175 Cal.App.3d 608; 220 Cal.Rptr. 799; In re Pridham (E.D. Cal. 1983) 31 B.R. 497; Triangle Management Services v. Allstate Savings & Loan Assn. (N.D.Cal. 1982) 21 B.R. 699.] However, if the trustor or junior lienholder’s right of reinstatement has not elapsed, the bankruptcy trustee may exercise the right before the later of the end of the reinstatement period or 60 days after the bankruptcy petition has been filed. [11 U.S.C. § 108(b); Napue v. Gor-Mev West, Inc., supra, 175 Cal.App.3d 608, 619.]
Notwithstanding the beneficiary’s demand that the entire balance be paid, the obligation is reinstated by the payment of the amount in default plus fees during the reinstatement period. [Civ. Code § 2924c(a)(1).] Thus, Civil Code § 2924c relieves the trustor and junior lienholder from the burden of the acceleration clause. After the reinstatement period, the beneficiary may still waive the acceleration of the balance, accept payment to cure the default, and reinstate the loan, but the beneficiary is not compelled to do so.
During the reinstatement period, payment or tender of payment of the default nullifies the right to proceed with the foreclosure. Any sale conducted after the entire amount necessary to cure the default was paid or properly tendered is invalid. Munger v. Moore (1970) 11 Cal.App.3d 1, 8; 89 Cal.Rptr. 323; Tomczak v. Ortega,supra, 240 Cal.App.2d 902, 906; 50 Cal.Rptr. 20; Bisno v. Sax, supra, 175 Cal.App.2d 714, 724; Macmus v. Morrison (1949) 93 Cal.App.2d 1, 3; 208 P.2d 407.]
Partial payments will not ordinarily cure the default. If the tender does not include all amounts needed to cure the default plus costs, the tender is ineffective. [See e.g., Enaelbertson v. Loan & Blda. Assn., supra, 6 Cal.2d 477, 479; Cassinella v. Allen (1914) 168 Cal. 677, 680-81; 144 P. 746.] Generally, the beneficiary may accept partial payments on the amount due after the notice of default is recorded without waiving the default, any rights under the acceleration clause, or the right to proceed with the foreclosure. [See Sellman v. Crosby (1937) 20 Cal.App.2d 562, 564-65; 67 P.2d 706; see also R. G. Hamilton Corp., Ltd. v. Corum (1933) 218 Cal. 92, 97; 21 P.2d 413; Bisno v. Sax, supra, 175 Cal.App.2d 714, 724; Birkhoffer v. Krurom, supra, 27 Cal.App.2d 513, 524; Harris v. Whittier Bldq. & Loan Assn. (1936) 18 Cal.App.2d 260, 268; 63 P.2d 840.] Nevertheless, the beneficiary’s conduct in conjunction with the acceptance of partial payments may be construed as a waiver or may estopped the beneficiary from claiming a default or invoking an acceleration clause. [See Altman v. McCollum (1951) 107 Cal.App.2d 847; 236 P.2d 914; see also R. G. Hamilton Corp., Ltd. v. Corum (1933) 218 Cal. 92, 97, 21 P.2d 413; Glas v. Glas (1896) 114 Cal. 566, 569, 46 P. 667; see discussion in Chapter III B(3)(c), “Waiver or Estoppel to Claim Payment or Default”, infra.]
The court may also suspend or toll the acceleration clause and thereby extend the right to cure the default and reinstate the loan. In Bisno v. Sax, supra, 175 Cal.App.2d 714, 724-30, the court relieved the trustors from the acceleration clause since they had cured the default during the seven-month pendency of a preliminary injunction. In Hunt v. Smyth (1972) 25 Cal.App.3d 807; 101 Cal.Rptr. 4, the trustor filed a complaint seeking a preliminary injunction 13 days before the expiration of the reinstatement period. The foreclosure was stayed through the lengthy appeal process. Nearly three years after the notice of default was originally filed, the Court of Appeal remanded the case to the trial court for a determination of the amount then owing and gave the trustors 13 days after that determination to make payment. (Id. at 837.)
If a junior lienholder cures the trustor’s default on the senior encumbrance, the junior lienholder may then foreclose based on the trustor’s failure to meet the obligation secured by the senior encumbrance or the failure to reimburse the junior lienholder for the amount of the advance to reinstate the senior lien. (See discussion in Chapter I B 3 d, “Senior Encumbrances,” supra.) The trustor or junior lienholder who cures a default may request that the beneficiary cause to be executed and recorded a notice of rescission of the notice of default. [Civ. Code § 2924c(a) (2). ] The notice of rescission must be recorded within 30 days of receipt of a written request. (Id.) No charge may be made except for recording fees. (Id.)
4. The Right of Redemption
The trustor has the right to redeem the real property securing the debt before the foreclosure sale (Civ. Code § 2903) by paying the entire secured obligation. [Civ. Code § 2905; see Winnett v. Roberts (1979) 179 Cal.App.3d 909, 922; 225 Cal.Rptr. 82; Kleeckner v. Bank of America (1950) 97 Cal.App.2d 30, 33; 217 P.2d 28; Lichtv v. Whitney (1947) 80 Cal.App.2d 696, 701; 182 P.2d 582.]
A tender of the proper amount due, even if rejected, extinguishes the lien and precludes foreclosure• [See, e.g., Winnett v. Roberts. supra, 179 Cal.App.3d 909, 902; Lichtv v. Whitney, supra, 80 Cal.App.2d 696, 701; see also Code Civ. Proc. § 2074.] In Winnett the court held that a tender of the principal amount without interest was sufficient because the note was usurious and the creditor was not entitled to receive interest.
Junior lienholders have a similar right of redemption. (Civ.Code § 2904.) If the junior lienholder redeems the property, the junior lienholder becomes subrogated to the rights of the satisfied senior lienholder and may add the amount paid to the senior lienholder to the amount secured by the junior lien. [See Civ. Code §§ 2876, 2904; Pacific Trust Co. TTEE v. Fidelity Fed. Sav. & Loan Assn. (1986) 184 Cal.App.3d 817, 825; 229 Cal.Rptr. 269.] The deed of trust routinely provides the same remedies. (See discussion in Chapter I B 3 d, “Senior Encumbrances,” supra.)
As a practical matter, the trustor or junior lienholder will generally attempt to exercise the right of reinstatement. However, if that right lapses, the right of redemption may become critically important.
5. Giving the Notice of Sale
At least three months must elapse between the date the notice of default is recorded and the date the trustee may give notice setting the sale. [Civ. Code § 2924.] The period is three calendar months, not 90 days. [See Hayward Lumber & Inv. Co. v. Corbett, supra, 138 Cal.App. 644, 651; see generally Tomczak v. Ortega, supra, 240 Cal.App.2d 902, 906, but see Bennett v. Ukiah Fair Assn. (1936) 7 Cal.2d 43; 59 P.2d 805.] There is no requirement that the notice of sale be given within any prescribed time after the three-month period elapses. [See Arata v. Downer (1937) 21 Cal.App.2d 406; 69 P.2d 213 (three years between notice
of default and sale)•]
The notice of sale must contain, in pertinent part, the name of the original trustor, the time of sale, the street address and the specific place at that address where the sale will be held, the name, street address and telephone number of the trustee, a special notice if a single home is being sold, a description of the property to be sold, the property’s street address or other common designation, and a statement of the total amount of the unpaid balance of the obligation and reasonable estimated costs, expenses and advances. The trustee has no liability for any good faith error in stating the proper amount, and an error or omission in the street address will not affect the validity of the notice if the legal description is given. [Civ. Code § 2924f(b).]
The trustee must record the notice of sale at least 14 days prior to the date of the sale. The trustee must post the notice of sale in a public place at least 20 days before the sale date and must publish the notice of sale once per week for the same period in an appropriate newspaper of general circulation. [Civ. Code § 2924f(b).] The publication requirement has been interpreted to mean that three successive publications are required, even though the first and last would be separated by only 14 days, since there can only be three weekly publications in the 20-day period; and, the first publication must be at least 20 days prior to the sale

date. Hotchkiss v. Darling (1933) 130 Cal.App. 625, 626-27; 20 P.2d 343; McCabe v. Willard (1931) 119 Cal.App. 122, 125; 6 P.2d 258.]
The trustee must also post a copy of the notice of sale in some conspicuous place on the property at least 20 days before the date of sale where possible and not restricted for any reason. If possible, and if not restricted for any reason, the trustee must post the notice on the door of a single family residence, but the trustee’s failure to post the notice on the door does not affect a sale to a bona fide purchaser for value. In the absence of any contrary evidence, the notices which have been posted are presumed to have remained in place for the required period. Hotchkiss v. Darling, supra, 130 Cal.App. 625, 627.]
If the trustee cannot place the notice on the front door of the single family residence, the notice must be placed in some conspicuous place on the property. [Civ. Code § 2924f(b).] The trustee may face a problem with compliance if the single family residence is not readily accessible, such as a condominium unit in a locked building. In this circumstance, many trustees have attempted a practical resolution by posting the notice near the main entry to the condominium units. However, this practice may not strictly satisfy the statute and may conceivably be an unfair collection practice in certain circumstances. [See Civ. Code § 1788.12(d).] The trustee, though, is permitted to post the notice

of sale at a guard gate or similar impediment at a “development community” if access to the single family residence in the development is blocked by a gate or other impediment.
Moreover, the trustee must send a copy of the notice of sale to the trustor’s address last known to the trustee at least 20 days before the date of sale. [Civ. Code § 2924b(2) (b). ] The rules applicable to the last known address requirement for notices of default also apply to notices of sale. [See Civ. Code § 2924b(2)(c); Chapter II B 2, “Adequacy of Notice to Trustor/’ supra.]
The trustee’s duty to assure that the trustor receives the notice of the sale is similar to the trustee’s duty to assure that the trustor receives the notice of default. (See Chapter II B 2, “Adequacy of Notice to Trustor,” supra.) The general rule is that the trustee need only comply with the statutory notice requirements notwithstanding whether the trustor knows of the sale. [ See e.g., Civ. Code § 2924b(b)(2) and (c); I. E. Associates v. Safeco Title Ins. Co., supra, 39 Cal.3d 281; Witter v. Bank of Milpitas (1928) 204 Cal. 570, 572-73, 269 P. 614; Sargent v. Shumaker, supra, 193 Cal. 122; Lopez v. Bell, supra, 207 Cal.App.2d 394.]
Without proper notice, a foreclosure sale is void. [See Scott v. Security Title Ins. & Guar. Co. (1937) 9 Cal.2d 606, 613; 72 P.2d 143; United Bank & Trust Co. v. Brown (1928) 203 Cal. 359; 264 P. 482.] However, defects in notice, such as setting the sale date before the expiration of the 20-day notice period, can be corrected prior to the sale, and the sale date may be postponed to permit an adequate period for correction. [See Mack v. Golino (1950) 95 Cal.App.2d 731; 213. P.2d 760.]
6. Notice Regarding Balloon Payment
A special notice must be given before the final payment is due on a balloon payment loan. [Civ. Code § 2924i.] A balloon payment loan is a loan which provides for a final payment as originally scheduled which is more than twice the amount of any of the immediately preceding six regularly scheduled payments. [Civ. Code § 2924i(d) (1). ] A balloon payment loan is also defined as a loan in which the holder of the loan exercises a call provision whereby the holder calls the loan due and payable either after a specified period or date. [Civ. Code § 2924i(d)(l) and (2).]
The notice requirement applies only if the following conditions are met: (1) the loan has a maturity exceeding one year; (2) the note for the loan was executed after January 1, 1984; (3) the loan is secured by a trust deed or mortgage on real property containing one to four residential units one of which is or will be occupied by the borrower; (4) the loan is not open-end credit; (5) the loan is not part of a transaction subject to Civil Code § 2956 (sales involving purchase money liens on residential property); and (6) the loan is not made for the principal purpose of financing construction. [Civ. Code § 29241(a), (b), and (g).]
If the statute applies, the holder of the loan must deliver or send by first-class mail a written notice to the trustor or the trustor’s successor in interest between 90 and 150 days before the due date of the final payment. The notice must state the name and address of the person to whom the final payment must be made, the date by which the payment must be made, the amount or good faith estimate of the amount to be paid (assuming timely payment of all scheduled payments due between the date of the notice and the date when the final payment is due), and a statement that the borrower has the right to refinance the final payment if such is the case. [See Civ. Code § 29241(c).]
If the notice is not given, the due date of the balloon payment is then deemed to be the latest of the following: (a) the due date specified in the loan, (b) 90 days from the date of delivery or mailing of the required notice, or (c) the due date specified in the notice. [See Civ. Code § 29241(e).] If the due date is extended beyond the date specified in the loan, the loan continues to accrue interest at the contract rate, and payments continue to be due at any periodic interval and on any payment schedule specified in the note. (Id.) Payments must be credited as the note requires, and any default in making any extended periodic payment shall be considered a default under the loan. (Id.)
Any person who willfully violates the notice requirement is liable for the actual damages suffered by the borrower as the proximate result of the violation and for the prevailing borrower’s reasonable attorney’s fees. [See Civ. Code § 2924i(f)(1).] The validity of the credit or security document, however, is unaffected by the failure to give notice. (Id-) If the violation of the section was unintentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid the error, there is no liability. [See Civ. Code § 2924i(f)(2).]
Civil Code § 2924i does not specify what effect failure to give the required notice has on the validity of any foreclosure sale predicated on the borrower’s nonpayment of the final balloon or call payment by the date specified in the note. Under the statute, the due date is extended; therefore, no default occurred when the balloon or call payment was not made by the date set forth in the note. Since no default occurred, the foreclosure sale should be held invalid subject to whatever rights may be held by a bona fide purchaser or encumbrancer. [See Chapter III B 3, “Dispute as to What, if any, Amount Owed”; III B 5, “Defective Procedure”; III D 4, “Conclusiveness of Deed Recitals”; III F, “The Status of Bona Fide Purchaser or Encumbrancer; infra. ] A sale could be predicated on a default in making any required extended periodic payments; however, the notice of default would have to state accurately the nature of the breach. [See Chapter III B 5 a, “Defective Notice of Default”, infra.1
7. Conduct of the Foreclosure Sale
The trustee must conduct the sale by public auction between 9 a.m. and 5 p.m. on any business day, Monday through Friday, in the county where all or some part of the property is located. [Civ. Code § 2924g(a).] Although the trustee usually conducts the sale, the sale may also be handled by anyone designated by the trustee. [See Civ. Code § 2924d(d); Central Sav. Bank of Oakland v. Lake (1927) 201 Cal. 438, 447; 257 P. 521.]
Ordinarily, the trustee or the trustee’s agent appears at the time and place designated in the notice of sale, announces the sale, identifies the property up for sale, and indicates the terms of sale, e.g., the amount of the minimum bid, whether the bids must be in cash or cashier’s check, etc. (See 1 Miller & Starr, Current Law of California Real Estate 534.) But this procedure is not mandated by statute. The trustee may require every bidder to show evidence of the bidder’s ability to deposit the full amount of the final bid in cash; a cashier’s check; a check drawn by a credit union, savings and loan association, savings association, or savings bank; or any equivalent specified as acceptable in the notice of sale. [Civ. Code § 2924h(b).] [See Witter v. Bank of Miloitas, supra, 204 Cal. 570, 580.] The trustee cannot refuse to accept a cashier’s check made payable to the bidder to be endorsed to the trustee. (Baron v. Colonial Mortgage Service Co. (1980) 111 Cal.App.3d 316; 168 Cal.Rptr. 450.) The selling beneficiary may bid a credit up to the amount owed without tendering that amount in cash. [Civ. Code § 2924h(b); Coraelison v. Kornbluth (1975) 15 Cal.3d 590, 607; 125 Cal.Rptr. 557; Passanisi v. Merit McBride Realtors, Inc.. supra, 190 Cal.App.3d 1496.] However, a junior lienholder cannot use the amount of the lien as a credit bid. [See Pacific Loan Management Corp. v. Superior Court (1987) 196 Cal.App.3d 1485, 1493; 242 Cal.Rptr. 547.]
The trustee has discretion to postpone the sale. The trustee, for example, may exercise that discretion by postponing the sale to protect the beneficiary’s or the trustor’s interests. [See Bank of Seoul & Trust Co. v. Marcione (1988) 198 Cal.App.3d 113, 118-19; 244 Cal.Rptr. 1; Pacific Readv-Cut Homes v. Title G. & T. Co. (1929) 103 Cal.App. 1, 5-6; 283 P. 963.] In addition, the trustee may postpone the sale at the instruction of the beneficiary or upon the written request of the trustor, if the trustor requests the postponement to obtain cash sufficient to satisfy the obligation or bid at the sale and the written request identifies the source from which the funds are being obtained. The trustee must grant at least one request by the trustor for a postponement not to exceed one day. [Civ. Code § 2924g(c)(l); Whitman v. Transtate Title Co. (1985) 165 Cal.App.3d 312, 320-21; 211 Cal.Rptr. 582.]
A sale also may be postponed by court order, operation of law, or mutual agreement between the trustor and beneficiary. If the sale has been stopped by an injunction, restraining order, stay effected by court order or operation of law, the sale may not be conducted sooner than seven days after the termination of the injunction, order, or stay unless a court expressly directs the conduct of the sale within that seven day period. [Civ. Code § 2924g(d).] If the sale was postponed to a time within that seven day period, a notice of postponement must be given. (.Id.)
While there is no limit to the number of postponements, if the trustee postpones the sale more than three times based on the exercise of its discretion or the instruction of the beneficiary, the trustee must give a new notice of sale. [Civ. Code § 2924g(c).] A postponement at the trustor’s request, by court order, or by operation of law, such as the automatic stay under the bankruptcy law [11 U.S.C. § 362(a)], is not included in counting the three postponements requiring a renoticing of the foreclosure sale. [See California Livestock Production Credit Assn. v. Sutfin (1985) 165 Cal.App.3d 136, 141; 211 Cal.Rptr. 152.]
The trustee must publicly declare the postponement and its reason at the time and place scheduled for sale, must declare the new date and time as well as place (which must be the same place), and must keep records of each postponement and the reason for it. The trustee does not have to give any further notice of a postponement. [Civ. Code § 2924g(d).] The trustee, for example, has no duty to give any special notice of a postponement to the trustor or the trustor’ s representative. (See California Livestock Production Credit Assn. v. Sutfin, supra, 165 Cal.App.3d 136, 141-42.)
The overriding duty of the trustee to the trustor is to conduct the sale fairly and properly to benefit the trustor:
A sale under a power in a mortgage or trust deed must be conducted in strict compliance with the terms of the power. The sale must be made fairly, openly, reasonably, and with due diligence and sound discretion to protect the rights of the mortgagor and others, using all reasonable efforts to secure the best possible or a reasonable price. Kleckner v. Bank of American Nat. Trust & Sav. Ass’n., supra, 97 Cal.App.2d 30, 33.[Accord, Bank of Seoul & Trust Co. v. Marcione, supra, (1988) 198 Cal.App.3d 113, 118-19; Baron v. Colonial Mortgage Service Co., supra. 111 Cal.App.3d 316, 323; Block v. Tobin (1975) 45 Cal.App.3d 214, 221; 119 Cal.Rptr. 288; Hill v. Gibraltar Sav. & Loan Assn. (1967) 254 Cal.App.2d 241, 243; 62 Cal. Rptr. 188; Brown v. Busch (1957) 152 Cal.App.2d 200, 204; 313 P.2d 19; see generally I.E. Associates v. Safeco Title Ins. Co., supra, 39 Cal.3d 281, 285 n.3.] But if the sale is openly and fairly conducted without any impropriety, the trustee can purchase the property for the trustee’s own benefit. (See Stephens, Partain & Cunningham v. Hollis, (1987) 196 Cal.App.3d 948, 955; 242 Cal.Rptr. 251.)
The trustee cannot fix or restrain bidding in any manner [Civ. Code § 2924h(g)] or “arbitrarily reduce the pool of available bidders.” (Bank of Seoul & Trust Co. v. Marcione, supra, 198 Cal.App.3d 118.) The trustee should exercise discretion to promote competitive bidding. (Id.; Baron v. Colonial Mortgage Service Co., supra, 111 Cal.App.3d 316, 323.) Accordingly, the trustee cannot use the device of repeated postponements to discourage and frustrate the participation of bidders so that the sale can be manipulated in favor of the beneficiary or anyone else. Such conduct constitutes a breach of the trustee’s duty to the trustor and is deceitful. (See Block v. Tobin (1975) 45 Cal.App.3d 214; 119 Cal.Rptr. 288.) Moreover, such conduct is a restraint on bidding. A trustee engaging in deceit or a restraint on bidding

is subject to criminal prosecution. [See Civ. Code § 2924h(f).]
The trustee is under no obligation to engage in improper or illegal conduct at the behest of the beneficiary. Indeed, the trustee is under an obligation to the trustor to conduct the sale fairly and reasonably. If the beneficiary insists on the trustee’s violating the law or its duty to the trustor in the conduct of the sale, the trustee should refuse. The beneficiary may substitute a new trustee pursuant to the trust deed or Civil Code § 2934a. As a practical matter, if the trustee refuses to act wrongfully, the beneficiary will either cease seeking improper trustee conduct or will substitute a new trustee. In the unlikely event the trustee needs judicial relief, the trustee can apply to the superior court for discharge as trustee [see generally Civ. Code § 2282(e)] and may be entitled to attorney’s fees depending on the terms of the trust deed.
The full parameters of the rule that the trustee must use all reasonable efforts to obtain a reasonable price have not been determined. Moreover, this rule cannot be easily reconciled with the oft-repeated rule that “mere inadequacy of price, however gross, is not itself a sufficient ground for setting aside a sale legally made” in the absence of fraud, unfairness, or irregularity in the trustee’s conduct of the sale. [E.g., Sargent v. Shumaker, supra, 193 Cal. 122, 129; Winbialer v. Sherman (1917) 175 Cal. 270, 275-76; 165 P. 943; Whitman v. Transtate Title Co., supra, 165 Cal.App.3d 312, 323; Crummer v. Whitehead, supra. (1964) 230 Cal.App.2d 264/ 266; Crofoot v. Tarman (1957) 147 Cal.App.2d 443f 446-47; 305 P.2d 56; see also Smith v. Allen (1908) 68 Cal.2d 93; 65 Cal.Rptr. 153.] The trustee must, for example, delay the sale and give the trustor at least one day to raise money to satisfy the debt. [Civ. Code § 2924g(c)(l); see Winbialer v. Sherman, supra, 175 Cal. 270; Whitman v. Transtate Title Co.. supra, 165 Cal.App.3d 312, 320-23; Foae v. Schmidt (1951) 101 Cal.App.2d 681.] The trustee may continue the sale and refuse to sell to the highest bidder if the bid is inadequate to satisfy the debt. [See Pacific Ready-Cut Homes, Inc. v. Title Guar. & Trust Co.. supra, 103 Cal.App. 1.]
The trustee, however, is under no obligation “to make other efforts to procure bidders than to advertise the sale . . . * Stockwell v. Barhum (1908) 7 Cal.App. 413, 420; 94 P. 400], or to delay the sale because of a decline in property values. (See Enqelbertson v. Loan & Blda. Assn., supra, 6 Cal.2d 477, 479.) The trustee is also not obligated to continue the sale even for a short time to allow bidders to obtain the necessary funds required to cover their bids: “[i]t is the duty of a trustee, once it has started, to continue with reasonable dispatch with a sale under a trust deed; the terms being cash, the trustee is not required to hold up the sale while sundry bidders leave the place to go to banks or elsewhere to get cash.” (Kleckner v. Bank of America Nat. Trust & Sav. Assoc, supra, 97 Cal.App.2d 30, 33-34.) Indeed, it might be a breach of duty to the beneficiary for the trustee to continue a sale and thereby risk losing a bid from a third party sufficient to satisfy the debt. [See Hill v. Gibraltar Sav. & Loan Assn., supra, 254 Cal.App.2d 241/ 244-45; Stockwell v. Barnum, supra, 7 Cal.App. 413, 420.) However, under Winbiqler, Foqe, Kleckner, Hill, supra, and Civil Code § 2924g(c)(l), the trustee may breach its obligation to the trustor if it fails to grant a reasonable continuance to the trustor to obtain funds when the only bidder is the beneficiary.
The sale is complete upon the delivery of the trustee’s deed although it is deemed complete at the conclusion of the public auction for the purpose of applying the antideficiency statutes. see Little v. CFS Service Corp. (1987) 188 Cal.App.3d 1354, 1362; 233 Cal.Rptr. 923; Ballencree v. Sadlier (1986) 179 Cal.App.3d 1, 5; 224 Cal.Rptr. 301.]
Since the trustee, beneficiary, and the bidders are the primary players at the foreclosure sale, the “trustor cannot be characterized as a ‘seller’ under a duty to disclose known defects as exists in the normal vendor-vendee relationship.” [Sumitomo Bank v. Taurus Developers, Inc., supra, 185 Cal.App.3d 211, 221.] Thus, when the beneficiary makes a full credit bid, the beneficiary is not entitled to rely on the representations or nondisclosures by the trustor during the negotiation of the loan transaction or on nondisclosures during the trustee’s sale. (Id. at 222.)
a. Foreclosure Sales on Lien Contracts
In addition to the general sale requirements discussed above, special rules apply to the foreclosure of deeds of trust contained in retail installment obligations for the purchase of goods or services subject to the provisions of the Unruh Act. [Civ. Code §§ 1801 et sec.1
If the default is not cured within 30 days following the recordation of the notice of default, the trustee must mail a statutorily prescribed notice to the trustor at the trustor’s last known address. [Civ. Code § 2924f(c)(3).]
The trustee is also required to accept offers for the purchase of the property during the ten days preceding the sale date. The offers are revocable until accepted. If an offer is accepted in writing by both the trustor and the beneficiary before the scheduled sale date, the sale must be postponed to a definite date before which the trustor may convey the property according to the terms of the offer. When the sale is consummated, the foreclosure proceedings are deemed canceled. [Civ. Code § 2924f(c)(4).]
b. Effect of Military Service
A foreclosure sale held during the trustor’s military service or within three months thereafter is invalid if the trustor incurred the debt and owned the property securing the debt before military service, and if the trustor still owned the property at the time of the foreclosure. The provision does not apply if the trustor waives the right or the court so orders. [50 App. U.S.C. SS 532(1), 532(3); see 50 App. U.S.C. S 517.]
8. Distribution of the Sale Proceeds
Once collected, the trustee must dispose of the sale proceeds. The distribution occurs in the following order: (1) payment of costs and expenses of sale (cf. Civ. Code § 2273); (2) reimbursement to the foreclosing beneficiary of any advances made to redeem a prior lien (Civ. Code §§ 2903, 2904); (3) payment of the foreclosed debt [see generally Windt v. Covert (1907) 152 Cal. 350, 355-56; 93 P. 67]; (4) payment of junior lienholders in order of their priority [see Caito v. United California Bank (1978) 20 Cal.3d 694, 701; 144 Cal.Rptr. 751; Pacific Loan Management Corp. v. Superior Court, supra, 196 Cal.App.3d 1485, 1491; Strutt v. Ontario Sav. & Loan Assn. (1972) 28 Cal.App.3d 866, 876; 105 Cal.Rptr. 395; Dockrey v. Gray (1959) 172 Cal.App.2d 388, 391; 341 P.2d 746; Sohn v. California Pac. Title Ins. Co., supra, 124 Cal.App.2d 757, 766, 269 P.2d 223]. A junior lienholder retains its claim to surplus proceeds in the absence of any impropriety even if that junior lienholder purchased at the senior lienholder’s sale. [See Pacific Loan Management Corp. v. Superior Court, supra, 196 Cal.App.3d 1485, 1492.] Any remaining surplus must be paid to the trustor. [See Pacific Loan Management Corp. v. Superior Court, supra, 196 Cal.App.3d 1485/ 1491; Nomellini Constr. Co. v. Modesto Sav. & Loan Assn. (1969) 275 Cal.App.2d 114, 118, 79 Cal.Rptr. 717; Atkinson v. Foote (1919) 44 Cal.App. 149, 156-67, 186 P. 831; see also Passanisi v. Merit McBride Realtors, Inc., supra, 190 Cal.App.3d 1496, 1504.] Since senior liens are unaffected by the foreclosure of junior liens [see Streiff v. Darlington (1937) 9 Cal.2d 42, 45, 68 P.2d 728], senior liens are not paid out of the proceeds of the sale on the junior lien. [See Sohn v. California Pac. Title Ins. go. (1954) 124 Cal.App.2d 757, 766; 269 P.2d 223.]
A number of disputes may arise concerning the amount owed on the obligation and amounts for costs, expenses, advances, preservation of the property, and attorney’s fees. For example, the beneficiary may claim a prepayment penalty as a result of accelerating the balance because of the default, but, depending on the wording of the prepayment provision, the beneficiary may not be entitled to any penalty. [See Chapter I B 3 f, “Prepayment Penalties”, supra. 1 Other amounts to which the beneficiary may not be entitled include usurious interest [see Arneill Ranch v. Petit(1976) 64 Cal.App.3d 277; 134 Cal.Rptr. 456] or advances on delinquent senior encumbrances made after the foreclosure sale [see Streiff v. Darlington, supra, 9 Cal.2d 42, 45-46]. [See also Eastland Sav. & Loan Assn. v. Thornhill & Bruce, Inc. (1968) 260 Cal.App.2d 259; 66 Cal.Rptr. 90.]
The trustor has the right to obtain a judicial determination of the amount due on the obligation and the costs of sale and may establish the existence of a surplus in this manner. [See Passanisi v. Merit McBride Realtors, Inc., supra, 190 Cal.App.3d 1496, 1504; de la Cuesta v. Superior Court (1984) 152 Cal.App.3d 945, 950; 200 Cal.Rptr. 1.] The trustor can bring an action for an accounting (see Code of Civ. Proc. § 1050), declaratory relief and injunction, or money had and received and an accounting. (See Passanisi v. Merit McBride Realtors, Inc., supra, 190 Cal.App.2d 1496, 1512. If the trustor owes a judgment to the beneficiary, the trustor can establish an offset of surplus proceeds against the judgment through a motion to compel satisfaction or partial satisfaction of judgment. (Id. at 1513.) The trustee is also obligated to account to the trustor for any excess bid over the amount properly required to satisfy the debt. [See Streiff v. Darlington, supra, 9 Cal.2d 42, 45-46; Arneill Ranch v. Petit, supra, 64 Cal.App.3d 277, 294. To the extent the excess is in the form of the beneficiary’s credit bid, the beneficiary will be liable to the trustor for the amount in cash. Arneill Ranch v.Petit, supra, 64 Cal.App.3d at 295 (see also Passanisi v. Merit McBride Realtors, Inc., supra, 190 Cal.App.3d 1496, 1512 (offset)).
The beneficiary and, thus, the trustee are not liable to the trustor for any profit realized on the resale of the property, particularly if the profit represents the equity value formerly encumbered by sold out junior liens. [See Strutt v. Ontario Sav. & Loan Assn., supra, 28 Cal.App.3d 866, 876.]
Before filing an action against the trustee for an accounting and for the claimed share of the surplus, counsel for the trustor should consider the trustee’ s culpability and potential entitlement to attorney’s fees. If the trustee has not participated in any wrongdoing and is sued solely as a stakeholder, the trustee will be able to file a motion or action in interpleader and may be entitled to reasonable attorney’s fees and costs which the court could award from the disputed amount deposited in court. (Code of Civ. Proc. §§ 386, 386.5, 386.6; see Pacific Loan Management Corp. v. Superior Court, supra, 196 Cal.App.3d 1485, 1488-90.) In certain circumstances such as where surplus money is being held by an institutional lender’s subsidiary trustee, the trustor may decide to claim directly against the beneficiary, rather than sue the trustee.
Quarrels about the distribution of the proceeds should not affect a bona fide purchaser at the foreclosure sale who takes free of the claims of the trustor and junior lienholders. [See generally Central Sav. Bank of Oakland v. Lake, supra, 201 Cal. 438, 448; Hohn v. Riverside County Flood Control & Wat. Conserv. Dist. (1964) 228 Cal.App.2d 605, 613; 39 Cal.Rptr. 647.]
9. Trustee Charges
The fees imposed on a trustor for trustee services are limited by statute. For the period from the recording of the notice of default until the notice of sale is mailed, the trustee’s fees assessed against a trustor cannot exceed $200 if the unpaid principal sum secured is $50,000 or less, plus one-half of one percent of the unpaid principal sum secured exceeding $50,000 up to and including $150,000, plus one-quarter of one percent of the unpaid principal sum secured exceeding $150,000 up to and including $500,000, plus one-eighth of one percent of the unpaid principal sum secured exceeding $500,000. [Civ. Code § 2924c(d).] If the foreclosure sale is on a trust deed contained in a retail installment obligation subject to the Unruh Act, the trustee may charge $50 in addition to the amount authorized by Civil Code § 2924c. [Civ. Code § 2924f (c) (5). ] From the date the notice of sale is mailed until the property is sold, the trustee’s fees, in lieu of the above fees, may not exceed $300 if the unpaid principal sum is $50,000 or less, plus one percent of any portion of the unpaid principal sum secured exceeding $50,000 up to $150,000, plus one-half of one percent of the unpaid principal sum secured exceeding $150,000 up to $500,000, plus one-quarter of one percent of any portion of the unpaid principal sum secured exceeding $500,000. [Civ. Code § 2924d(a).] Upon sale of the property, in lieu of other fees, $300 or one percent of the unpaid balance, whichever is greater, may be deducted by the trustee from the sale proceeds, but the trustor is not personally liable for the fee after the sale. [Civ. Code §§ 2924c(d), 2924d(b).] Fees within the statutory limits are conclusively presumed valid and lawful. [Civ. Code §§ 2924c(d), 2924d(a), 2924d(b).]
However, if the amount or nature of the default is disputed and litigation results, the court may set the trustee’s fees at a sum less than the maximum statutorily authorized amount. [Sweatt v. The Foreclosure Co., supra, 166 Cal.App.3d 273, 278.)
The only costs and expenses which may be charged are those which are reasonable and actually incurred for recording, mailing, publishing, and posting required notices, for a trustee’s sale guarantee and for the postponement of a sale pursuant to a trustor’s written request under Civil Code § 2924g provided the charge does not exceed $50. [Civ. Code §§ 2924c(c), 2924d(a), 2924d(b).]
Kickbacks for the referral of any business involving trustee services are forbidden. If an unlawful rebate occurs, the offenders are liable to the trustor for treble the amount of the kickback plus reasonable attorney’s fees and costs in addition to any other remedy. The payment of an unlawful rebate will not affect the validity of a foreclosure sale to a bona fide purchaser or the rights of an encumbrancer for value without notice. [Civ. Code § 2924d(c).] If an illegal kickback is paid and the amount is imposed on the trustor under the guise of trustee’s fees, the trustor could argue that an improper statement of the default was set forth in the notice of default and the notice of sale. In such a situation, the trustor may seek to halt or invalidate the sale because of the defective notice. However, if the sale is to a bona fide purchaser, the trustor may be able to argue that the trustee is liable for all the damages sustained by the loss of the property and not just for the kickback amount which is relatively small amount, even when trebled. The trustee’s illegal misstatement of the appropriate fees in the notices rendering the notices defective should sufficiently taint the sale to make the trustee liable beyond the kickback.
10. Effect of Nonjudicial Foreclosure
a. Redemption
The trustor generally has no right of redemption after a nonjudicial foreclosure sale. [See e.g., Bank of Italy Nat’l. Trust & Sav. Ass’n. v. Bent lev (1933) 217 Cal. 644, 655; 20 P.2d 940; Ballenaee v. Sadlier, supra, 179 Cal.App.3d 1, 5; Pv v. Pleitner (1945) 70 Cal.App.2d 576, 579, 161 P.2d 393; City Lumber Co. v. Brown (1920) 46 Cal.App. 603, 608-09; 189 P. 830; see generally Roseleaf Corp. v. Chieriahino (1963) 59 Cal.2d 35, 43-44; 27 Cal.Rptr. 873.]
After a nonjudicial foreclosure sale for at least the full amount of the underlying debt, the trustor’s obligations under the promissory note and the trust deed are extinguished. (See, e.g., Cornelison v. Korabluth, supra, 15 Cal.3d 590, 606; Ballenaee v. Sadlier, supra, 179 Cal.App.3d 1, 5.)
A significant, but seldom employed, exception to this general rule permits the trustor to redeem the property from the beneficiary after the sale if the beneficiary both served as trustee and acquired the property. (Coosey v. Sacramento Bank (1901) 133 Cal. 659; 66 P. 7.) The right of the trustor to treat the sale as voidable and to redeem the property should be applicable to a beneficiary, such as an institutional lender, that purchases the property at a foreclosure sale conducted by an “in-house” or “captive” trustee [see Baron v. Colonial Mortgage Service Co., supra, 111 Cal.App.3d 316, 322-23], which is a subsidiary business entity of the beneficiary. [See Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal.App.3d 112, 116; 92 Cal.Rptr. 851.]
The general rule allowing no redemption after a nonjudicial foreclosure differs from the redemption rules that apply after a judicial foreclosure. After a judicial foreclosure in which the beneficiary’s right to a deficiency judgment is waived or precluded by law, the notice of sale may not be given until 120 days after the date the notice of levy was served on the judgment debtor, but there are no post-sale redemption rights. (Code of Civ. Proc. § 701.545.) After a judicial foreclosure in which the court may order a deficiency, the notice of sale may be given upon entry of judgment, but the debtor or the debtor’s successor in interest may redeem the property (a) during a three-month period following the sale if the sale price is sufficient to satisfy the debt plus interest and costs, or (b) during a one-year period following the sale if the sale price is insufficient to satisfy the debt plus interest and costs. (Code of Civ. Proc. §§ 729.010, 729.020, 729.030.)
b. Junior Liens
The trustee’s deed relates back in time to the date the trust deed was originally executed. Carpenter v. Smallpacre (1934) 220 Cal. 129, 132; 29 P.2d 841.] Thus,
The trustee’s deed on the sale under the power of sale passed to the purchasers . . . the title to the property held by the maker of the security instrument on the date he executed the same, and any title afterwards acquired. [Citation omitted. ]
The purchaser at the trustee’s sale and the grantee in the trustee’s deed acquires title free of all rights of the trustor or anyone claiming under or through him, and his title is free of all claims subordinate to the encumbrance pursuant to which the sale was made. Hohn v. Riverside County Flood Control & Wat. Conserv. Dist., supra, 228 Cal.App.2d 605, 612-13.
[See Streiff v. Darlington, supra, 9 Cal.2d 42, 45; Weber v. McCleverty (1906) 149 Cal. 316, 320-23; 86 P. 706; FPCI Re-Hab 01 v. E&G Investments, Ltd. (1989) 207 Cal.App.3d 1018, 1023; 255 Cal.Rptr. 157; Pacific Trust Co. TTEE v. Fidelity Fed. Sav. & Loan Assn., supra, 184 Cal.App.3d 817, 825; Bracey v. Gray (1942) 49 Cal.App.2d 274, 277-78; 121 P.2d 770; Duaand v. Magnus (1930) 107 Cal.App. 243, 247, 290 P. 309; see also Sain v. Silverstre (1978) 78 Cal.App.3d 461, 471; 144 Cal.Rptr. 478.] The foreclosure sale does not extinguish liens for real property taxes and assessments which have priority regardless of the date the liens attach [see Rev. & Tax Code § 2192.1] or mechanic’s liens recorded after the recordation of the deed of trust in foreclosure if the work commenced before the deed of trust was recorded. [See Civ. Code § 3134.] The effect of a foreclosure on other liens is beyond the scope of this handbook.
c. Deficiencies
1. Deficiency Judgments
If a beneficiary forecloses by a power of sale, a judgment for any deficiency between the sale proceeds and the debt is prohibited. (Code of Civ. Proc. § 580d.) However, a junior lienholder whose security is extinguished by the foreclosure of a senior lien still can sue the obligor to collect the underlying debt. (See e.g., Roseleaf Corp. v. Chierighino, supra, 59 Cal.2d 35, 39.)
A beneficiary may choose to pursue judicial foreclosure (see Code of Civ. Proc. §§ 725a and 726) which permits a deficiency judgment in some circumstances. (See Code of Civ. Proc. § 726.) However, the deficiency judgment cannot exceed the difference between the debt owed and the greater of the fair market value of the property or its sale price. (See Code of Civ. Proc. §§ 580a and 726.) In addition, a deficiency judgment is prohibited if the obligation is owed to the seller of the property or to a lender of all or a portion of the purchase price of an owner-occupied dwelling for not more than four families. (Code of Civ. Proc. § 580b.)
A full discussion of the anti-deficiency statutes and judicial foreclosure procedures is beyond the scope of this handbook.
2. Beneficiary1s Right to Insurance Proceeds After Foreclosure
The trust deed usually gives the beneficiary the right to the proceeds of a hazard insurance policy as additional security. The beneficiary would be entitled to those proceeds up to the amount of the indebtedness remaining after the foreclosure sale. (See Cornelison v. Kornbluth, supra, 15 Cal.3d 590, 607; Armsev v. Channel Associates, Inc. (1986) 184 Cal.App.3d 833, 837-38; 229 Cal.Rptr. 509.) However, if the full amount of the indebtedness is satisfied through the foreclosure sale by the beneficiary’s full credit bid or by payment by a third party bidder, the beneficiary will not be entitled to any of the insurance proceeds. [See id.; Duarte v. Lake Gregory Land and Water Co. (1974) 39 Cal.App.3d 101/ 105; 113 Cal.Rptr. 893.]
d. Junior Lienholder as Bidder at Senior Lienholder’s Sale
A junior lienholder may bid at a sale conducted by a senior lienholder. If the junior lienholder purchases the real property security at the nonjudicial foreclosure sale, the junior lienholder is not precluded from obtaining a deficiency judgment by Code of Civil Procedure section 580d. Walter E. Heller Western, Inc. v. Bloxham (1985) 176 Cal.App.3d 266, 273; 221 Cal.Rptr. 425.] However, the fair value limitations of Code of Civil Procedure Section 580a apply. (Id.)
11. Right to Possession
After the foreclosure sale, the purchaser generally has the immediate right to possession. [See, e.g., Farris v. Pacific States Aux. Corp. (1935) 4 Cal.2d 103, 105, 48 P.2d 11; Central Sav. Bank of Oakland v. Lake, supra, 201 Cal. 438, 448.] The purchaser is accorded the right to use summary unlawful detainer proceedings to obtain possession. (See Code of Civ. Proc. § 1161a; see discussion in chapter III, section E, at p. 111-36, infra.) The foreclosed owner is subject to a three-day notice to quit; however, a tenant or subtenant of rental housing must be given a notice to quit at least as long as a rental period but not exceeding 30 days [See Code of Civ. Proc. § 1161a(b)(3) and (c).]
However, a local rental control or housing ordinance which limits the grounds for eviction may limit or preclude the purchaser at a trustee’s sale from obtaining possession. [See Gross v. Superior Court (1985) 171 Cal.App.3d 265, 274-76; 217 Cal.Rptr. 284.]
The foreclosure sale also extinguishes any leases made after the deed of trust. [See Sullivan v. Superior Court (1921) 185 Cal. 133, 138, 195 P. 1061; Dugand v. Magnus, supra, 107 Cal.App. 243, 247. ] The sale should extinguish any unrecorded lease exceeding one year made prior to the recordation of the trust deed. (See Civ. Code § 1214.) If a lease is recorded before a trust deed, the lease will survive the foreclosure of the trust deed, and the purchaser will be entitled to receive rent after the date of purchase. [See Fahrenbaker v. E. Clemens Horst Co. (1930) 209 Cal. 7, 9, 284 P. 905.]
12. Damages for Improper Sale
The sale process must closely adhere to the procedure set forth in Civil Code §§ 2924 et sea.; “The statutory requirements must be strictly complied with, and a trustee’s sale based on a statutorily deficient notice of default is invalid.” (Miller v. Cote, supra. 127 Cal.App.3d 888, 894.) A trustee is liable to the trustor for damages sustained from an “illegal, fraudulent or willfully oppressive” foreclosure sale. Munaer v. Moore, supra, 11 Cal.App.3d 1, 7.] Normally, the trustor will attempt to stop or vacate a foreclosure sale based on an invalid notice of default. (See Chapter III B 5 a, “Defective Notice of Default”, infra.) However, an action for damages may be the only avenue of redress if the property has been sold to a bona fide purchaser.
a. Liability for Deficient Notice
Although no case has held a trustee liable for damages for a deficient notice of default, a variety of theories depending on the nature of the trustee’s failings would support causes of action for damages. In any event, the trustor will likely have to show prejudice or an impairment of rights as a result of the deficiency in the notice of default. (See U.S. Hertz. Inc. v. Niobrara Farms (1974) 41 Cal.App.3d 68, 86; 116 Cal.Rptr. 44.) If the appropriate nexus between the notice and the loss is established, the trustor may be able to show that (1) the trustee intentionally failed to perform, or was negligent in performing, its duties under the trust deed and statute; (2) the trustee engaged in negligent or intentional misrepresentation in setting forth the information contained in the notice of default; (3) the trustee breached the covenant of good faith and fair dealing which is implied in a trust deed (see Schoolcraft v. Ross (1978) 81 Cal.App.3d 75; 1146 Cal.Rptr. 57); and (4) the trustee may have the duty as agent of the trustor to inquire of the beneficiary to verify the accuracy of the information contained in the notice of default and the trustor’s entitlement to a Spanish translation (but see Civ. Code § 2924c(b)(1) providing that the trustee has no liability for failing to give a Spanish language explanation of the right of reinstatement unless Spanish is specified on a lien contract or unless the trustee has actual knowledge that the obligation was negotiated principally in Spanish).
b. Liability for Deficient Sale
If the property is sold without compliance with notice requirements the trustee may be liable for damages. The trustor must first establish that any damages were sustained. Since a sale held without proper notice may be void, the trustor may suffer no damages because no sale was actually effected. (Scott v. Security Title Ins. & Guar. Co.. supra. 9 Cal.2d 606, 613-14, 72 P.2d 143.) However, the trustor may be precluded from attacking the sale and recovering the property from the purchaser if the sale was made to a bona fide purchaser for value and without notice and the trustee’s deed recites that all notice requirements were met. (See Chapter III F, “The Status of Bona Fide Purchaser or Encumbrancer’1, section 4, at p. 111-32; F, at p. 111-40, infra.) As a result, the trustor will have incurred damage.
The trustee will be liable to the trustor for damages resulting from the trustee’s bad faith, fraud or deceit (Scott v. Security Title Ins. & Guar. Co., supra, 9 Cal.2d 606, 611.) In Scott, the trustee failed to post notice of the sale and then sold the property in satisfaction of the debt. The sale was set aside because of the improper notice, and the trustee thereafter properly sold the property but only for a nominal sum insufficient to pay the debt. The beneficiary obtained the deficiency from a former owner who had assumed the debt and who in turn sued the trustee for breach of contract and agency. The Supreme Court held that the only valid sale was regularly conducted, and that the trustee had no liability for breach of contract or agency for mistakenly performing the first sale which was declared a nullity. (9 Cal.2d at 612-14.) The court indicated that the only liability might be for negligence but that the plaintiff could not recover since that theory had not been alleged. (9 Cal.2d at 614.)
Munger indicates that a trustee can be held liable for its negligence in the conduct of an illegal sale. [See supra, 11 Cal.App.3d at 7 citing Civ. Code § 1708; Dillon v. Legg (1968) 68 Cal.2d 728; 69 Cal.Rptr. 72; Davenport v. Vaughn (1927) 137 S.E. 714, 716 (the trustee is “charged with the duty of fidelity, as well as impartiality; of good faith and every requisite degree of diligence; of making due advertisement; and giving due notice . . . . If, through haste, imprudence, or want of diligence, his conduct was such as to advance the interest of one person to the injury of another, he became personally liable to the injured party”).]
c. Beneficiary’s Liability For Trusteefs Misconduct
The trustee is the common agent of the parties, and, as a result, a party to whom the trustee owes a duty to conduct a fair and open sale may impute a breach of that duty to the beneficiary. (Bank of Seoul & Trust Co. v. Marcione, supra, 198 Cal.App.3d 113, 120.)
13. Mobilehome and Manufactured Home Foreclosures
The foreclosure process for a “manufactured home” or a “mobilehome,” as those terms are respectively defined (see Health & Safety Code §§ 18007 and 18008), is the same as the foreclosure process for real property if any of the following conditions are met: (1) the manufactured home or mobilehome is affixed to a permanent foundation as provided by Health & Safety Code § 18551, (2) the security for the loan for these types of homes includes the real property on which the manufactured home or mobilehome is installed or affixed, or (3) the loan or credit sale was made under circumstances requiring disclosures under Regulation Z (Health & Safety Code §§ 18039.1, 18039.5). A lawyer representing an owner of one of these types of homes should ascertain whether either condition (1), (2), or (3) apply and should remember that, even though the home may be on a permanent foundation, the permanent foundation system may not comply with Health & Safety Code § 18551. If the manufactured home or mobilehome does not meet the description in Health & Safety Code § 18039.1 but is required to be registered pursuant to the Mobilehomes-Manufactured Housing Act of 1980, the default procedure is governed by special rules set forth in Health & Safety Code § 18037.5 which permit a sale generally pursuant to Commercial Code § 9504.
The mobilehome foreclosure procedures present a number of questions, and the statutes should be scrutinized by counsel. One of the questions concerns the right to cure a default provided in Health & Safety Code § 18037.5(a). The statute is silent on whether the default can be cured by paying only the arrearage and disregarding the accelerated balance or whether the right to cure the default is tantamount to a right of redemption. [Compare Health & Safety Code § 18037.5(a) with Civ. Code §§ 2924c,2983.3(b).] The language of the notice of default form suggests that a right of reinstatement is intended, and the statute should be liberally construed as a remedial statute protecting mobilehome owners from the loss of their residences.
A more detailed discussion of the foreclosure procedures and problems related to deficiency judgments is beyond the scope of this manual.
14. Condominium Assessment Lien Foreclosures
An assessment, including all charges, interest, costs, attorney’s fees, and penalties, levied on a condominium owner becomes a lien against the condominium upon the recordation of a notice of assessment containing certain statutorily required information. (See Civ. Code § 1367.) The lien expires one year after its recordation unless it is earlier satisfied and released or enforced or unless it is extended up to one additional year by the recordation of a written extension. (Id.) The lien may be enforced by a sale of the condominium as prescribed by Civil Code sections 2924, 2924b and 2924c “applicable to the exercise of powers of sale in mortgages and deeds of trust” or in any other manner permitted by law. (Id.) However, the nonjudicial foreclosure procedure cannot be used, with respect to subdivisions under the jurisdiction of the Department of Real Estate, against a person to enforce a lien for penalties imposed for any of the following reasons: (a) failure to comply with the governing instruments [Covenants, Conditions, and Restrictions, Articles of Incorporation, and Bylaws] or (b) as a means of reimbursing the association for costs incurred (1) in the repair of damage to common areas allegedly caused by the person or (2) in bringing the individual and the person’s subdivision interest into compliance with the governing instruments. [See 10 Cal.Adm. Code § 2792.26(c).]
The statutes authorizing a sale in accordance with nonjudicial foreclosure procedures conspicuously omit reference to Civil Code sections 2924d, 2924f, 2924g, and 2924h. (See Civ. Code § 1367.) Since the condominimum lien statutes suggest that the sale should be conducted in accord with law applicable to the exercise of the power of sale, an association enforcing its lien by the nonjudicial foreclosure method will not likely escape the protections and procedures required by the omitted Civil Code sections. Moreover, the condominium’s governing instruments may provide by contract that the enforcement procedure must follow Civil Code section 2924d, 2924f, 2924g, and 2924h.
A lawyer representing a condominium owner in foreclosure should consider the constitutionality of the foreclosure procedure. The constitutionality of the nonjudicial foreclosure process was upheld against attack on due process grounds because the contractually created private power of sale did not involve state action. (See Garfinkle v. Superior Court, supra, 21 Cal.3d 68.) The assessment lien foreclosure procedure, however, is established by statute and, thus, may involve State action. Nevertheless, the governing instruments, depending on their wording, may be construed to provide a contractual basis for the exercise of the power of sale.
15. Mixed Collateral – Real and Personal Property Security
A creditor may secure a single obligation with a security interest in real property and personal property. For example, a personal loan may be secured by a trust deed on the borrower’s house and a lien on both of the borrower’s automobiles. In the event of default, the creditor may foreclose in any sequence (1) under real property law (e.g., Civ. Code § 2924 et seg.) as to the real property and Article 9 of the Commercial Code as to the personal property; (2) under real property law as to the real property and some or all of the personal property; or (3) under real property law as to the real property and some of the personal property and under Article 9 as to other personal property. [Comm. Code § 9501(4).]
Commercial Code section 9501(4)(b) may be construed to abrogate substantially the operation of real property foreclosure and antideficiency protections in non-consumer transactions. [See Hetland and Hansen, ‘”Mixed Collateral’ Amendments to California’s Commercial Code – Court Repeal of California’s Real Property Foreclosure and Antideficiency Provisions Or Exercise in Futility?,” 75 Cal.L.Rev. 185 (1987).] However, Commercial Code section 9501(4)(b) does not apply to loans or credit sales made to individuals primarily for personal, family, or household purposes. [Comm. Code § 9501(4)(c)(v).] One commentator has indicated that the rules in existence before the 1986 amendment to Commercial Code section 9501(4) apply; thus, a foreclosure of mixed collateral would be governed by real property law. [See CEB, California Mortgage and Deed of Trust Practice Supp., § 44, p. 47 (1988).]
The exemption for consumer transactions casts doubt on the applicability of other provisions of the section which are predicated on the abrogation of real property foreclosure rules. For example, the disposition of personal property collateral and the application of the proceeds to the debt does not cure a monetary default so as to affect the secured party’s rights regarding other personal property collateral. [Comm. Code § 9501(4)(d)(ii).] This provision presupposes that the reinstatement rights afforded by Civil Code section 2924c do not apply. [Comm. Code § 9501(4)(b).] But, reinstatement rights continue to apply in consumer transactions. [Comm. Code § 9501(4)(c)(v).] As a result, if the sale proceeds from the disposition of personal property collateral are sufficient to cure the default under Civil Code section 2924c, the obligation will be reinstated, and the creditor should be precluded from enforcing any other security interest•
For example, suppose a loan is secured by a consumer’s house, car, and pickup truck. The consumer defaults, the creditor accelerates the $10,000 balance, and the amount needed to cure the default is $2,000. The creditor conducts a sale of the car and nets $2,000. A creditor might argue that the sale does not cure the default and that the creditor could proceed against the pickup. [See Coram. Code § 9501(4)(d)(ii).] Civil Code section 2924c, however, continues to apply to the obligation, and the $2,000 sale would be sufficient to reinstate the obligation. Because no default remains, the creditor could not proceed against the pickup.
A lawyer representing a homeowner who has given both real and personal property as security should evaluate whether the security interest is excessive. A court may conclude that a security interest which was disproportionate to the extension of credit and subjected a homeowner to the loss of significant personal property, such as cars and work related vehicles, as well as the homeowner’s home was unduly oppressive and unconscionable. As a result, the court might limit the enforcement of the creditor’s security interest. (See Civ. Code § 1670.5; )

Tender rule and Credit bid


California Civil Code 2924h (b) provides:
(b) At the trustee’s sale the trustee shall have the right (1) torequire
every bidder to show evidence of the bidder’s ability todeposit with the
trustee the full amount of his or her final bid incash, a cashier’s
check drawn on a state or national bank, a checkdrawn by a state or
federal credit union, or a check drawn by a stateor federal savings and
loan association, savings association, orsavings bank specified in
Section 5102 of the Financial Code andauthorized to do business in this
state, or a cash equivalent whichhas been designated in the notice of
sale as acceptable to thetrustee prior to, and as a condition to, the
recognizing of the bid,and to conditionally accept and hold these
amounts for the durationof the sale, and (2) to require the last and
highest bidder todeposit, if not deposited previously, the full amount
of the bidder’sfinal bid in cash, a cashier’s check drawn on a state or
nationalbank, a check drawn by a state or federal credit union, or a
checkdrawn by a state or federal savings and loan association,
savingsassociation, or savings bank specified in Section 5102 of
theFinancial Code and authorized to do business in this state, or a
cashequivalent which has been designated in the notice of sale
asacceptable to the trustee, immediately prior to the completion of
thesale, the completion of the sale being so announced by the fall ofthe
hammer or in another customary manner. The present beneficiary ofthe
deed of trust under foreclosure shall have the right to offsethis or her
bid or bids only to the extent of the total amount due thebeneficiary
including the trustee’s fees and expenses.This provision provides for
the purchase options at a trustee’s sale.
The first type of bid at a trustee sale is a purchase money bid.
Purchase money bidders are by definition third parties who pay with cash
or a check. Unless there is a lis pendens or obvious title flaw which
puts them on constructive notice, PMBs are given the status of good
faith purchasers and the sale cannot be undone — even with tender.
Therefore, there can be two types of purchase money bidders:good faith
purchasers for value, and those on constructive notice of clouds or
flaws in title. Either type of purchase money bidder is required under
Civil Code 2924h to pay with cash or check,the actual cost of their
winning bid.
Lastly, the section provides for what is known commonly as a “credit
bid.” In a credit bid, the creditor on the note applies the amount of
indebtedness toward its bid on the property, therebyallowing it to take
title without paying a single dollar out of pocket at the sale. The
rationale is simple: the creditor has already lent the borrower/trustor
a sum of money in exchange for the trust deed For seemingly obvious
reasons, credit bidders are not allowed the status of a “good faith
purchaser for value” because they are deemed to be aware of any
improprieties of title which would undermine their title position.
Where a third party shows up to a trustee sale and without any notice of
title issues, comes out of pocket to purchase an auctioned home in good
faith, then simple fairness requires that he be paid back the moneyhe
spent prior to being divested of the title he purchased, prior to the
court allowing an action to proceed against that title, which he would
have to defend or forfeit. Tender is the general rule where it comes to
However, the law also provides exceptions to the tender requirement,
even in cases of PMBs. For instance, where the sale is void because
the trustee holding the sale is not empowered to hold a sale on a
property, then tender is not required to set aside the trustee’s deed
after sale because it is void and good title did not transfer in the
first instance. Bank of America v. LaJolla Group II. Tender is also
excepted in the case offraud, where the equities of the case favor the
victim, even over a good faith purchaser for value. (CITE) Such
exceptions are easily rationalized in light of the need for society to
depend on due process and fairness.
In these cases, the amount of tender required is the amount of the
winning bid.
However, where a credit bid is made, the bidder is not a good faith
purchaser. It is the creitor party. The trustee deed is a mere matter
of paperwork, without a penny out of pocket. All the tender that is
required to put a credit bidder in a pre-sale condition is 1) cost of
the trustee sale, 2) interest and fees, and 3) reinstate the preexisting
debt which would still be serviced by the creditor but for the sale.
Especially where it may be shown that a sale was knowingly wrongful,
without right, and carried out in spite of borrower’s preexisting claims
on the validity of the debt or recorded lis pendens, equity weighs
heavily against requiring the borrower to make a full tender of the
challenged debt rather than what is required to put the creditor in a
pre-sale position.
Defendants argue that the tender in these cases should be not the sale
price, not the amount required to put the defendant in a pre-sale
position, but the full amount of the debt! In so doing, Defendants are
conflating the idea of a RESCISSION tender with the concept of a SET
ASIDE TENDER. While sharing a common name, these are two very different
a. Court’s equitable discretion allows it great leeway in fashioning a
remedy appropriate to this case.
Court has equitable discretion (cite) etc. .
b. The creditor does not need tender of the full debt to be put in a
pre-sale condition.
Do the math — What has the creditor actually been displaced from its
pre-sale position?
c. A Credit Bidders Expectations do Not Require the Same Reconciliation
that a PMB’s Expectations Require.
The creditor was not expecting payment in full for 30 more years vs. a
PMB has immediate expectation of title for money and the deal the PMB
gets is title for money; the deal the bank had wasmonthly payments at
interest over 30 years.
In a public policy sense, the imposition of full debt tender on
borrowers as to credit bid grantees by many courts in this state has
caused the floodgates to open for massive abuse of the California
non-judicial foreclosure system. This effect has been caused because
banks view wrongful foreclosure as having no practical recourse where
the only penalty for a wrongful foreclosure is getting a 30-year debt
paid in full 25 years early — which is in reality not a penalty at all,
but rather an incentive to hold more foreclosure sales whether they are
wrongful or not.
If the sale was wrongful to begin with, and the title has not passed
beyond the pre-sale parties, no rationale exists for overburdening the
Plaintiff with a full-debt tender where the sale has been a matter of
paperwork rather than payment, and to require a tender bond in the
amount of the cost of the sale and fair marker rent going forward would
adequately protect the creditor from prejudice.

… Just a rough draft.
Any thoughts on the idea?
Any help in drafting?
I think it may help to go through some of the tender cases and look at
the equities, the status of the parties, and see if we can find some
strong exception cases where the court’s rationale is actually looking
at the equities rather than the word “tender”.

Double dipping They foreclose, Get Insurance, Get Tarp, Get yeild prem, Bailout our tax money then they evict…

See this motion for discovery it shows all the sources of recovery for the lenders it also shows the trustees take the money and don’t even allocate to the investors but keep it


Latest on MERS and “possession of the Note”

There is a great case re MERS’ authority to operate in CA since it is NOT registered to do business. The case is Champlaie. It
states that MERS is not a foreign lending institution, nor is it creating evidences.

The case is also interesting since it discusses why those who foreclose do not have to be in possession of the promissory note.Here are three paragraphs below from the court, although they are taken from different pages.
It is not helpful for us but the court does question why those who foreclose do not have to be in possession of the note.

“Several courts have held that this language demonstrates that possession of the note is not required, apparently concluding that the statute authorizes initiation of foreclosure by parties who would not be expected to possess the
note. See, e.g., Spencer v. DHI Mortg. Co., No. 09-0925, 2009 U.S. Dist. LEXIS 55191, *23-*24, 2009 WL 1930161 (E.D. Cal. June 30, 2009) (O’Neill, J.).
However, the precise reasoning of these cases is unclear.FN14”

“To say that a trustee’s duties are strictly limited does not appear to this court to preclude possession of the note as a prerequisite to foreclosure. On the other hand, perhaps it is not unreasonable to suggest that such a prerequisite imposes a nonstatutory duty.”

“At some point, however, the opinion of a large number of decisions, while not in a sense binding, are by virtue of the sheer number, determinative. I cannot conclude that the result reached by the district courts is unreasonable or does not accord with the law. I further note that this conclusion is not obviously at odds with the policies underlying the California statutes. The apparent purpose
of requiring possession of a negotiable instrument is to avoid fraud. In the context of non-judicial foreclosures, however, the danger of fraud is minimized by the requirement that the deed of trust be recorded, as must be any assignment or substitution of the parties thereto. While it may be that requiring production of the note would have done something to limit the mischief that led to the economic pain the nation has suffered, the great weight of authority has reasonably concluded that California law does not impose this requirement.”

Its complicated but read Niel Garfield’s declaration and see why and what the problem truly is

Declarationrevised3-30-10FINAL Niel Garfield

JULY 1, 2007;
ENTITY 1 THROUGH INFINITY, unknown Defendants
(collectively “Defendants”)
Adversary # 4:09-ap-01447-JMM
Case # 08-10544-TUC-JMM
Chapter 13
Neil Franklin Garfield, deposes and states unsworn under penalty of perjury as follows:
“I am over the age of eighteen years and qualified to make this affidavit. I have no direct or
indirect interest in the outcome of the case at Bar for which I am offering my observations,
analysis, opinions and testimony. I have been a licensed member in good standing of the Florida
Bar since May 31, 1977. My Resume is attached and incorporated herein.
“My area of expertise, based upon knowledge, training and experience is in the field of securities,
the securities industry, derivative securities, securities regulation, special purpose vehicles,
structured investment vehicles, creation of trusts pooling agreements, issuance of asset backed
securities and specifically mortgage backed securities by special purpose vehicles in which an
entity is named as trustee for the holders of certificates of mortgage backed securities, the
economics of securitized residential mortgages, securitization of mortgage loans, accounting in
the context of said securitizations and REMIC vehicles and pooling and servicing of securitized
loans. I have been what might be referred to as a “Wall Street Insider” with contacts in
investment banking, including intermediary conduits, underwriters of reissued securities that
were sold to investors in the form of mortgage-backed securities. I have knowledge, training and
experience of various precursor asset protection strategies, including minimization of tax
liability, which also are constructed to be made bankruptcy remote in commercial and real estate
settings. I have knowledge, training and experience in loan origination, underwriting and the
assignment and assumption of securitized residential mortgage loans. I also have legal
knowledge, training and experience, including the areas of securities law, real property law,
Internal Revenue Code law as applicable to REMICs and Uniform Commercial Code law. I also
have knowledge, training and experience in the practices prevalent during the period of 2001-
2008 that enabled the accumulation and availability of an overwhelming abundance of
investment dollars, made possible because the derivatives sold to investors were made to appear
that they contained both exceptional growth and zero risk, because the history of mortgage
success up to that point in time had been high, and because these instruments were in addition
made to appear undeniably and excessively guaranteed by 3rd party sources. I also have
knowledge, training and experience that this abundance of funding was one of the direct and
inevitable causes of violations against homeowners and purchasers pertaining to funding of
mortgage loans for purchases and refinancing, including predatory lending practices and Truth in
Lending Act violations.
“All factual testimony made by me is true and correct to the best of my knowledge and belief.
All opinion testimony made by me is beyond a reasonable degree of probability in my area of
expertise, which is set forth in the above paragraph and in my Resume. I have no direct or
indirect interest in the outcome of the case at Bar for which I am offering my observations,
analysis, opinions and testimony.
“I have been asked to render opinions pertaining to the above case, in which Lucy Santa Cruz, is a
bankruptcy Debtor, and the Mortgage Note (“Note”), and Deed of Trust (“DOT”), the obtaining
of Automatic Stay Relief, the propriety of foreclosure, and securitization issues, among others,
are in question. The original Lender according to said documents was Everbank (“Lender”). An
Order lifting stay was entered by the Court on 03/22/09 in favor of HomEq Servicing
Corporation fka TMS Mortgage, Inc., dba The Money Store, (“HEQ”) was the Movant in this
proceeding. The Stay was lifted in favor of HEQ.
“I evaluated the materials listed below, among other materials, facts and data in basing my
opinions and inferences. Each of these documents and other materials, facts and data are of the
type that experts in my field would customarily rely upon in forming opinions and inferences.
The information sources I reviewed were sufficient for me to testify as to the facts and opinions
that are included herein. Where additional information is required to make other factual
statements and express opinions on further subject matter, I have so stated. To the extent that
information was presented to me by way of the forensic review and analysis performed by Brad
Keiser of Foreclosure Defense Group, I have confirmed the information through my review of
the loan closing documentation. I also performed independent internet searches as to
Securitization Documents available to the public online. Most of the testimony in this
Declaration was plainly clear from review of the below listed materials, but to the extent that
technical or specialized principles and methods were required, they have been reliably applied:
A. The closing loan documents relating to the loan transactions that are the
subject of this lawsuit. Not attached, because too voluminous and others are already
of record with the Court.
B. The factual results of a forensic review and analysis performed by Brad Keiser
of Foreclosure Defense Group, which I have attached hereto as Exhibit A.
C. The Qualified Written Request, served upon Everbank; MERS; Homeq; Mark
Bosco of Tiffany & Bosco and the responses, such as they were. They were
incomplete. In addition I also reviewed additional correspondence sent to the Mark
Bosco, who was the Substitute Trustee, that constituted written notice alleging several
improprieties in him going forward with the foreclosure Trustee Sale. Additionally,
there were emails from Ronald Ryan to Bosco requesting an accounting and other
information pertaining to the sale and return emails from the same law firm that
previously represented Defendant, HomEq and now represent Defendant,
Everbank/Everhome. These series of letters and email correspondence are attached as
Exhibit B
D. The following recorded documents: Note; Deed of Trust; Substitution of
Trustee; Statement of Breach or Non-Performance; Notice of Trustee’s Sale; Trustee’s
Deed. Not attached because already of record with the Court.
E. Various Bankruptcy Court pleadings and the Proof of Claim.
F. Various applicable Securitization Documents pertaining to Mortgage Trust
Pool, U.S. Bank N.A., Trustee for the Holders of the Pooled Mortgages, entitled
“Holders of MASTR Adjustable Mortgages Trust 2007-HF2,” including but not
limited to the Pooling and Servicing Agreement Dated As of July 1, 2007 (“PSA”);
Prospectus Supplement, dated July 30, 2007 (“ProS”). The Securitization Documents
are too voluminous to attach to this Declaration as they are perhaps 1000 pages. I
have attached a few key pages from the PSA, including a diagram of the transaction,
with the identity of the various Participants typed thereon, and a few pages from the
ProS. EXHIBIT C.1 and C.2.
G.I have also reviewed the MERS Min Summary and Milestone History, and the
correspondence whereby they were transmitted by Shar Bahmani, Esq., Wright, Finlay
& Zak, 4665 MacArthur Court, Suite 280, Newport Beach CA 92660, on behalf of
Everhome aka Everbank, which are attached hereto as Exhibit D.
H. I have also reviewed the MERS Servicer ID Report, which is attached as
Exhibit E.
“I use the following definition of “Creditor” taken from research in cases, the Bankruptcy Code
and the Uniform Commercial Code. A “Creditor” is a legal entity that has advanced funds, goods
or services in consideration of the right to payment, or has purchased the right to be paid. In the
bankruptcy context, a “Creditor” is an entity that had a Claim against Debtor before the case was
filed. 11 U.S.C. § 101(10). A “Claim” is a right to payment. § 101(5). Only a Creditor may file
a Proof of Claim. § 501(a). The “Official Form 10 reflects this requirement by describing the
‘Name of Creditor’ as ‘the person or other entity to whom the debtor owes money or property.”
In the context of securitized residential mortgages (including the one in the instant case), a
“Creditor” is a legal entity or group of entities or persons under the law who have advanced
money for the funding of mortgage loans and who are owed money from those mortgage loans.
The creditor in the case at bar can be generically described as an Investor, as defined under the
rules and regulations of the Securities and Exchange Commission who has paid money to an
intermediary in a chain of securitization that resulted in the funding of one or more residential
loan transactions; the promise to pay is from an entity usually referred to as a Special Purpose
Vehicle (SPV) which is frequently erroneously referred to as a “Trust” with a “Trustee,” that in
the applicable Pool in this case was U.S. Bank N.A. The creditor/investor receives an instrument
which is generically referred to as a Mortgage Backed Asset Certificate (“Certificate”). The
Certificate incorporates terms by which the promise to pay interest and principal is made by the
issuing SPV. The promise to pay is conditioned upon several terms, including but not limited to
the performance of a pool of loans, the obligations of third parties, and impliedly the receipt of
insurance proceeds triggered by partial non-performance of the pool of assets allocated to the
SPV. In turn the SPV pool is carved out of other pools created by Aggregators employed by
investment banking firms. The Aggregators are parties to Pooling and Service Agreements and
Assignment and Assumption Agreements, which are Securitization documents that predate the
funding of the loans in any of the Pools. The Certificate issued to the Investor conveys a
percentage interest in the Pool of assets that is allocated to the SPV.
“I was asked to render an opinion as to the factual basis pertinent to the issue of Standing. As
relates to Constitutional Standing, my opinion is premised on the following definition:
Constitutional standing under Article III requires, at a minimum, that a party must
have suffered some actual or threatened injury as a result of the defendant’s conduct,
that the injury be traced to the challenged action, and that it is likely to be redressed by
a favorable decision.
Valley Forge Christian Coll. v. Am. United for Separation of Church and State, 454 U.S. 464,
472 (1982); United Food & Commercial Workers Union Local 751 v. Brown Group, Inc., 517
U.S. 544, 551 (1996). My presumption, in the context of the question posed to me, is that
standing requires that a party will suffer financial loss derived from non-performance (i.e., nonpayment)
of the subject contract, which in this case is the obligation that arose when the subject
loan was funded on behalf of the debtor as homeowner and referred to in some documents as the
Borrower. Since the funding occurred out of a pool of money received by the investment banker
from the investors, the investors are the creditors. By way of indenture (usually incorporating a
prospectus) the investors agreed to an operating plan that defined the functions of the conduit
which was used to funnel funds to the investor from the pool. This operating plan is loosely and
erroneously referred to as a trust, with the manager referred to as a Trustee. However, since no
assets remain in the conduit which is defined under the Internal Revenue Code as a REMIC (Real
Estate Mortgage Investment Conduit). The REMIC is referred to in the world of finance as an
SPV (Special Purpose Vehicle). I presume the words “conduit” and “vehicle” convey the fact
that no actual business events of taxable or monetary significance takes place in the REMIC. I
conclude that this corroborates my opinion that the investors are the creditors, having been the
only parties to advance funds from which the subject loan was funded.
The note signed by said borrower and the mortgage-backed bond accepted by the investor who
purchased said security are both evidence of the obligation. The Deed of Trust is intended to be
incident to the note and possibly incident to the bond, if the chain of title was perfected. The
Payee on the note and the payee on the bond are different parties. The bonds were issued with
three principal indentures: (1) repayment of principal non-recourse based upon the payments by
obligors under the terms of notes and mortgages in the pool (2) payment of interest under the
same conditions and (3) the conveyance of a percentage ownership in the pool of loans, which
means that collectively 100% of the investors own 100% of the the entire pool of loans. This
means that the “Trust” does NOT own the pool nor the loans in the pool. It means that the
“Trust” is merely an operating agreement through which the investors may act collectively under
certain conditions. Accordingly, it is my opinion that the parties with standing in relation to a
securitized loan are the debtor/borrowers and the creditor/investors. This would be further
corroborated if, as a matter of fact, the investment banker followed industry standard of selling
the mortgage backed security FORWARD. “Selling forward” means that the security was sold
and the money was collected before the first loan was funded on behalf of borrowers. However,
even if the investment banker had not closed the sale of the securities with investors before
accepting applications for loans, it would have been on the basis of an expectation of said
funding. Ultimately, in all securitized loans there is really only one transaction — a loan from the
investors to the homeowner. Without an investor there would be no loan; conversely without a
borrower there would be no investor or investment.
“It is accordingly my opinion that none of the following parties are or ever were creditors and
that they therefore lack standing as defined above: U. S. Bank, N.A. As Trustee for the Holders
of MASTR Adjustable Mortgages Trust 2007-HF2 in a series of securitization transactions,
pursuant to Pooling and Servicing Agreement, dated July 1, 2007 (“USB as Trustee”); HomEq
Servicing fka HomEq Servicing Corporation, fka TMS Mortgage, Inc., dba The Money Store;
Wells Fargo Bank NA, MERS, nor Everbank had at any time relevant to the subject matter
before this Court, the filing of the Bankruptcy Case on 08/14/2008 to the present, suffered any
actual or threatened injury as a result of the Debtor’s non-payment of monthly payments pursuant
to the original terms of the Note, nor because of her alleged default thereon, nor can any actual or
threatened injury be traced to any other proceedings in bankruptcy court, including but not
limited to the motion for relief from stay proceedings, any action involving a Proof of Claim, the
Chapter 13 Plan or otherwise, and therefore there never was any legitimate redress available to
any of these parties by a favorable decision. Specifically, Everbank, named as “Lender” in the
Note and Deed of Trust at least held physical possession of the Note issued to it by Debtor,
though it likely did not have the right to enforce the Note, between approximately 4/11/2007 to
4/28/2007, but no later than 4/28/2007. Specifically, pursuant to the materials I have reviewed,
which I have been asked to assume includes all evidence presented to the Court, along with my
knowledge and experience involving securitized mortgages, and my legal training and
experience, it is certain that HomEq did not hold, own, nor have the right to enforce the Note at
any time from the filing of the case through to the time it obtained stay relief in this case. The
evidence in the Court’s record that is contrary to this opinion appears to constitute an intentional
attempt to misleadingly make it appear that Everbank was the holder of the Note, and that MERS
could contend that it could act through its Nominal Beneficiary status on behalf of Everbank
(apparently sometimes referred to as “Everhome”), when the case was filed and when the
automatic stay was lifted. However the Motion was filed on behalf of HomEq and the Order
Lifting Stay granted in Favor of it. The evidence fails even on its face to successfully even to
create the appearance that HomEq was the: A) holder of the Note; B) owner of the Note; or C)
party with the right to enforce the Note. Moreover, the evidence is overwhelming that neither
Everbank aka Everhome, nor HomEq held any interest at all in the Property, Note nor Deed of
Trust at the time the case was filed, nor any time thereafter. It is clear that Everbank transferred
the ownership of the Note to the above described Mortgage Pool, for which USB as Trustee
operated as the Trustee. There is no evidence in the record that any other Defendant attempted to
claim to own, hold, nor to have the right to enforce the Note at any time in these proceedings.
“The specific evidence that neither HomEq Servicing fka HomEq Servicing Corporation, fka
TMS Mortgage, Inc., dba The Money Store; Wells Fargo Bank NA, MERS, nor Everbank had at
any time relevant to the subject matter before this Court, the filing of the Bankruptcy Case on
08/14/2008 to the date of the Order Lifting Stay, dated 3/19/2009, nor even to the present is that
Between 4/28/2007 and 09/27/2007, the ownership of the Note was transferred from Everbank to
Mortgage Asset Securitization Transactions, Inc. as Depositor, and then to UBS Real Estate
Securities Inc., as Transferor, and then to U.S. Bank, N.A., as Trustee of MBS Trust.
Accordingly, it was impossible for any of these Defendants to own the Note during the above
time frame. Besides an admission from Attorney for Everhome, Shar Bahmani, Esq., Wright,
Finlay & Zak, these facts match with the MERS Min Summary and Milestone History
information, as well as pursuant to the legal and contractual requirements in the herein described
Securitization Documents of the above referenced Trust. Among other things, former Counsel
for HomEq filed Doc 49 on 02/19/09,”Declaration of Witness [Joy Vanish] filed by MARK
BOSCO of TIFFANY & BOSCO, P.A. on behalf of c/o Mark S. Bosco HomEq Servicing
Corporation fka TMS Mortgage, Inc., dba The Money Store,” which also admits that the Note
was owned by the above described mortgage pool.
“Accordingly it is my opinion that, pursuant to the above definition, none of the Defendants that
attempted to proceed in this Court to have the automatic Stay Lifted or to file a Proof of Claim
had Constitutional Standing to invoke the subject matter jurisdiction of the Bankruptcy Court in
this case. In re Foreclosure Cases, 521 F.Supp.2d 650 (S.D. Ohio, 2007); In re Kang Jin
Hwang, 396 B.R. 757, 764 (Bankr.C.D.Cal., 2008); In re Jacobson, 402 B.R. 359 (Bankr.
W.D.Wash., 2009).
“As relates to the issue of Real Party in Interest, the factual criteria and question I have
presupposed is: “Whether any of said Creditors own financial interest was at stake in the
outcome of the litigation before the Bankruptcy Court.”
“My opinion is offered based on all evidence before the Court to date is as follows.
A) That U. S. Bank, N.A. As Trustee for the Holders of MASTR Adjustable Mortgages
Trust 2007-HF2 in a series of securitization transactions, pursuant to Pooling and
Servicing Agreement, dated July 1, 2007 (“USB as Trustee”), did not have any of its
own funds at risk in the outcome of the litigation. USB as Trustee may have been, but
in my opinion was probably not, fully and completely authorized to appear as the
named party on behalf of the Real Party in Interest, in a representative capacity for the
parties whose own funds were at risk, the Creditors, whom I have described above, as
the investors in the securities for the above described and named Mortgage Trust Pool.
Also, the proof in the record is inadequate to establish that the ownership of the Note,
holdership of the Note, or right to enforce the Note was properly pooled to the above
described Mortgage Trust Pool. Accordingly, as the record stands, the evidence does
not establish USB as Trustee as being the Real Party in Interest.
B) Neither HomEq Servicing, fka HomEq Servicing Corporation, fka TMS
Mortgage, Inc., dba The Money Store; Wells Fargo Bank, MERS, nor Everbank was a
party whose own funds were at risk in the outcome of the litigation, and therefore none
of them were a Real Party in Interest.
“Additionally, my review of the evidence of record is that HomEq presented to the Court false
and misleading statements in conjunction with the following filings and proceedings, and in the
supporting evidentiary documents filed in conjunction with each such filing: A) Motion for
Relief from Stay; B) Proof of Claim, and C) in its Objection to Chapter 13 Plan. Additionally,
my opinion is that HomEq filed the Pleadings and the supporting documentation, and made
representations to the Court with knowledge that they were false and misleading. For example,
the following are false and misleading statements made with knowledge they were false.
A) Motion for Relief from Stay, Doc 22 Filed 11 04 08: “Movant is the
Assignee of the Deed of Trust.” ¶ 2; “Debtor is in default on her obligation to
Movant for which the property is security. . .” ¶ 5; “Debtor is indebted to HomEq
Servicing Corporation fka TMS Mortgage, Inc., dba The Money Store for the
principal balance in the amount of $131,205.36, plus accruing interest, costs, and
attorneys fees.” ¶ 6.
B) Proof of Claim, Claim 9 Filed 11/06/08: Issue not ripe, because claim
was filed by U.S. Bank National Association as Trustee, this is additional proof that
stay relief was obtained by party without standing (“HomEq”).
C) Objection to Chapter 13 Plan, Doc 32 Filed 11/14/08: “The Chapter 13 Plan
does not adequately provide for repayment of arrearages owed to HomEq Servicing
Corporation fka TMS Mortgage, Inc., dba The Money Store, pursuant to the proof
of claim in the amount of $11,997.53.” ¶ 1;
“In terms of the real estate portion of the transaction, the homeowner was the Borrower and the
Investor was the actual Creditor. The investor is still the Creditor if the investor has not sold,
transferred or alienated the hybrid mortgage backed security and if the investor has not been
directly or indirectly paid through credit default swaps, with or without subrogation, or paid
through a federal program with or without subrogation. Since no such instruments appear on
record, any right of subrogation would appear to be equitable. Thus for purposes of this
declaration, the unknown and undisclosed Investors constitutes the only Creditor presumed to
exist until the undersigned is presented with contrary evidence of the type that an expert in my
field of expertise would normally take into account in forming opinions and conclusions.
Therefore I conclude that if there remain any Creditors, pursuant to the Note, they are the
unidentified Investors and all other parties are intermediary or representative or disinterested.
Debtor has made unsuccessful attempts to obtain from Movant and others the identity of the
lender, the documentation authenticating the identity of the lender, and an accounting from the
lender as to all money paid or received in connection with the subject obligation. Neither
Affiant, nor Movant, nor the Court will be able to determine amount of Debtor’s equity in the
property until a complete accounting of all debits and credits including but not limited to the 3rd
party payments referred to above. Until such time as requests for said information have been
answered, I will be unable to identify with certainty the exact identity of the current creditor,
meaning the true owner of the alleged obligation, other than to say that it is not Movant, nor any
Participant in the Securitization chain.
“The only party that can claim to be a Holder in Due Course (“HDC”) of the Note are those that
paid value for the Note, without knowledge that there were any pending challenges to its validity
and who fulfill the other requirements for HDC status. This HDC and the Third Party Sources
are the only ones that could conceivably suffer a monetary or pecuniary loss resulting from
non-payment of the obligation. The Investor could lose if because they advanced the actual funds
from which the Financial Product Loan was funded, assuming these Investors that purchased
asset backed securities were those in which ownership of the Loans were described with
sufficient specificity as to at least express the intent to convey ownership of the obligation as
evidenced by the Promissory Note and an interest in real property consisting of a security interest
held by an entity that was described as the Beneficiary of a Trust created by an instrument
entitled “Deed of Trust.” These Investors were not named. This practice has been intentional, in
my opinion, based on the overwhelming commonality of this obvious reoccurring obvious
failure, and other overwhelming evidence. The Third Party Sources that could conceivably lose
because they would have paid value prior to default or notice of default, and fall within one or
more of the following classifications:
a) Insurers that paid some party on behalf of said investors;
b) Counterparties on credit default swaps;
c) Conveyances or constructive trusts arising by operation of law
through cross collateralization and over collateralization within the aggregate
asset pools or later within the Special Purpose Vehicle tranches;1
d) The United States Treasury Department through the Troubled
Assets Relief Program in which approximately $600 billion of $700 billion has
been authorized and paid to purchase or pay the obligation on “troubled” (non
performing) assets of the LOANS are part of the class of assets targeted by
e) The United States Federal Reserve, which has extended credit
on said troubled assets and has exercised options to purchase said troubled
f) Any other party that has traded in mortgage backed securities
1 “Tranches” is an industry term of art referring to the types of division within a Special Purpose
from the aggregated pools or securitized tranches containing interests in the
“I concur with the allegations in the Amended Complaint that challenge the validity of
endorsements and/or transfers as they have been presented in Court to obtain stay relief, and I
believe that there is good cause, based on the totality of circumstances to challenge that the Note
was endorsed or otherwise properly transferred to the Mortgage Trust for which U.S. Bank is or
was the Trustee. In my opinion, it is unlikely that any HDC exists, because of the way
securitization was universally practised within the investment banking community during 2001
through 2008. Hence the loan product sold to the subject homeowner included a Promissory
Note that was evidence of a real obligation that arose when the transaction was funded but lost its
negotiability in the securitization process, which thus bars anyone from successfully claiming
HDC status, such as by:
a) Also concurring with allegations in the Amended Complaint,
the negotiability of the note was negatively affected by (1) the splitting of the
note and mortgage as described herein; (2) by the addition of terms,
conditions, third party obligors and undisclosed profits, fees, kickbacks all
contrary to existing federal and state applicable statutes and common law
(which has relevance to the TILA, RESPA and related allegations in ¶¶ 21-23
in the Amended Complaint); and (3) knowledge of title and chain of title
defects in the ownership of the note, beneficial interest in the encumbrance,
and position as obligee on the obligation originally undertaken by the subject
b) None of the known Participants in the subject securitization
chain, including but not limited to Defendants herein, has suffered any
financial loss relating to the loan, nor are they threatened with any future loss
even if foreclosure never occurs.
c) None of the known securitization Participants has ever been
the real party in interest as a lender or financial institution underwriting a loan
while funding same with respect to the loan.
d) None of the known securitization Participants, will suffer any
monetary loss through non performance of the loan.
e) All of the known securitization Participants received fees and
profits relating to the loans.
f) The existence and identity of the real parties in interest was
withheld from the Borrowers/Plaintiffs in the closing and servicing of the loan,
and since.
g) All of the known securitization Participants fail to meet one or
more of the following two tests required for HDC status: 1) without actual
knowledge of defects; and/or 2) in good faith, meaning a legitimate belief that
the loan was solid, based upon the information they had at the time of
purchase of the Note.
“There was never a real Beneficiary named on any DOT, as in this case, prior to the foreclosure
as the Plaintiff’s Amended Complaint accurately points out in several paragraphs.
“Several transactions have purportedly taken place regarding the subject loan, as the Note was
transferred up the chain of securitization to the Trustee of the MBS Pool. In my opinion, the
“Lender,” as set forth in the original DOT, or Everbank in this case, in securitized loans is at best
only a nominee for an undisclosed principal. The transaction with the homeowner was subject to
a pre-existing contractual relationship wherein the Investors advanced the cash for the loan and
profits, fees, expenses, rebates, and kickbacks. This is known to many of the known and
unknown securitization Participants, inasmuch as they have been the recipients of memoranda
from legal counsel and advisers, which in my opinion are not protected by attorney client
privilege or the attorney work product privilege, in which they have been informed that any
nominee that does not advance cash for funding the loan and does not receive any payments on
the obligation. A situation has been created which at least theoretically would allow multiple
parties to make claims on the same property from the same borrower, claiming the same Note
and DOT as the basis therefore. The intended monetary effect of the use of such a Nominee was
to provide obfuscation of profits and fees that were disclosed neither to the Investor who put up
the money nor to the Borrower in this loan. In the case at bar, it is my opinion based upon a
reasonable degree of financial analytical certainty, that the total fees and profits generated were
actually in excess of the principal stated on the note which is to say that Investors unknowingly
placed money at risk the amount of which vastly exceeded the funding on the loan to the
borrower. The only way this could be accomplished was by preventing both the Borrower and
the Investor from accessing the true information, which is why the industry practice of Nominees
like the private MERS system were created. Even where MERS is not specifically named in the
originating documents presented to the homeowner at the “closing” it was industry practice from
2001-2008 to utilize MERS “services”, or to implement practices similar to those utilized by
MERS. Therefore it is possible and even probable that the data from the closing was entered into
the MERS electronic registry and that an assignment was executed to MERS purportedly giving
MERS some power over the obligation, the Note and/or the encumbrance. As a general rule in
securitized transactions and especially where MERS is named as Nominee, documents of transfer
(assignments, indorsements, etc.) are created and executed contemporaneously with the notice of
default thus selecting a Participant in or outside the securitization chain to be the party who
initiates collection and foreclosure.
“The notice of default in the case at bar was substantially before any fabrication or creation of
documents of transfer and before any such documents were recorded. Further it does not appear
that any such documents were executed in recordable form under the laws of Arizona and in
accordance with Arizona statutes governing recordation of instruments that purport to show an
interest in real estate. Hence it is my opinion that the existence of any document of transfer in
this case is inconsistent with the authority, apparent or actual, to execute same without some
additional documentation establishing a foundation for the document of transfer, assignment,
indorsement etc., from the true Beneficiaries. No such document having been produced the
inescapable conclusion is that no authority exists and that if permitted to move forward with a
foreclosure or foreclosure sale, a title defect would be created beyond the current cloud on title,
thus rendering the title permanently unmarketable without the entry of a court order from a court
of competent jurisdiction declaring the rights of all stakeholders, potential and otherwise. This
opinion should not be construed to deny the existence or validity of the Note, DOT or underlying
obligation. This particular opinion is solely that none of the parties known to the homeowner
had any authority, apparent or otherwise, to declare the obligation in default or to pursue
collection on the Note or enforcement of the encumbrance. This concurs with allegations
express and implied in the Amended Complaint.
“The loan made to Debtor was part of a two way transaction in which the two parties at each end
thereof each purchased a “Financial Product.” On one end, the home buyer or refinancer was
“sold” a residential home loan. On the other side, a Mortgage Bond was sold to an Investor. In
my opinion, both financial products were securities. Neither set of securities were properly
registered or regulated, and the information that would reveal the identity of the “Lender” is in
the sole care, custody and control of the Loan Servicer or another Intermediary conduit in the
Securitization Chain, including but not limited to the Trustee or Depositor for the Special
Purpose Vehicle that re-issued the homeowner’s Note and encumbrance as a Derivative Hybrid
Debt Instrument (bond) and equity instrument (ownership of percentage share of a pool of assets,
of which the subject loan was one such asset in said pool). Said Security, the Bond, that was sold
to an Investor was done by use of the Borrower’s identity and obligation without permission. In
my opinion, it is equally probable that the Investors were kept unaware that a maximum of only
2/3 of their investment was actually going to fund Debtor’s loan and others similarly situated,
with the excess being used to create instant income for Participants. Debtor was unaware that
such large profits or premiums were being generated by virtue of his identity and signature on the
purported loan documents.
“According to information from Debtor, Debtor has made unsuccessful attempts to obtain from
Movant and others the identity of the Investor/Creditor and possession of documentation
authenticating this identity. Neither Affiant, Movant, nor the Court will be able to determine the
identity of the Creditor, if any still remains, until requests for information and documentation
have been complied with.
“It is also my opinion that there is a very high probability that all or part of the Debtor’s Note was
paid in whole or in part by third parties, based upon industry practice, my personal review of
hundreds of similar transactions including the one at bar, and published reports. Until such time
that the identity of the Creditor, the document trail, and the precise money pertaining to
payments by third party sources is disclosed, neither Affiant, Movant, nor the Court will be able
to determine the amount of Debtor’s equity in the Property. Debtor’s “Obligation” is the amount
of money owed to the Creditor. The Obligation originated with the advance of capital by
Investors who purchased mortgage-backed securities and ended with the promise to pay by the
homeowner who is the debtor in the transaction. The securitization chain obscures the fact that
the Investor was the Creditor to the Homeowner/Debtor. HomEq’s prior assertion of a default is
based upon partial and insufficient information relating only to first party (Debtor) payments and
excluding many undisclosed Third Party payments and receipts that were obscured in the
securitization chain. Contrary to the Defendant’s assertion of default, it is my opinion that it is
much more likely than not that the debtor’s obligation has not been in default at any time and
even if in default it is highly unlikely that any party or entity in this adversary is at risk of loss.
The general practices of the industry during the period of time in which the subject transactions
were originated resulted in third party payments upon a Declaration of Default by a party without
knowledge of the entire accounting of all debits and credits. This triggered insurance-type
payments to the Investment Bank that originated the securitization chain that more likely than not
exceeded the total principal of the subject obligation, resulting in a liability of the Investment
Bank to the Debtor, the Creditor or both. Since the Investment Bank never advanced funds
except those delivered by or on behalf of Investors, neither the Investment Bank nor any other
Participant in the securitization chain was ever a Creditor. Further, based upon repeated
interactions with Servicers across the country and the specific documentation reviewed in this
case, it is highly unlikely that any of the current parties in litigation have or desire to have any
knowledge of Third Party debit or credit transactions in the securitization chain of the
transactions originated from the subject of this action. Hence, based upon industry practice, it is
my opinion that it is far more likely than not that they would be ignorant of the true status of the
amount of principal or interest due, if any on the subject obligation. It is not known by the
Servicer (in this case “HomEq”) or Originator (the “Lender” on original Deeds of Trust – in this
case, Everbank), whether the Debtor’s note is or ever was in default, a fact that can only be
known by the real Creditor, the Investment Bank that is the real party in charge of the
securitization management decisions (in this case, Swiss Bank U.B.S. or one of its subsidiaries),
although possibly the Trustee for the Pool (in this case, U.S. Bank as Trustee) and/or the Trust
Administrator (in this case, Wells Fargo Bank, N.A.) know at least some of the information.
Based upon experience with the parties claiming an interest in the financial product sold to the
homeowner in this case and their behaviour and method of operating as demonstrated in other
cases, it is my opinion that none of the Participants, with whom the Debtor had contact,
individually or collectively, has knowledge or has done due diligence to determine the existence
of a default as to the Creditor, nor whether as a factual matter, the Note, DOT or obligation has
been extinguished or paid in whole or in part by co-obligors, insurers, federal bailout and/or
etcetera. The reason “as a factual matter” is emphasized is that Investment Bank in charge of the
entire security never intended to credit any borrowers accounts for payments by these third party
sources. Considering the fact that Affiant is aware of many dozens of times in which there is a
pending action to enforce a mortgage and to foreclose upon the home in which information
providing the Identity of the Creditor and the fact that Third Party payments have been made on
behalf of Borrower’s Obligation, it is my opinion that this behaviour is intentional and designed
to obscure the facts long enough for the Court to presume that the action taken to collect on the
debt or foreclose on the home was reasonable and proper.
“It is also my opinion that many different parties in the securitization chain came to express title
or claim rights to enforce the DOT and Note and that there was an intention to split the Note
from the DOT, while heretofore unusual in the marketplace was commonplace in securitization
of residential loans. The recorded encumbrance was never effectively or constructively
transferred because it was never executed in recordable form nor was an effort made to create
such a document by the parties to the instant case until they decided to pursue foreclosure. All
transfers or purported transfers of the Note were not accompanied by the encumbrance being
incident to said transfers because the DOT interest as recorded remained in the name of the
Originator, or that party defined as the “Lender” in the Note and DOT. Applicable Arizona Deed
of Trust statutes require that every change of beneficiary interest in a DOT to real property to be
recorded. And Arizona recording statutes require that every change of beneficiary interest in a
DOT to real property to be recorded to be enforceable against a bone fide purchaser for value
without notice of a competing claim. Hence, it is my opinion, that the holder of the Note, either
singular or plural, were not the same parties as those who purportedly held the DOT at any time
pertinent to this case and that this was the result that was intended by the mortgage Originator
and the Participants in the securitization chain, since it was a typical practice in the investment
banking industry in their process of securitising loans throughout the period of 2001-2009. In
my opinion, with a high degree of certainty, the Debtor’s title was and is subject to a cloud on
title, a claim of unmarketable title and possibly a title defect that cannot be cured without court
order as a result of the manner in which Debtor’s loan was securitized. In all cases reviewed by
me, which include more than fifty securitization chains, the Prospectus and other published
documents clearly express that a securitized mortgage is treated sometimes as being secured by
real estate, and sometimes as not being secured by real estate, depending on the context and
purpose of the accounting. The naming of a party other than the Investor as Beneficiary under
the DOT as distinct from a third party named as Payee on the promissory note and the same or
other third party named as Beneficiary under the policy of title insurance demonstrates an intent
or presumption or reasonable conclusion that there was intent by some or all of the parties at
various times in the steps of the securitization process to separate the Note from the Deed of
Trust, thus creating a cloud on title for both the owner of the property and any party seeking to
express or claim an interest in the real property by virtue of the encumbrance.
“I have also reviewed, for the past 40 years, published Financial Accounting Standards obviously
intended for auditors involved in auditing and rendering opinions on the financial statements of
entities involved in securitization, securities issuance and securities sale and trading. If the
known Participants in the securitization scheme followed the rules, they did not post the instant
transaction as a loan receivable. The transaction most likely was posted on their ledgers as fee
income or profit which was later reported on their income statement in combination with all
other such transactions. These rules explain how and why the transactions were posted on or off
the books of the larger originating entity. These entries adopted by said companies constitute
admissions that the transaction was not considered a loan receivable on its balance sheet, or on
the ledgers used to prepare the balance sheet, but rather shown on the income statement as a fee
for service as a conduit. These admissions in my opinion are fatal to any assertion by any such
party currently seeking to enforce mortgages in their own name on their own behalf, including
but not limited to the securitization Participant in this case.
“It also appears that the standard industry practice of creating a yield spread premium between
the Creditor and Originator was extended and expanded in the case of the securitization chain
such that in this case, in my opinion, it is highly probable, far beyond 50% probability that the
Debtor’s loan was sold or pre-sold to the Investors at a gross profit to the Participants in the
securitization chain of at least 35% of the total principal balance of the note. It is also my
opinion that this was done without full disclosure to the Investors and that this is tantamount to
fraud upon the Investors. In my opinion the investors were and remain completely unaware that
much, and in many cases most of the money they supplied was used to fund fees for the
Participants in the securitization chain, with the rest used to fund bloated mortgage loans based
upon inflated appraisals by companies that had a less than arm’s length relationship with the
Originator and others involved in obtaining approval for the loan. These yield spread premiums
far exceed those ever paid prior to the securitization of residential mortgages. With yield spread
premiums such as these, there was no way that there could ever be a legitimate profit made by
any Investor under ordinary circumstances, with the exception of those in upper tranches, whose
profit was insured from the start, no matter how lacking in viability were these investment
vehicles on the whole, because of the way payments to the Investors were prearranged. It is also
my opinion that the overall Security was planned by the Aggregator (in this case, U.B.S. and
subsidiaries) and other Participants to fail from the start. The reason for the intended failure of
the overall Pool in my opinion was to better insure that the fraud perpetrated on the Investors
would be less likely to be discovered and to make it so that additional unearned profit could be
made by the Aggregator and other Participants, based on the Third Party Payments discussed
above that were payable only when there was a declaration of default by the Pool, often called a
“trigger event.” In my opinion, the allegations in the Amended Complaint regarding fraud and
conversion, as well as intentional aiding and abetting or conspiracy are well taken. The theory
that each Participant, including the very first party in the securitization chain, the Lender on the
Deed of Trust, is complicit in acts and series of acts with knowledge that these actions will harm
the debtors, including fraud and conversion, and/or are part of a scheme to commit fraud and
conversion in the form of not crediting borrowers account by third party source payments,
thereby converting ownership of the property from the borrower, the Debtor Plaintiff in this case,
is well respected among those that study transactions of this sort.
“The following are types of wrong performed upon borrowers, at least some of which occurred
with the Debtor/Plaintiff in this case, by Loan Brokers and Originators (“Lenders” in the original
deeds of trust), which were acts in furtherance of an overall fraud and conversion scheme that
were necessary to its success, because without a large number of loans doomed to fail from the
start the main planner and major Participants could not be certain that the Mortgage Pools as a
whole would fail.
a) The fact that Borrowers paid as much as double what the homes were
actually worth, due to a real estate market that was artificially inflated because of
the wealth of investment dollars looking for a home following the bursting of the bubble, followed by what amounts to an economic depression for the
working poor. Borrowers can’t afford the payments and they are losing their homes,
and the unbelievable abundance of foreclosures shows the extent to which any
defect in character they may have is common to large numbers of persons.
Appraisal values were often over-inflated even above the artificially high values
provided by the market and appraisers were advised they would not receive further
business unless they cooperated.
b) Borrowers were mislead as to what the monthly payments would be a few
years into the loans.
c) In more extreme cases, Borrowers were often offered teaser rates that they
qualified for, but which greatly increased within a very short period of time.
d) There was so much investment money looking for someone to borrow it
that could sign a note during this time, that loans were pushed at people with
persuasive and high pressure tactics;
e) Borrowers were advised that they could afford much more home then they
really could. It appears hard to resist a home that is much nicer than one thought
they could afford, when someone that appears to be a reputable professional assures
them they can afford. Optimism and wishful thinking overpower reason.
f) Loan brokers were pushed to offer loans that were on worse terms than
the borrower could qualify for. Sometimes they received higher commissions, often
in secret, for getting people to take out loans on terms that were less beneficial then
a loan that Borrowers would have qualified for. And sometimes the only loan
products that loan brokers had available to them were those containing unfavorable
g) Borrowers were advised that they did not have to worry about the
payments being unaffordable in the future, because they would be definitely be able
to refinance again at that point, because the market was so solid.
h) Underwriters were pushed by supervisors to pass through bad loans,
many of which were obviously doomed to fail from the start.
“Under the Truth in Lending Act, Regulation Z, and the Real Estate Settlement Procedures Act,
these undisclosed yield spread premiums are a liability of Participants in the securitization chain,
including the loan Originator and all Participants owed to the Homeowner/Debtor. In my
opinion, this disclosure does not appear on any of the Homeowner/Debtor’s documents
identifying the parties participating in fee-splitting or yield spread premiums nor the amounts
involved as required by the Truth in Lending Act and the Real Estate Settlement and Procedures
Act. Further, no information appears in Debtor’s closing documentation that would have caused
him to inquire about such a premium.
“In my opinion, the allegations contained in ¶¶ 21-23 of the Amended Complaint, pertaining to
TILA, RESPA and similar statutes are well taken. Questions as to statute of limitation would not
be applicable on a number of theories, including, but not limited to: fraud tolls the statute of
limitations; and until the name of the true creditor, lender, beneficiary is made known to the
borrower, the statute of limitations time frame does not begin to run.
“A MBS Pool Trust is not really a true “Trust.” The Trustee thereof has been involved in a joint
enterprise with the other Participants in the creation of a Financial Product for sale to Investors,
the purchasers of Mortgage Bonds. The so-called Pool “Trustee” is more like an administrator.
The first loyalty of the Pool Trustee is not to the Investors, but to the parties to which it entered
into contract with, the Participants. Based on its actions as can be seen over and over again, it
seems it is more interested finding ways not to reimburse the Investors than to find ways to do so.
In the securitization of the loans, the rights of various named mortgagees, assignees and/or
Trustees have each been superseded by succeeding conduits including the alleged Trustee or
officer of the Special Purpose Vehicle that issued bonds to the Investor who at least at some
point in time material to the subject transaction with the homeowner in the subject transaction
was holder of Mortgage Backed Securities. The powers of said officer or Trustee are limited to
ONLY what the Certificate Holders authorize. It cannot be overemphasized that the Investors
were not signatories to the Securitization Documents. Only the Participants were. The
transaction with the Investor in which they advanced “loan” money for the subject homeowner’s
loan product, was consummated most likely before the transaction with the homeowners or was
subject to binding agreements between various Participants in the securitization scheme that
pre-dated the transaction with the homeowner. Therefore, the actual and undisclosed Creditor
was the Investor who advanced the cash and who was known by the securitization Participants,
and therefore was the only party entitled to claim first lien either legally or under equitable
subrogation. Accordingly, the only potential party to a foreclosure wherein the purported
creditor alleges financial injury and therefore a right to collect the obligation, enforce the Note or
enforce the DOT is either a party who has actually advanced cash and stands to lose money or an
authorized representative who can disclose the principal, provide proof of service or notice and
show such express, unequivocal and complete authority to perform all acts and make all
decisions without condition. In my opinion, any condition placed upon the Trustee to act for the
MBS Pool Certificate Holders, including the power to enter into any compromise, makes the
Trustee something less than the Real Party in Interest on behalf of the Certificate Holders. Also,
a party must be present that is answerable to the claims, affirmative defenses and counterclaims
of the homeowners for such causes of action or defenses as might be applicable or they would be
blocked potentially by collateral estoppel if the court determined the foreclosing party was acting
within the scope of its agency for the Principal, the Certificate Holders. In my opinion, as above,
and with a reasonable degree of factual and legal certainty, the disclosed principals in the
securitization chain, up to and including the Pool Trustee, are not the Creditors nor are they
authorized agents for the Creditors, without proof that they have been granted this authority
pursuant to the terms of the Securitization documents. Otherwise, the Participants, including
Servicers and Pool Trustees, in my opinion, are interlopers or impostors whose design is to take
title to property they have no right to claim, and to enforce a Note which is evidence of an
obligation that is not owed to them but rather to another. The details of this information, whether
the Special Purpose Vehicle still exists, whether the investor has been paid in full through Third
Party Payments, are known only to these securitization Participants and the heretofore
undisclosed Investors. And the Participants have demonstrated time and time again that they are
not credible. In my opinion the attorneys for the known Securitization Participants do not have
any authority to represent the Creditor, and could not represent them due to the obvious conflict
of interest, to wit: the Investors upon learning that a substantial amount of their advance of cash
was pocketed by the intermediaries and now is left with a mortgage whose nominal value is far
below what was paid, and whose fair market value is far below the nominal value, would have
potential substantial claims against the securitization Participants for fraud, conversion, breach of
contract, and other claims. Fraud upon the investors in relevant to borrowers because it is
additional evidence of an overall fraud and conversion scheme against borrowers, because it
tends to show motive and intent in the fraud and conversion claims made by borrowers.
“This concludes this Unsworn Declaration, made under penalty of perjury.”
Signed on _________________________________, 2010.
Neil Franklin Garfield, Esq.

Motion to transfer eviction to unlimited court

The court won’t hear your arguments on defective foreclosure make a motNotice of motion and Motion Strike Portionsion to transfer  Opposition for Motion to Strike UD complaint

Opp. of Defendant Deutsche

first aCaparas, Answer_to_UD_Complaint[1]

Amended complaint


WMc’s demurrer for 10-22-09

Our motion to consolidate

request for admission of plaintiff deutsch bank national tust company to defendant hermenegildo


Motion to Consolidate P & A

Notice of Motion to Consolidate

requests for admission to plaintiff


Pre-Foreclosure Complaint (Plaintiffs)


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