ASSAILING THE FORECLOSURE

ASSAILING THE FORECLOSURE

Introduction

Neither the beneficiary nor the trustee needs to invoke any judicial procedure or obtain any judicial process to cause the sale of property pursuant to a power of sale. The only court procedure needed to complete the full foreclosure process is an action for unlawful detainer, after the consummation of the sale, to oust the former owner from possession.

The onus of challenging the merit of the foreclosure and the fairness and regularity of the process is placed on the trustor or junior lienholder. Thus, judicial supervision, examination, and intervention would come almost exclusively through an action instituted by the trustor or, to a lesser extent, a junior encumbrancer. The notion is that the minimum period of three months coupled with the succeeding 20-day period is sufficient time for the trustor to take appropriate action to stop the foreclosure sale. [See generally Smith v. Allen (1968) 68 Cal.2d 93, 96; 65 Cal.Rptr. 153.] In Py v. Pleitner (1945) 70 Cal.App.2d 576, 582; 161 P.2d 393, for example, the court denied the trustor any relief but commented that “[w]e appreciate the unfortunate position in which appellant finds herself because she did not seek legal advice to protect her legal rights.”

The foreclosure proceeding can be attacked before and after the sale; however, as discussed below, the trustor may be unable to successfully assert claims, regarding the invalidity of the proceeding, against a bona fide purchaser for value and without notice. If an action is initiated prior to the sale, the basic remedy sought is an injunction to restrain the foreclosure sale in addition to other remedies such as quiet title or cancellation of the trust deed. If an action is initiated after the foreclosure sale, the trustor will seek various remedies and will attempt to vacate the sale and to enjoin the purchaser from attempting to oust the trustor from possession. After the sale, the battleground may be in unlawful detainer proceedings where raising defenses based on the obligation or the trust deed may not be allowed or, if allowed, would be perilous.

Grounds for Attacking the Foreclosure

One of the fundamental grounds for attacking a foreclosure is that the lien is invalid. The lien may be invalid and unenforceable because of defects related to its negotiation and execution. Moreover, since the lien is a mere incident to the obligation which it secures, the lien cannot be enforced if the obligation is invalid or if the obligation has not been breached. The lien also may not be enforced if the breach is less than the amount stated in the notice of default and the trustor cures the

default by paying the lesser amount.

In addition, the foreclosure can be stopped if the procedural requirements and safeguards established by statute are not followed. Thus, defects in the notice of default, notice of sale, the reinstatement procedure, or the proposed or actual conduct of the sale afford grounds for preventing or voiding the sale.

The Obligation is Unenforceable

Various common law theories (e.g., fraud in factum, fraud in inducement, duress, failure of consideration, unconscionability, forgery, etc.) may be raised to render the obligation unenforceable.

The Lien is Unenforceable

Common Law Theories

Various common law theories (e.g., fraud, mistake, no delivery, forgery, community property but both spouses did not encumber, etc.) may be raised to render the lien unenforceable.  105 Cal.App.3d 65, 75-80; 164 Cal.Rptr. 279; Thomas v. Wright (1971) 21 Cal.App.3d 921; 98 Cal.Rptr. 874; Brewer v. Home Owners Auto Finance Co. (1970) 10 Cal.App.3d 337; 89 Cal.Rptr. 231.]

One form of transaction involving seller participation in the financing is the seller assisted loan. In this type of loan, the seller assists the buyer in obtaining a loan for all or part of the purchase price of the vehicle from a third party lender. If the seller is significantly involved in the procurement of the loan, the Rees-Levering Act applies. [See Hernandez v. Atlantic Finance Co. of Los Angeles, supra, 105 Cal.App.3d 65, 70, 73-80.] Rees-Levering exempts loans made by supervised financial organizations, such as banks and consumer finance lenders, and security interests taken in connection with such loans from the Act’s coverage [Civ. Code § 2982.5(a)]; however, this exemption applies only to loans independently obtained by purchasers without seller assistance. [See Hernandez v. Atlantic Finance Co. of Los Angeles, supra, 105 Cal.App.3d 65, 70.] If Rees-Levering applies to a seller assisted loan, any trust deed or other real property lien securing the loan will be void. [See Civ. Code § 2984.2(c); Brewer v. Home Owners Auto Finance Co.. supra, 10 Cal.App.3d 337.]

After Hernandez was decided, the Legislature amended the Rees-Levering Act to include special provisions for seller assisted loans.  [Civ. Code § 2982.5(d).]  The seller may assist the buyer

in obtaining a loan for all or part of the purchase price; however, any real property lien securing the loan is void and unenforceable unless the loan is for $7,500 or more and is used for certain recreational vehicles. [Civ. Code § 2982.5(d)(1) and (2).] This section does not apply to seller assisted loans made by banks and savings and loan associations which continue to be governed by Hernandez principles.

Neither Hernandez nor Civil Code section 2982.5(d) defines seller assisted loan. In Hernandez, the seller completed the buyer’s credit application, repeatedly called the buyer to inform her that credit had been approved, picked her up and drove her to the seller’s place of business to sign documents, and drove her to the lender’s place of business to sign more documents. (105 Cal.App.3d at 73.) Hernandez, presents an extreme example of seller involvement in obtaining financing. A seller assisted loan may occur without the degree of seller involvement present in Hernandez. For example, a seller assisted loan embraces a loan in which the seller prepares or helps the buyer prepare a loan application and forwards it to the lender. [See Eldorado Bank v. Lytle (1983) 147 Cal.App.3d Supp. 17, 21; 195 Cal.Rptr. 499.] Although a precise definition of seller assisted loan does not appear in the cases or the statute, the term appears to be broad and at least includes loans arranged or facilitated by the direct involvement of the seller in preparing and/or submitting loan information to the creditor.

The Rees-Levering Act does not specifically address the situation of a seller assisted loan which is used partly for a vehicle purchase and partly for some other purpose such as a home improvement or bill consolidation. A creditor could argue that the lien covering the non-vehicle portion of the loan is not in violation of the statute and, therefore, is not void to the extent the lien secures repayment of the nonvehicle loan. However, the lien is taken as part of an entire loan transaction. The purpose of the transaction was to obtain a vehicle loan. Other portions of the loan may have been required by the creditor as a condition to giving the vehicle loan, such as a pay off of other creditors. The creditor may use the setting of the vehicle loan negotiation as a method of persuading buyers to obtain loans which they neither sought nor needed. Since the Legislature apparently did not want a buyer to enter the door of a vehicle dealer and come out with a trust deed on the buyer’s home, the broad language invalidating

real property security interests should extend to the entire vehicle inspired loan. [See Civ. Code §§ 2982.5(d)(1) and 2984.2(c).]

The creditor could argue that it may be entitled to an equitable lien for the non-vehicle portion of the loan. An equitable lien may be created when justice requires if a party intends to give a mortgage as security for a debt. [See generally Estate of Pitts (1933) 218 Cal. 184, 189; 22 P.2d 694; McColaan v. Bank of California Nat. Assn. (1929) 208 Cal. 329, 338; 281 P. 381; Lentz v. Lentz (1968) 267 Cal.App.2d 891, 894; 73 Cal.Rptr. 686; see also Forte v. Nolfi (1972) 25 Cal.App.3d 656, 692; 102 Cal.Rptr. 455 in which the court gave an unwitting assignee of a forged trust deed an equitable lien to the extent of the consideration received by the debtor who had originally intended to execute a trust deed.] However, the buyer cannot waive rights against the seller. [See Civ. Code 2983.7(c) and (e).] Thus, the buyer’s intent is essentially irrelevant since the buyer cannot waive the prohibition against trust deeds in transactions covered under Rees-Levering even if the buyer intends to do so. Moreover, the creditor’s right to an equitable lien, in any case, will depend on the circumstances of the case and whether justice would be served by the imposition of an equitable lien. If, for example, the creditor required an unsophisticated buyer to pay other obligations,  particularly unsecured or low interest rate secured

obligations, as a condition to obtaining an automobile loan unlawfully secured by a trust deed, the creditor may have worsened the buyer’s financial condition. As a result, an equitable lien for the nonvehicle portion of the loan which the buyer did not seek or require would inequitably reward the creditor’s conduct; thus, the creditor should be left unsecured. Even if the creditor could receive an equitable lien for the non-vehicle portion of the loan, the creditor cannot nonjudically foreclose it. Since there is no power of sale, the equitable lien can be enforced only by judicial foreclosure.  [See Code of Civ. Proc. § 726.]

An exception to the general rule that Rees-Levering prohibits real property liens may be found in Civil Code section 2982.5(b). That section permits the seller to assist the buyer in obtaining a loan “upon any security” for all or part of the down payment “or any other payment” on a conditional sale contract or purchase order. Rees-Levering does not prohibit a real property lien for such a loan. [See Civ. Code §§ 2982.5(b), 2984.2(b).]

The validity of a real property lien taken in connection with seller assisted financing may turn on whether the loan falls within Civil Code section 2982.5(b) or section 2982.5(d). These sections do not specify the size of the loans to which they respectively apply; therefore, there may be a dispute over whether a loan is for a downpayment or “any other payment” [Civ. Code § 2982.5(b)] or a

loan for “the full purchase price, or any part thereof.” [Civ. Code § 2982.5(d).] The legislative scheme apparently contemplates that the loans covered under Civil Code section 2982.5(b) are small in amount and are used for modest downpayments or pickup payments (the difference between the downpayment demanded by the seller and the amount given by the buyer toward the downpayment.) [ See Hernandez v. Atlantic Finance Co. of Los Angeles, supra, 105 Cal.App.3d 65, 76-77.] Lenders such as banks normally do not take real property liens for such relatively small amounts, and personal property brokers and consumer finance lenders which regularly make small loans for car purchases are precluded from taking any real property lien for loans under $5,000. [See Fin. Code §§ 22466 and 24466.] Thus, a specific prohibition on real property liens for small loans covered under Civil Code section 2982.5(b) was probably thought unnecessary. Since real property liens cannot be taken to secure loans for all or part of the purchase price or for financing under conditional sales contracts, it would be absurd to sanction a real property lien for a small loan. Given the protective purpose and policy of the Rees-Levering Act and its hostility to real property security, a seller assisted loan involving real property security should be deemed to be covered by Civ. Code §§ 2982.5(d) and 2984.2(a) and (c). Otherwise, Civ. Code § 2982.5(b) would become an exception which would destroy the rule.

Retail Installment Sales

The Unruh Act [Civ. Code § 1801 et seq.] governs the sale of goods and services for a deferred payment price, including finance charges, payable in installments. [See Civ. Code §§ 1802.3 -1802.6.] Any real property lien taken to secure payment on a contract for goods which are not to be attached to real property is void. [Civ. Code §§ 1804.3(b), 1804.4.) Thus, for example, liens securing contracts for carpeting installed by the tackless strip method are void because carpeting so installed is not attached to real property. [See People v. Custom Craft Carpets, Inc. (1984) 159 Cal.App.3d 676, 685; 206 Cal.Rptr. 12.]

In Custom Craft, the Court observed that whether goods are attached to real property is a question of fact. However, neither the Unruh Act nor Custom Craft equate an article’s being “attached to real property” with being a fixture. Therefore, the facts to be analyzed relate to the goods’ method and degree of attachment to the real property and not to the parties’ intent which is a fundamental element in establishing fixture status.

Other provisions of the Unruh Act affect the validity of a security interest in real property. For example, a retail installment contract for goods or services which contains a lien must contain a statutorily designated warning notice printed in a prescribed manner in the same language used in the contract; otherwise the lien is void and unenforceable. [Civ. Code § 1803.2(b)(3).] The Unruh Act also includes the following requirements:

1. A contract providing for a real property security interest must have the phrase “Security Agreement” printed in at least 12-point type at the top of the contract.  [Civ. Code § 1803.2(b)(1)];

2. The entire agreement of the parties regarding cost and terms of payment including any promissory note or any other evidence of indebtedness must be contained in a single document. [Civ. Code § 1803.2(a); see Morgan v. Reasor Corp. (1968) 69 Cal.2d 881; 73 Cal.Rptr. 398];

3. The contract must contain all of the disclosures required by Regulation Z. [Civ. Code § 1803.3(b).] Regulation Z requires, in part, the disclosure of the existence of a security interest in property [12 C.F.R. § 226.18(m)] and the disclosure of the right of rescission. [12 C.F.R. § 226.23(b)];

4. The seller must not obtain the buyer’s signature on a contract containing blank spaces to be filled in

after it has been signed.  [Civ. Code § 1803.4.]

Any prohibited contract provision is void. [Civ. Code § 1804.4.] Thus, for example, if the lien provision were blank when the customer signed the contract and were subsequently completed or if the lien were not part of a single document containing all of the costs or terms of payment, the lien provision should be declared void. Even if the lien were not declared void, the penalty against the seller for the violation of the Unruh Act is the loss of all finance charges, including those already collected [Civ. Code § 1812.7], which might sufficiently offset the amount in default to stop the foreclosure.

The Unruh Act applies to credit sales. The statutory scheme specifically deals with retail installment sales in which the seller extends credit by permitting the buyer to obtain the goods and services on a deferred payment basis. [See, e.g., Civ. Code §§ 1802.5, 1802.6.] The essence of the transaction is the sale, and the credit terms merely facilitate the sale. In practice, the seller frequently assigns the installment contract to a third party creditor such as a bank or finance company in the business of supplying consumer credit. Indeed, a seller under a retail installment contract often has no intention of extending credit to a buyer through the maturity date of the contract but nevertheless

enters into the contract with a view to assigning the contract soon after the sale to a creditor with which the seller had made previous arrangements for financing. See Morgan v. Reasor Corp., supra, 69 Cal.2d 881, 895.] Such prearranged assignment of the credit sale contract does not alter the characterization of the transaction as a credit sale. [See Boerner v. Colwell Co. (1978) 21 Cal.3d 37, 50; 145 Cal.Rptr. 380.]

The Unruh Act also applies to transactions, involving sales financed from the proceeds of seller assisted loans, that are credit sales in substance. [Civ. Code § 1801.6(a).] A seller assisted loan transaction has the same attributes as a credit sale. The buyer is willing to buy only on credit. The seller arranges for credit; however, instead of using a retail installment contract which is assigned to a third party creditor, the seller arranges for the creditor to loan the money directly to the buyer, and the seller receives the proceeds of the loan.

The conventional retail installment sale and the seller assisted loan transaction embody similar relationships and objectives. The buyer obtains goods on a deferred payment basis, but instead of making monthly payments to the creditor as the assignee of the installment contract, the buyer makes monthly payments to the creditor as the lender. The seller has arranged for credit for the buyer either through a direct loan by the

creditor or an “indirect loan” consisting of the creditor’s advancing money for the buyer’s purchase in exchange for receiving an assignment of the buyer’s installment obligation. The seller receives payment either in the form of the proceeds from the loan or the proceeds from the assignment. A transaction in the form of a sale financed by a seller assisted loan is strikingly similar to the transaction held to be a credit sale in Boerner v. Colwell Co., supra, 21 Cal.3d 37, 41-42, 50-51. The Legislature has declared that Boerner should be considered in determining whether a transaction is in substance a credit sale. [Civ. Code §1801.6(a).] Since a seller assisted loan transaction is in substance a credit sale, it should be governed by the Unruh Act restrictions regarding credit sales. [See 64 Ops.Cal.Atty.Gen. 722; see also Hernandez v. Atlantic Finance Co. of Los Angeles, supra, 105 Cal.App.3d 65 holding that seller assisted loans for automobile purchases were governed by the Rees-Levering Act.]

The Unruh Act also provides coverage for transactions which are loans both in substance and in form. This coverage applies when the lender and the seller share in the profits and losses of the sale and/or the loan or when the lender and the seller are related by common ownership and control and that relationship is a material factor in the loan transaction.  [See Civ. Code § 1801.6(b).]

Creditors  may attempt  to  shield  seller assisted  loan

transactions from the requirements of the Unruh Act by claiming that transactions in the form of loans are exempt from the Unruh Act unless the lender and seller share profits and losses or have common ownership and control as described in Civil Code section 1801.6(b). However, Civil Code section 1801.6(a) declares that the substance, not the form, of the transaction is paramount. The legislative intent expressed in Civil Code section 1801.6(a) dictates the construction of section 1801.6(b); thus, section 1801.6(b) cannot be read to exempt all transactions in the form of a loan regardless of the transactions true substance. Accordingly, section 1801.6(b) must be viewed as exempting certain actual loan transactions from the Unruh Act but not exempting credit sales cast in the form of loans.

3.   Dispute as to What, if any. Amount Owed

a.   Disputed Amount Owed

The notice of default should appropriately describe the nature of the breach. As the Court of Appeal observed, “The provisions of section 2924 of the Civil Code with reference to inclusion, in the notice of default, of a statement setting forth the nature of the breach ‘must be strictly followed.'”  System Inv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 152-53; 98 Cal.Rptr. 735.] A foreclosure sale should not be permitted if the amount of the

debt is disputed or uncertain. [See More v. Calkins (1892) 85 Cal. 177, 188; 24 P. 729; cf. Sweatt v. Foreclosure Co, (1985) 166 Cal.App.3d 273, 276; 212 Cal.Rptr. 350; but see Ravano v. Sayre (1933) 135 Cal.App. 60; 26 P.2d 515.] Accordingly, the sale may be enjoined until the court determines the correct amount owed. [See Producers Holding Co. v. Hills (1927) 201 Cal. 204, 209; 256 P. 207; More v. Calkins, supra, 85 Cal. 177, 188, 190; see also Hunt v. Smyth (1972) 25 Cal.App.3d 807, 837; 101 Cal.Rptr. 4; Lockwood v. Sheedy (1958) 157 Cal.App.2d 741, 742; 321 P.2d 862.] If some liability is admitted, then that amount may have to be tendered to do equity [see Meetz v. Mohr (1904) 141 Cal. 667, 673; 75 P. 298]; however, the court could enjoin the entire sale, under a defective notice of default which improperly states the nature of the default, notwithstanding the existence of a clear breach, and could permit the beneficiary to file a proper notice of default upon which the foreclosure may proceed. (See Lockwood v. Sheedy, supra, 157 Cal.App.2d 741, 742.) Of course, if there is no default (e.g. the full amount due has been tendered), a foreclosure is void. [See e.g., Lichty v. Whitney (1947) 80 Cal.App.2d 696, 702; 182 P.2d 582 (tender of amount due); Huene v. Cribb (1908) 9 Cal.App. 141, 144; 98 P. 78; see also Winnett v. Roberts (1979) 179 Cal.App.3d 909, 921-22, 225.]

b. Payment Excused

The trustor may also dispute whether any amount is owed if the beneficiary breaches its obligation to the trustor and the breach excuses the trustor’s performance. [See System Inv. Corp, v. Union Bank, supra, 21 Cal.App.3d 137, 154.]

c. Waiver or Estoppel to Claim Payment or Default

The trustor may deny that any amount is owed at that particular time, or may deny that the prescribed amount demanded is owed, if the beneficiary has waived the time requirements contained in the obligation by accepting late payments or if the beneficiary has accepted payments smaller than that permitted in the contract.

A waiver is unlikely to be construed as permanent in the absence of a writing or new consideration. A permanent waiver is, in effect, a change in the agreement equivalent to a novation requiring new consideration. [E.g., Hunt v. Smyth, supra, 25 Cal.App.3d 807, 819; Bledsoe v. Pacific Ready Cut Homes, Inc. (1928) 92 Cal.App. 641, 644-45; 268 P. 697.] The beneficiary and trustor may modify their payment schedule in writing without new consideration. [See Civ. Code §§1698(a), 2924c (b)(1).] The beneficiary’s conduct, however, may constitute a temporary waiver.

The beneficiary cannot declare the trustor in default of the terms of the obligation where the beneficiary has temporarily waived such terms — until the beneficiary has given definite notice demanding payment in accord with the obligation and has provided the trustor a reasonable length of time to comply. In addition, the beneficiary must give the trustor definite notice that future payments must comply with the terms of the obligation. [E.g., Hunt v. Smyth. supra, 25 Cal.App.3d 807, 822-23; Lopez v. Bell (1962) 207 Cal.App.2d 394, 398-99; 24 Cal.Rptr. 626; Bledsoe v. Pacific Ready Cut Homes, Inc., supra, 92 Cal.App. 641, 645.] Even if the beneficiary’s conduct does not constitute a knowing relinquishment of rights, it may create an equitable estoppel. [See e.g., Altman v. McCollum (1951) 107 Cal.App.2d Supp. 847; 236 P.2d 914.]

d.   Offsetting Obligation

The trustor also may offset against the amount claimed by the beneficiary any amount due the trustor from the beneficiary. [See Hauger v. Gates (1954) 42 Cal.2d 752, 755; 249 P.2d 609; Richmond v. Lattin (1883) 64 Cal. 273; 30 P. 818; Goodwin v. Alston (1955) 130 Cal.App.2d 664, 669; 280 P.2d 34; Cohen v. Bonnell (1936) 14 Cal.App.2d 38; 57 P.2d 1326; Zarillo v. Le Mesnacer (1921) 51 Cal.App. 442; 1196 P.902 (damages for conversion offset against debt secured by chattel mortgage); Williams v. Pratt (1909) 10 Cal.App. 625, 632; 103 P. 151.]  In Goodwin, supra, the mortgagor

established that the mortgagee charged usurious interest, and the penalty of the trebled interest payments along with other amounts were setoff against the mortgage debt. As a result, the debt was effectively satisfied, the mortgage was thereby extinguished and no foreclosure was permitted, and the mortgagee was held liable to the mortgagor for damages.  (See 130 Cal.App.2d at 668-69.)

The Supreme Court made clear in Hauaer, supra, that the trustor, in the context of the nonjudicial foreclosure of a deed of trust, could use the right of setoff. [See 42 Cal.2d at 755.] Normally, setoff is employed defensively through an affirmative defense or cross-complaint (or formerly counterclaim) in response to an action for money. The court in Hauaer, however, saw no distinction between the right of setoff held by a trustor defending a foreclosure action or by a trustor affirmatively attacking a nonjudicial foreclosure proceeding. (Id. at 755-56.) Accordingly, the Supreme Court held that the trustor, as plaintiff, could establish the impropriety of a foreclosure by showing that the trustor was not in default on his obligation since the obligation was offset by an obligation which the beneficiary owed to him. (Id. at 753, 755.) The court further held that the trustor did not have to bring an independent action to establish the setoff. (Id. at 755.) Moreover, the court declared that unliquidated as well as liquidated amounts could be setoff; thus, the court allowed the trustor to setoff an unliquidated claim for damages for breach of

contract.  (Id.)

Hauaer and the other cases cited above are based on former Code of Civ. Proc. § 440 which has been superseded by Code of Civ. Proc. § 431.70. The rule of these cases should not be altered because the new section appears broader than the old. Furthermore, the Legislative Committee Comment to section 431.70 not only states that the new section continues the substantive effect of section 440 but also approvingly cites Hauaer.

The right of setoff has substantial significance in contesting the validity of any foreclosure since the trustor may establish that no default occurred or, indeed, no indebtedness exists because of an offsetting amount owed by the beneficiary to the trustor. As discussed above, this offset may be a liquidated or an unliquidated claim. In addition, the claim which the trustor may wish to offset may be barred by the statute of limitations at the time of the foreclosure, but as long as the trustor’s claim and the beneficiary’s claim coexisted at any time when neither claim was barred, the claims are deemed to have been offset. [See Code of Civ. Proc. § 431.70.] The theory is that the competing claims which coexisted when both were enforceable were offset to the extent they equaled each other without the need to bring an action on the claims. Therefore, since the offsetting claim is deemed satisfied to the extent it equaled the other claim, there was no

existing claim against which the statute of limitation operates. See Jones v. Mortimer (1946) 28 Cal.2d 627, 632-33; 170 P.2d 893; Singer Co. v. County of Kings (1975) 46 Cal.App.3d 852, 869; 121 Cal.Rptr. 398; see also Hauger v. Gates, supra, 42 Cal.2d 752, 755.]

The right of setoff not only gives the trustor the ability to setoff liquidated and unliquidated claims for money paid or for damages, but also permits setoffs for statutory penalties to which the trustor may be entitled because of the beneficiary’s violation of the law. In Goodwin v. Alston, supra, 130 Cal.App.2d 664 the debtor in a foreclosure action offset his obligation against the treble damages awarded to him for the creditor’s usury violations. Similarly, the penalty for violating the federal Truth in Lending Act — twice the amount of the finance charge but not less than $100 or more than $1,000 [15 U.S.C. § 1640(a)(2)(A)(i)] — may be offset against the obligation owed the creditor.-‘ [See 15 U.S.C. § 1640(h); Reliable Credit Service, Inc. v. Bernard (La.App. 1976) 339 So.2d 952, 954, cert, den. 341 So.2d 1129, cert, den. 342 So.2d 215; Martin v. Body (Tex.Civ.App. 1976) 533 S.W.2d 461, 467-68].

Although Truth in Lending penalties may be offset against the creditor’s claim, the debtor may not unilaterally deduct the penalty; rather, the offset must be raised in a judicial proceeding, and the offset’s validity must be adjudicated.  [15 U.S.C. § 1640(h); see e.g., Pacific Concrete Fed. Credit Union v. Kauanoe (Haw. 1980) 614 P.2d 936, 942-43; Lincoln First Bank of Rochester v. Rupert (App.Div. 1977) 400 N.Y.S. 618, 621.]

Although no cases have authorized the trustor’s offset of punitive damages against the obligation owed, no reason appears to prevent the offset of punitive damages. Normally, if punitive damages were appropriate, sufficient fraud, oppression, or other misconduct would be established to vitiate the entire transaction. But even if the transaction were rescinded, the injured trustor likely would be required to return any consideration given by the offending beneficiary. The trustor almost always will have spent the money, usually to satisfy another creditor or to purchase goods or services which cannot be returned for near full value. A punitive damage offset may reduce or eliminate the trustor’s obligation to restore consideration paid in a fraudulent, oppressive, or similarly infirm transaction.

4. De Minimis Breach

Foreclosure is a drastic remedy, and courts will not enforce a forfeiture if the default is de minimis in nature such as a minor delay in making an installment payment. [See Bavpoint Mortgage Corp. v. Crest Premium Real Estate etc. Trust (1988) 168 Cal.App.3d 818, 829-32; 214 Cal.Rptr. 531.]

5. Defective Procedure

The trustee’s failure to comply with the statutorily mandated

procedures for a foreclosure sale is an important basis for attacking the foreclosure sale. The trustor bears the onus of establishing the impropriety of the sale, for a foreclosure is presumed to be conducted regularly and fairly in the absence of any contrary evidence Stevens v. Plumas Eureka Annex Min. Co. (1935) 2 Cal.2d 493, 497; 41 P.2d 927; Sain v. Silvestre (1978) 78 Cal.App.3d 461, 471 n. 10; 144 Cal.Rptr. 478; Hohn v. Riverside County Flood Control & Wat. Conserv. Dist. (1964) 228 Cal.App.2d 605, 612; 39 Cal.Rptr. 647; Brown v. Busch (1957) 152 Cal.App.2d 200, 204; 313 P.2d 19.] The presumption can be rebutted by contrary evidence [See, e.g., Wolfe v. Lipsv (1985) 163 Cal.App.3d 633,639; 209 Cal.Rptr. 801] and the courts will carefully scrutinize the proceedings to assure that the trustor’s rights were not violated. [See e.g., System Inv. Corp. v. Union Bank, supra, 21 Cal.App.3d 137, 153; Stirton v. Pastor (1960) 177 Cal.App.2d 232, 234; 2 Cal.Rptr. 135; Brown v. Busch, supra, 152 Cal.App.2d 200, 203-04; Pierson v. Fischer (1955) 131 Cal.App.2d 208, 214; 280 P.2d 491; Pv v. Pleitner, supra, 70 Cal.App.2d 576, 579.]

a.  Defective Notice of Default

A foreclosure may not be predicated on a notice of default which fails to comply strictly with legal requirements: “. . . a trustee’s sale based on a statutorily deficient notice of default is invalid.”   Miller v. Cote (1982) 127 Cal.App.3d 888, 894; see

System Inv. Corp. v. Union Bank, supra, 21 Cal.App.3d 137, 152-53; Lockwood v. Sheedy. supra, 157 Cal.App.2d 741, 742.] Defective service of the notice of default will also invalidate the sale procedure. [See discussion in Chapter II, supra, “Adequacy of Notice to Trustor.]

b.  Defective Notice of Sale

Some cases hold that a sale held without proper notice of 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; Standlev v. Knapp (1931) 113 Cal.App. 91, 100-02; 298 P. 109; Seccombe v. Roe (1913) 22 Cal.App. 139, 142-43; 133 P. 507; see also discussion in Chapter II B 4 supra, “Giving the Notice of Sale”.] However, if a trustee’s deed has been issued that states a conclusive presumption that all notice requirements have been satisfied, the sale is voidable and may be vacated if the trustor proves that the conclusive presumption does not apply and that notice was defective. The conclusive presumption may not apply if there are equitable grounds for relief such as fraud or if the purchaser is not a bona fide purchaser for value. [See Little v. CFS Service Corp. (1987) 188 Cal.App.3d 1354, 1359; 233 Cal.Rptr. 923;

Moreover, a serious notice defect that was directly prejudicial to the rights of parties who justifiably relied on notice procedures may independently justify setting aside a sale, especially if the trustee’s deed has not been issued and the highest bidder’s consideration has been returned. [See Little v. CFS Service Corp., supra. 188 Cal.App.3d 1354, 1360-61.]

c.  Improper Conduct of Sale

As discussed above, the trustee must strictly follow the statutes and the terms of the deed of trust in selling the property. [See discussion in Chapter II B, supra, “Nonjudicial Foreclosure”.] For example, the Court of Appeal has declared that:

The power of sale under a deed of trust will be strictly construed, and in its execution the trustee must act in good faith and strictly follow the requirements of the deed with respect to the manner of sale. The sale will be scrutinized by courts with great care and will not be sustained unless conducted with all fairness, regularity and scrupulous integrity …. Pierson v. Fischer, supra, 131 Cal.App.2d 208, 214.

Postponements

One of the major problems occurring at sales involves postponements: the trustee may fail to postpone a sale when the trustor needs a postponement or the trustee may unnecessarily postpone the sale and thereby discourage the participation of bidders. Current law expressly gives the trustee discretion to postpone the sale upon the written request of the trustor for the purpose of obtaining cash sufficient to satisfy the obligation or bid at the sale. [Civ. Code § 2924g(c) (1). ] There are no limitations on the number of times the trustee may postpone the sale to enable the trustor to obtain cash. The trustor is entitled to one such requested postponement, and any postponement for this reason cannot exceed one business day. (Id.) Failure to grant this postponement will invalidate the sale. [See discussion in Chapter II B 7, supra, “Conduct of the Foreclosure Sale”.] However, the trustee is under no general obligation to postpone the sale to enable the trustor to obtain funds, particularly when the trustor receives the notices of default and sale and has months to raise the money. [See Oiler v. Sonoma County Land Title Co. (1955) 137 Cal.App.2d 633, 634-35; 290 P.2d 880.] In addition, the trustee’s duty to exercise its discretion to favor the trustor is tempered by the trustee’s duty to the beneficiary; thus, for example, the trustee may be more obliged to postpone the sale at the trustor’s request if only the beneficiary appears at the sale

to bid than if other bidders appear who are qualified to bid enough to satisfy the unpaid debt.

The foreclosure sale may also have to be postponed if there is an agreement between the beneficiary and the trustor for a postponement. An agreement to postpone a trustee’s sale is deemed an alteration of the terms of the deed of trust and is enforceable only if it assumes the form of a written agreement or an executed oral agreement. [See Civ. Code § 1698; Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal.App.3d 112, 121; 92 Cal.Rptr. 851; Stafford v. Clinard (1948) 87 Cal.App.2d 480, 481; 197 P.2d 84.] Thus, a gratuitous oral promise generally is insufficient to support an agreement to continue the sale; however, if the oral agreement is predicated on a promissory estoppel or if the trustor fully performs the trustor’s consideration for the oral agreement, the trustor may enforce the beneficiary’s oral promise to postpone. Raedeke v. Gilbraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665; 111 Cal.Rptr. 693.] In Raedeke, the trustor could obtain a responsible purchaser for the property, and the beneficiary agreed. The trustor obtained the purchaser, but the beneficiary foreclosed. The Supreme Court held that the trustor fully performed its promise — to procure a buyer — which was good consideration for the agreement to postpone and that the beneficiary’s breach entitled the trustor to damages for the wrongful foreclosure.

Although the failure to postpone may be a problem, the trustee’s improper granting of postponements is generally a far greater problem. Notice of a postponement must be given “by public declaration” at the time and place “last appointed for sale,” and no other notice need be supplied. [Civ. Code § 2924g(d).] Therefore, any prospective bidder will have to attend each appointed time for sale to discover whether the sale will occur or be postponed. As a result, prospective bidders will be discouraged from participating in a sale involving numerous postponements, and there will be less chance that an active auction will occur which will generate surplus funds to which the trustor may be entitled. [Cf. Block v. Tobin (1975) 45 Cal.App.3d 214; 119 Cal.Rptr. 288.]

The abuse of the postponement procedure prompted the Legislature to curb the trustee’s ability to make discretionary postponements. The trustee may make only three postponements at its discretion or at the beneficiary’s direction without re­commencing the entire notice procedure prescribed in Civ. Code § 2924f. [Civ. Code § 2924g(c)(1).] In addition, the trustee must publicly announce the reason for every postponement and must maintain records of each postponement and the reason for it. [Civ. Code § 2924g(d).]

A lawyer representing a client whose home has been sold at a foreclosure sale involving discretionary or beneficiary directed

postponements should, at the first opportunity for discovery, obtain production of the foreclosure file and any documents relating to it, and any documents relating to the postponement and reasons for it, including the statutorily mandated record concerning the postponement, as well as any notes, telephone messages, logs, or calendar entries relating to the postponement. In addition, the lawyer should quickly discover who attended the sale to determine whether the reason for the postponement was given “by public declaration” and, if so, whether the same reason is indicated for the postponement in the record maintained by the trustee.

The failure to postpone properly should invalidate the sale. Certainly, a sale held without any public announcement of the date, time, and place to which the sale has been postponed is invalid. [See Holland v. Pendelton Mortgage Co. (1943) 61 Cal.App.2d 570, 573-74; 143 P.2d 493.] The cases upholding sales made on postponed dates are based on the trustee’s compliance with the notice of postponement requirements prescribed by statute or contained in the trust deed. [See e.g., Cobb v. California Bank (1946) 6 Cal.2d 389, 390; 57 P.2d 924; Craig v. Buckley (1933) 218 Cal. 78, 80-81; 21 P.2d 430; Alameda County Home Inv. Co. v. Whitaker (1933) 217 Cal. 231, 234-35; 18 P.2d 662.] Since the trustee sale must be conducted in strict compliance with the notice requirements, a notice of postponement which does not contain a statement of the

reason for the postponement is defective.  Any sale held pursuant to the defective notice may be held to be improper.

Moreover, the records relating to the postponement may reveal that the postponement was unnecessary or may lead to evidence establishing that the postponement was made in bad faith. As discussed above, fraud, unfairness, and irregularity in the conduct of the sale should render the sale invalid.

e.  Bidder Collusion

One of the more pernicious aspects of foreclosure sales — and one of the most difficult to prove — is the existence of agreements among bidders to suppress bidding. The arrangement may consist of one bidder paying the others not to bid. The bidders may also agree that one of the group will buy the property without competition and that then the group will hold a secret auction among themselves to determine who will be the ultimate purchaser. The difference between the purchase price at the public auction and the ultimate purchase price determined at the secret auction will be divided among the colluding parties; thus, junior lienholders and the trustor are deprived of surplus funds which would have resulted from open and competitive bidding.

Such bid rigging is clearly illegal.  Offering or accepting

consideration not to bid, or fixing or restraining bidding at a foreclosure sale, is specifically declared unlawful and constitutes a crime. [Civ. Code § 2924h(f).] Agreements between bidders to fix or restrain bidding, to make sham bids, or to become a party to a fake sale have been routinely denounced as illegal, void, unenforceable and a fraud on the public. [See Russell v. Soldinaer (1976) 59 Cal.App.3d 633, 641-45; 131 Cal.Rptr. 145; Roberts v. Salot (1958) 166 Cal.App.2d 294, 298-99; 333 P.2d 232; see also Haley v. Bloomouist (1928) 204 Cal. 253, 256-67; 268 P. 365; Packard v. Bird (1870) 40 Cal. 378, 383; Jenkins v. Frink (1866) 30 Cal. 586, 591-92; 89 Am.Dec. 134.] The problem of determining market price by secret arrangement rather than by open bidding was most clearly addressed in Crawford v. Maddux (1893) 100 Cal. 222; 34 P. 651. In Crawford, a bidder at an execution sale was willing to purchase the property at several times the amount of the judgment. The bidder agreed with another that the other person should refrain from bidding, that the bidder would buy the property for the minimum amount, and that the bidder would pay the other person the difference between the purchase price and the maximum price the bidder would have been willing to pay if the sale were open and competitive. The Supreme Court had no difficulty in concluding that the arrangement “was against public policy, and wholly void.”  (Id. at 225.)

The chilling of bidding at a trustee’s sale is a fraud on the

trustor, and the trustor may have the sale vacated. [Bank__of America Nat¹!. Trust & Sav. Ass’n. v. Reidv (1940) 15 Cal.2d 243, 248; 101 P.2d 77; Roberts v. Salot, supra, 166 Cal.App.2d 294, 299; see Bertschman v. Covell (1928) 205 Cal. 707, 710; 272 P. 571 (dictum).] The fraudulent bidder not only will have to return the property but also will be liable for any encumbrances placed on the property. See Roberts v. Salot, supra, 166 Cal.App.3d 294, 301.] The trustor’s damage is not measured by the difference between the artificially low public sale price and the secret price paid by one of the bidders to his co-conspirators. The appropriate measure of damages should be the fair market value of the property at the time of the sale less the value of the liens against the property. [See Munaer v. Moore (1970) 11 Cal.App.3d 1, 11; 89 Cal.Rptr. 323.] The bidding restraint is illegal regardless of whether small or large amounts are involved; the bidders cannot determine the trustor’s damage by their own private manipulations. [See Crawford v. Maddux, supra, 100 Cal. 222, 225.]

The bidding conspiracy may also be actionable under the Cartwright Act which denounces combinations of two or more people to restrain trade or commerce. [See Bus. & Prof. Code §§ 16720(a), 16726.] Violations of the Cartwright Act contain substantial sanctions: “Any person who is injured in his business or property by reason of . . .” an unlawful restraint of trade may recover treble damages and reasonable attorney’s fees and costs.  [Bus. &

Prof. Code § 16750(a).] The Cartwright Act is patterned after the Sherman Act, and federal cases interpreting federal law apply to the construction of state law. [E.g., Partee v. San Diego Chargers Football Co. (1983) 34 Cal.3d 378, 392; 466 U.S. 904, cert, den.; 194 Cal.Rptr. 367; Mailand v. Burckle (1978) 20 Cal.3d 367, 376; 143 Cal.Rptr. 1; Marin County Bd. of Realtors v. Palsson (1976) 16 Cal.3d 920, 925; 130 Cal.Rptr. 1.]

Proving a Cartwright violation may be a difficult task. The threshold question is whether there was an agreement to restrain bidding. The answer to this question, of course, is crucial not only to the antitrust claim but also to attacking the sale on common law grounds. In the absence of direct evidence, circumstantial evidence may point to a conspiracy. For example, A, B, and C are professional and experienced bidders at foreclosure sales. Each has had substantial dealings with the others. A, B, and C attend the foreclosure sale and each qualifies to bid more than $10,000 over the minimum opening bid placed by the beneficiary. A buys the property for $1 over the minimum bid. Eight days later, A deeds the property to B for $6,000 more than A’s purchase price. Similar transactions have occurred involving the three bidders, and each has become the ultimate purchaser at different times. Such pattern of conduct evinces a bidding agreement. In order to gather other evidence needed to establish an agreement, a lawyer representing a homeowner should obtain,

through discovery from the trustee, all records revealing who attended the sale, who qualified to bid and for how much, and to whom the trustee’s deed was issued.

If a conspiracy can be shown, the Cartwright plaintiff will have to address the legal issue of whether the bidding is trade or commerce. This should not be difficult. The Cartwright Act has been expansively interpreted: “. . .it forbids combinations of the kind described with respect to every type of business.” Soeeale v. Board of Fire Underwriters (1946) 29 Cal.2d 34, 43; 172 P.2d 867; see Marin County Bd. of Realtors, Inc. v. Palsson, supra, 16 Cal.3d 920, 925-28.] The Speeale court also recognized that the Cartwright Act reflects this state’s common law proscriptions against competitive restraints and price fixing. [See 29 Cal.2d at 44.] Virtually any business carried on for gain is embraced in the antitrust laws [see United States v. National Assn. of Real Estate Bds. (1950) 339 U.S. 485, 490-92; 70 S.Ct. 711], and the antitrust laws, in reaching all commerce, touch transactions which may be noncommercial in character and may involve illegal or sporadic activity. [See United States v. South-Eastern Underwriters Assn. (1944) 322 U.S. 533, 549-50; 64 S.Ct. 1162.]

Agreements restraining bidding are clearly the type of combinations prohibited under the antitrust laws. Price fixing agreements are per se unlawful under the Cartwright Act.  [E.g.,

Mailand v. Burckle (1978) 20 Cal.3d 367, 376-77; 143 Cal.Rptr. 1; Kollincr v. Dow Jones & Co. (1982) 137 Cal.App.3d 709, 721; 189 Cal.Rptr. 797; Rosack v. Volvo of America Corp. (1982) 131 Cal.App.3d 741, 751; 182 Cal.Rptr. 800, cert, den. (1983) 460 U.S. 1012.] An agreement to submit collusive, rigged bids is likewise a per se violation. [See e.g., United States v. Brighton Bldq. & Maintenance Co. (7th Cir. 1979) 598 F.2d 1101, 1106, cert. den. 444 U.S. 840; United States v. Champion International Corp. (9th Cir. 1977) 557 F.2d 1270, cert, den. 434 U.S. 938; United States v. Flom (5th Cir. 1977) 558 F.2d 1179, 1183.]

After establishing bidder conspiracy and a violation of the Cartwright Act, the complainant property owner then will have to show injury emanating from the violation to establish entitlement to the treble damage and the attorney’s fee and cost remedies. [Bus. & Prof. Code § 16750(a); see A. B.C. Distrib.’ Co. v. Distillers Distrib. Corp. (1957) 154 Cal.App.2d 175, 191; 316 P.2d 71.] The property owner need not show a competitive injury, for the protections of the Cartwright Act extend to consumers and all others who are victimized by the violation of law. [See Saxer v. Philip Morris, Inc. (1975) 54 Cal.App.3d 7, 26; 126 Cal.Rptr. 327.] The nature and extent of the injury, however, may be difficult to prove because of the difficulty in determining the price at which the property would have sold in the absence of a conspiracy to fix the price.

For example, suppose property worth $100,000 is sold to satisfy the $19,990 unpaid balance of a note secured by a first trust deed. Only two bidders attend the sale, and they conspire. One of the bidders purchases the property for $20,000 and pays the other $10,000. Has the trustor been injured by $10,000, $80,000, or some other amount? Crawford v. Maddux, supra, 100 Cal. 222, 225; 34 P. 651 indicates that the consideration paid for the suppression of bidding is not the common law measure of damage for the illegal bidding restraint; however, that amount should logically be the minimum amount of the injury under the Cartwright Act. The purchaser would have paid at least that additional amount to acquire the property at the public sale in the absence of collusion since the purchaser in fact paid that amount as part of the collusive sale.

Normally, the damages in a price fixing case consist of the full amount of the overcharge — i.e., the difference between the artificially high price and the price that would have otherwise prevailed. [See e.g., National Constructors Assn. v. National Electrical Contractors (D. Md. 1980) 498 F.Supp. 510, 538, mod. on other grounds (4th Cir. 1982) 678 F.2d 492.] Similarly, if prices are set artificially low, the damages will be the difference between the artificially low price and the price which would have been charged to fully maximize profits. [See Knutson v. Daily Review, Inc. (9th Cir. 1976) 548 F.2d 795, 812, cert. den. (1977)

433 U.S. 910.] Although no cases are specifically on point, an argument should be made that the antitrust injury suffered by a property owner whose home was sold through collusive bidding should be the difference between the artificially low price and the reasonable or fair value of the property at foreclosure. This view is buttressed by the holding in Munaer v. Moore, supra, 11 Cal.App.3d 1, 11 that the trustee’s or beneficiary’s liability for an improper sale should be the fair market value of the property in excess of encumbrances.

However, it could be argued that even in the absence of collusive bidding, “. . . it is common knowledge that at forced sales such as a trustee’s sale the full potential value of the property being sold is rarely realized . . . .” strutt v. Ontario Sav. & Loan Assn. (1972) 28 Cal.App.3d 866, 876; 105 Cal.Rptr. 395.] Complete fair market value cannot be realistically expected in the context of a foreclosure sale. Consequently, it would be unlikely that the property’s full value would be realized at a foreclosure sale even without the bidding conspiracy. On the other hand, some courts consider foreclosure sales prices at less than 70 percent of fair market value to be unfair, at least for bankruptcy purposes. [See e.g., Durrett v. Washington Nat. Ins. Co. (5th Cir. 1980) 621 F.2d 201; the rejection of the Durrett fair value rationale in In re Madrid (Bank.App.Pan. 9th Cir. 1982) 21 B.R. 424, aff’d on other grounds (9th Cir. 1984) 725 F.2d 1197 was

predicated on a noncollusive, regularly conducted sale.] Accordingly, as an alternative to the fair market value measure of damage, the measure of damages could be deemed the difference between the collusive bid price and 70 percent of the fair market value of the property less encumbrances.

The collusive bidder should not be permitted to complain that a more precise measure of damage based on the ultimate sale price in an open and competitive public auction was not used, because the bidding conspiracy itself prevented a more precise evaluation of the measure of damages. As the United States Supreme Court observed,

Where the tort itself is of such a nature as to preclude the ascertainment of the amount of damages with certainty, it would be a perversion of fundamental principles of justice to deny all relief to the injured person, and thereby relieve the wrongdoer from making any amend for his acts. In such case, while the damages may not be determined by mere speculation or guess, it will be enough if the evidence shows the extent of the damages as a matter of just and reasonable inference, although the result be only approximate. The wrongdoer is not entitled to complain that they cannot be measured with the exactness and precision that would be possible if the

case, which he alone is responsible for making, were otherwise.

There is no sound reason in such a case, as there may be, to some extent, in actions upon contract, for throwing any part of the loss upon the injured party, which the jury believe from the evidence he has sustained; though the precise amount cannot be ascertained by a fixed rule, but must be matter of opinion and probable estimate. And the adoption of any arbitrary rule in such a case, which will relieve the wrong-doer from any part of the damages, and throw the loss upon the injured party, would be little less than legalized robbery.

Whatever of uncertainty there may be in this mode of estimating damages, is an uncertainty caused by the defendant’s own wrongful act; and justice and sound public policy alike require that he should bear the risk of the uncertainty thus produced. . . . [citation omitted]. Story Parchment Co. v. Patterson Paper Co. (1931) 282 U.S. 555, 563-65; 51 S.Ct. 248.

See Biaelow v. RKO Radio Pictures, Inc. (1946) 327 U.S. 251, 264-66; 66 S.Ct. 574.]

Trustee’s Unfair Conduct

As previously mentioned, the trustee must conduct the sale “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 reasonable price.” Baron v. Colonial Mortgage Service Co. (1980) 111 Cal.App.3d 316, 323; 168 Cal.Rptr. 450.] The trustee’s obligations in conducting a sale and its duty to the trustor are discussed in detail in Chapter II B 7, supra, “Conduct of the Foreclosure Sale”.] Obviously, a sale tainted with the trustee’s fraud or improper conduct is subject to attack, and the trustee may be liable to the trustor as well as to innocent bidders. (See Block v. Tobin, supra, 45 Cal.App.3d 214.]

Inadequacy of Price

The cases are legion that inadequacy of price, even gross inadequacy of price, will not justify a repudiation of a trustee’s sale in the absence of fraud, unfairness, or irregularity of some type. [See e.g., Scott v. Security Title Inc. & Guar. Co., supra, 9 Cal.2d 606, 611; Prudential Ins. Co. of America v. Sly (1937) 7 Cal.2d 728, 731; 62 P.2d 740, cert. den. 301 U.S. 690; Encelbertson v. Loan & Building Assn. (1936) 6 Cal.2d 477, 479; 58 P.2d 647; Central Nat. Bank of Oakland v. Bell (1927) 5 Cal.2d 324, 328; 54

P.2d 1107; Stevens v. Plumas Eureka Annex Min. Co., supra. 2 Cal.2d 493, 496; 41 P.2d 927; Baldwin v. Brown (1924) 193 Cal. 345; 352-53; 224 P. 462; Sargent v. Shumaker. supra, 193 Cal. 122, 129; 223 P. 464; Winbialer v. Sherman (1917) 175 Cal. 270, 275; 165 P. 943; Crummer v. Whitehead (1964) 230 Cal.App.2d 264, 266; 40 Cal.Rptr. 826; Lancaster Security Inv. Corp. v. Kessler (1958) 159 Cal.App.2d 649, 655; 324 P.2d 634.]

The fraud, unfairness, or irregularity which must accompany inadequate price in order for the sale to be set aside, must be such “as accounts for and brings about the inadequacy of price.” Stevens v. Plumas Eureka Annex Min. Co., supra, 2 Cal.2d 493, 496.] Thus, the inadequacy of price must be caused by or related to the irregularity or to some misconduct by the trustee. [See e.g., Sargent v. Shumaker. supra, 193 Cal. 122, 131-33; Crofoot v. Tarman (1957) 147 Cal.App.2d 443, 446-47; 305 P.2d 56; Bank of America Nat’l. Trust & Sav. Ass’n. v. Century Land & Wat. Co. (1937) 19 Cal.App.2d 194, 196; 65 P.2d 109.] In Crofoot, for example, the trustee had done no wrong, and the court rejected the trustor’s argument that misinformation supplied by someone other than the trustee when coupled with inadequate price afforded grounds for relief.

The quantum of fraud, unfairness, or irregularity needed to avoid a foreclosure sale may be slight,  especially if the

inadequacy of price is great. [See e.g., Sargent v. Shumaker, supra, 193 Cal. 122, 129; Winbialer v. Sherman, supra, 175 Cal. 270, 275; Bank of Seoul & Trust Co. v. Marcione (1988) 198 Cal.App.3d 113, 119; Whitman v. Transtate Title Co. (1988) 165 Cal.App.3d 312, 323.] Inadequacy of price is indicative of fraud and will support a trial court’s finding of fraud if one is made. [See Scott v. Security Title Inc. & Guar. Co., supra, 9 Cal.2d 606, 612.]

If the trustor’s property is sold for an inadequate price, the trustor’s loss for breaching the obligation and trust deed far exceeds the beneficiary’s damage from the breach. Indeed, the beneficiary reaps a windfall if the beneficiary purchases the property at the foreclosure sale for an inadequate price. Arguably, the clause in the trust deed which permits the sale at such a dramatically low price could be construed to be a provision authorizing an impermissible forfeiture or penalty or providing for what is in effect punitive damages for the breach. The Supreme Court has apparently rejected this viewpoint and has stated that the trustor has ample opportunity after the recordation of the notice of default to avoid the potentially harsh consequences of foreclosure. See Smith v. Allen, supra, 68 Cal.2d 93.] In Smith, the Supreme Court observed that if:

. the borrower has a substantial equity in the

property, the above mentioned statutory provisions (Civ. Code §§ 2924 et sea.) afford him an opportunity to refinance his monetary obligations or to sell his equity to a third party.  (Id. at 96.)

The court concluded that the Legislature intended that a proper “foreclosure sale should constitute a final adjudication of the rights of the borrower and the lender.”  (Id.)

The recent legislative denunciation of unconscionability may point to a different result in cases involving significantly inadequate prices. Indeed, the new statutes regarding unconscionability may lead California to recognize the well established equity rule that extreme inadequacy of price in itself justifies the overturning of a foreclosure sale. [See Washburn, “The Judicial and Legislative Response to Price Inadequacy in Mortgage Foreclosure Sales,” 53 So.Cal.L.Rev. 843, 862-69.] The new statutes and accompanying legislative findings may also undermine the rationale of cases like Smith holding that the nonjudicial foreclosure process does not produce forfeitures or other impermissible, inequitable results.

The insertion of an unconscionable provision into a contract is deemed unfair or deceptive. [Civ. Code § 1770(s).] If a court finds  that  a  contract or any clause of  the  contract  is

unconscionable, the court may refuse to enforce the contract or the unconscionable provision or may limit the unconscionable provision to avert any unconscionable result. [Civ. Code § 1670.5(a).] It is unlawful, and perhaps criminal, for any person to participate in a transaction involving a residence already in foreclosure whereby that person takes unconscionable advantage of the homeowner. [Civ. Code § 1695.13.] Any such transaction resulting in unconscionable advantage is subject to rescission. [Civ. Code § 1695.14.]

Moreover, the express policy of this state is “to preserve and guard the precious asset of home equity, and the social as well as economic value of homeownership.” [Civ. Code § 1695(b).] This state has adopted the national housing goal — “the provision of a decent and a suitable living environment for every American family. …” [Health & Safety Code § 50002.] The Legislature has recognized the “vital statewide importance” of housing, in part, “as an essential motivating force in helping people achieve self-fulfillment in a free and democratic society.” [Health & Safety Code § 50001(a).] Accordingly, “It is the policy of the State of California to preserve home ownership.” [Stats. 1979, c. 655, § 1(g), p. 2016.] The Legislature was mindful, however, that the foreclosure process does not provide complete protection to homeowners whose homes are in jeopardy:

Many homeowners in this state are unaware of the legal rights and options available to them once foreclosure proceedings have been initiated against their homes. The present foreclosure process fails to provide sufficient meaningful information to homeowners to enable them to avoid foreclosure or save the equity in their homes. (Stats. 1979, c. 655, § 1(c), p. 2016.)

In light of the legislative concern about continued home ownership, the preservation of home equity, and the operation of unconscionable contracts, the courts should not tolerate the use of the power of sale to deprive a homeowner of substantial equity. The loss of equity may not only be financially disastrous but may prevent the homeowner from acquiring another home immediately after the foreclosure or likely ever thereafter. Sales made at unconscionably low prices should be voided under the enhanced power of the court to avoid unconscionable results in the enforcement of contracts.

Traditionally, courts in the United States adopted Lord Eldon’s rule that “a sale will not be set aside for inadequacy of price, unless the inadequacy be so great as to shock the conscience, or unless there be additional circumstances against its unfairness . . . .* Graffam v. Burgess (1886) 117 U.S. 180, 191-92.] This rule was adopted in California with respect to execution

sales, and, in Odell v. Cox (1907) 151 Cal. 70, 74; 90 P. 194, the California Supreme Court recognized that:

. . . according to very respectable authority, inadequacy of price may be so gross as in itself to furnish satisfactory evidence of fraud or misconduct on the part of the officer or purchaser, and justify vacating the sale.

See Young v. Barker (1948) 83 Cal.App.2d 654, 659; 189 P.2d 521.]

The California cases dealing with inadequacy of price in trustee’s sales are based on execution sale cases such as Odell, supra♦ [See e.g., Winbialer v. Sherman, supra, 175 Cal. 270, 275.] California courts have not expressly adopted the first element of Lord Eldon’s rule—that inadequacy of price so great as to shock the conscience will invalidate a sale—in examining trustee’s sales; the courts have expressly accepted only the second element--that inadequate price, when coupled with unfairness which produces the inadequacy, will render a sale voidable. The cases have neither expressly rejected the first element of Lord Eldon’s rule nor explained the element’s omission from the general formulation of the rule on inadequacy of sale’s price. Federal common law, however, recognizes that a trustee’s sale may be invalidated if the sale price is so low that it shocks the conscience.  [See United

States v. Wells (5th Cir. 1968) 403 F.2d 596, 598; United States v. MacKenzie (D. Nev. 1971) 322 F.Supp. 1058, 1059, aff’d. (9th Cir. 1973) 474 F.2d 1008.] Since California now statutorily acknowledges the equitable power of the court to safeguard parties from the oppression of unconscionable contractual terms, California courts should embrace the rule prohibiting sales based on shockingly insignificant sales prices.

Enjoining the Sale

1.  Propriety of Injunctive Relief

An action to enjoin a foreclosure sale is a well recognized remedy to prevent an unwarranted foreclosure. [See 2 Ogden’s, Rev. Cal. Real Prop. Law 959.] An injunction may issue to prevent acts which: (a) cause great or irreparable injury; (b) violate the party’s rights and tend to render the judgment ineffectual; (c) create harm for which money damages are inadequate; (d) may lead to a multiplicity of actions; and (e) violate a trust. [Code of Civ. Proc. § 526; see Civ. Code §§ 3368, 3422.]

In determining whether to issue any preliminary injunction, the trial court must examine two interrelated factors:

The first is the likelihood that the plaintiff will

prevail on the merits at trial. The second is the interim harm that the plaintiff is likely to sustain if the injunction were denied as compared to the harm that the defendant is likely to suffer if the preliminary injunction were issued. IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69-70; 196 Cal.Rptr. 715.

[See e.g., Robbins v. Superior Court (1985) 38 Cal.3d 199, 206; 211 Cal.Rptr. 398; Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 527-28; 67 Cal.Rptr. 761; Baypoint Mortgage Corp. v. Crest Premium Real Estate etc. Trust, supra, 168 Cal.App.3d 818, 824.] Whether or not the trustor is likely to prevail on the merits is obviously a question of fact in each case. If the trustor is not likely to prevail, the injunction may be denied notwithstanding any irreparable harm which may attend the foreclosure:

In a practical sense it is appropriate to deny an injunction where there is no showing of reasonable probability of success, even though the foreclosure will create irreparable harm, because there is no justification in delaying that harm where, although irreparable, it is also inevitable. Jessen v. Keystone Sav. & Loan Assn. (1983) 142 Cal.App.3d 454, 459; 191 Cal.Rptr. 104.

Foreclosure is a “drastic sanction.” Bavpoint Mortgage Corp.

v. Crest Premium Real Estate etc. Trust, supra, 168 Cal.App.3d 818, 837.] Irreparable injury will almost always be involved in a home foreclosure, especially if the grounds for invalidating the foreclosure rest on the voidability rather than the voidness of the transaction. Since a bona fide purchaser may buy the property at a foreclosure sale free of many, if not all, of a particular trustor’s defenses to the sale, the court’s failure to enjoin an improper foreclosure may doom the trustor to the loss of the property. “The Status of Bona Fide Purchaser or Encumbrancer”.] Furthermore, courts presume in a foreclosure context that the property is unique, that its loss is irreparable, and that money damages are inadequate unless the property is being openly marketed and has no special value to the owner other than its market price. [See Jessen v. Keystone Sav. & Loan Assn.. 142 Cal.App.3d 454, 457-58; 191 Cal.Rptr. 104; Stockton v. Newman (1957) 148 Cal.App.2d 558, 564; 307 P.2d 56.] In addition, the trustor will suffer irreparable injury because the trustor generally has no right of redemption after a foreclosure sale.  [See discussion in Chapter II B 10a, supra, “Redemption”.]

A foreclosure will often render ineffectual any ultimate relief that may be awarded. If the trustor, for example, is entitled to damages but not rescission in a particular transaction, the trustor would be allowed to retain the property and would be compensated in damages.  But, such a judgment would be rendered

ineffectual through the loss of the property at foreclosure. [See Stockton v. Newman, supra, 148 Cal.App.2d 558, 563-64.] Similarly, a foreclosure would render moot the trustor’s attempt to cancel a trust deed if the property were to be sold to a bona fide purchaser. Thus, an injunction is necessary to preserve the status quo. [See Weinqand v. Atlantic Sav. & Loan Assn. (1970) 1 Cal.3d 806, 819; 83 Cal.Rptr. 650.]

Courts have held that injunctions are appropriate to restrain foreclosure sales in various contexts. The following is an illustrative but not exclusive list: (a) no default [see Freeze v. Salot (1954) 122 Cal.App.2d 561, 564; 266 P.2d 140; cf. Salot v. Wershow (1958) 157 Cal.App.2d 352, 355; 320 P.2d 926]; (b) disputes about the amount owed [see e.g., Paramount Motors Corp. v. Title Guar. & Trust Co. (9th Cir. 1926) 15 F.2d 298, 299; More v. Calkins, supra, 85 Cal. 177, 188]; (c) disputes about the amount owed because of the trustor’s offsetting claims [see Hauger v. Gates (1954) 42 Cal.2d 752, 756]; (d) fraud [see e.g., Stockton v. Newman, supra, 148 Cal.App.2d 558, 563-64; Daniels v. Williams (1954) 125 Cal.App.2d 310, 312-13; 270 P.2d 556; see also U.S. Hertz, Inc. v. Niobrara Farms (1974) 41 Cal.App.3d 68, 79; 116 Cal.Rptr. 44]; (e) no consideration [see Ybarra v. Solarz (1942) 56 Cal.App.2d 342; 132 P.2d 880 (no consideration for novation creating balloon payment)]; (f) improper notice of default [see Lockwood v. Sheedv, supra, 157 Cal.App.2d 741, 742; see also Strike

v. Trans-West Discount Corp. (1979) 92 Cal.App.3d 735; 155 Cal.Rptr. 132 (court vacates notice of default and permits new notice, but disallows usurious interest), app. dis. 444 U.S. 948; System Inv. Corp. v. Union Bank, supra, 21 Cal.App.3d 137, 152-53; (g) trustee’s breach of duty in conducting the sale [see Baron v. Colonial Mortgage Service Co., supra, 111 Cal.App.3d 316, 324]; (h) trustor’s minor delays in making installment payments [see Bavpoint Mortgage Corp. v. Crest Premium Real Estate etc. Trust, supra, 168 Cal.App.3d 818, 827.]

Unless the obligation or trust deed is fundamentally infirm so that no foreclosure would be proper, most preliminary injunctive relief will only temporarily halt the foreclosure until corrective measures are taken. For example, if the amount is disputed, the foreclosure may be enjoined until the court determines the amount properly owed. [See Producers Holding Co. v. Hill, supra, 201 Cal. 204, 209; More v. Calkins, supra, 85 Cal. 177, 188.] If the notice of default is defective, the court may enjoin the sale on that particular notice of default without prejudice to the beneficiary’s recording a proper notice of default. [See Lockwood v. Sheedv, supra, 157 Cal.App.2d 741, 742.] Alternatively, the court could vacate a notice of default containing an improper demand (e.g., usurious interest) without issuing a preliminary injunction and permit the beneficiary to file a proper notice. [See Strike v. Trans-West Discount Corp., supra, 92 Cal.App.3d 735; 155 Cal.Rptr.

132.]

2.  Scope of Injunctive Relief

The injunctive relief requested should be for an order restraining the trustee and the beneficiary. If only the trustee is enjoined, the beneficiary might be able to circumvent the order by substituting a new trustee. [See Civ. Code § 2934a.] A trustee can employ an agent or subagent to perform the trustee’s tasks under a trust deed. [See Civ. Code § 2924d(d); Orloff v. Pece (1933) 134 Cal.App. 434, 436; 25 P.2d 484.] Therefore, the injunction should cover all agents, subagents, employees, representatives and all other persons, corporations, or other entities which act by, on behalf of, or in concert with the trustee and beneficiary.

The injunction should apply not only to selling, attempting to sell, or causing the sale of the property, but also should enjoin any act authorized or permitted by Civil Code §§ 2924, 2924b, 2924f, 2924g, and 2934a in connection with or incident to the sale. Some of the acts authorized or permitted by these sections may not be construed to be covered by a general anti-sale injunction.

For example, in American Trust Co. v. De Albergria (1932) 123 Cal.App. 76, 78; 10 P.2d 1016, the trustee postponed a sale after

a temporary restraining order issued and held the sale on the postponed date after the order was dissolved. The court held that the order restraining the continuing of the sale did not preclude postponements. Frequently, if a temporary restraining order prevents a sale, the trustee will postpone the sale so that it will be held on the same day as and immediately after the hearing on the preliminary injunction. If the preliminary injunction is denied, the sale will take place post haste. If, however, the trustee is prevented from postponing the sale, a new notice of sale will have to be given, and the trustor will have the opportunity to use the new notice of sale period to raise money or consider other appropriate remedies, including bankruptcy. If the sale is postponed in violation of a restraining order, the sale will be voidable. See Powell v. Bank of Lemoore (1899) 125 Cal. 468, 472; 58 P. 83; Baalev v. Ward (1869) 37 Cal. 121 139; 10 P.2d 1016; American Trust Co. v. De Alberqria, supra, 123 Cal.App. 76, 78.]

The injunction should also restrain the beneficiary from transferring the note and trust deed without informing the transferee of the trustor’s claims and defenses. Otherwise, the transferee may be a holder in due course and take the obligation and security free of the trustor’s rights. [See e.g., Szczotka v. Idelson (1964) 228 Cal.App.2d 399; 39 Cal.Rptr. 466;

National Banks

The statute precluding preliminary injunctions against national banks [12 U.S.C. § 91] does not prevent a state court from issuing a preliminary injunction against a national bank to restrain a nonjudicial foreclosure pending the adjudication of the trustor’s rights. [See Third National Bank In Nashville v. Impac Ltd., Inc. (1977) 432 U.S. 312; 97 S.Ct. 2307.] Kemple v. Security-First Nat. Bank (1967) 249 Cal.App.2d 719; 57 Cal.Rptr. 838 and First Nat. Bank of Oakland v. Superior Court (1966) 240 Cal.App.2d 109; 49 Cal.Rptr. 358 are contra but no longer good authority.]

Tender

The general rule is that the trustor cannot obtain an injunction against a foreclosure without tendering the amount owed. see Sipe v. McKenna (1948) 88 Cal.App.2d 1001, 1006; 200 P.2d 61.] Similarly, the court may dissolve an injunction it issued if the trustor does not tender what is owed. [See Meetz v. Mohr, supra, 141 Cal. 667, 672-73.] If the injunction action is commenced during the reinstatement period, the tender would have to be the amount needed to cure the default. [See Civ. Code § 2924c; Bisno v. Sax (1959) 175 Cal.App.2d 714, 724; 346 P.2d 814.]

A tender is an offer of full performance. An offer of partial performance has no effect. [Civ. Code § 1486; see e.g., Gaffrev v. Downey Savings & Loan Assn. (1988) 200 Cal.App.3d 1154, 1165; 246 Cal.Rptr. 421.] The tender cannot be conditioned on any act of the beneficiary which the beneficiary is not required to perform. [Civ. Code § 1494; see e.g., Karlsen v. American Sav. & Loan Assn.. supra, 15 Cal.App.3d 112, 118.]

A tender is effective only if the trustor has the present ability to fulfill the tender. [See Civ. Code § 1495; see e.g., Napue v. Gor-Mev West, Inc. (1985) 175 Cal.App.3d 608, 621; Karlsen v. American Sav. & Loan Assn., supra, 15 Cal.App.3d 112, 118.] If the trustor’s continued ability to perform is at issue during or at the conclusion of an action, the court may consider the trustor’s ability at that time. [See Napue v. Gor-Mev West, Inc., supra, 175 Cal.App.3d 608, 621-22.] The trustor’s offer to sell the property to pay the debt is a sufficient tender of full payment if the property is worth considerably more than the debt. [See In re Worcester (9th Cir. 1987) 811 F.2d 1224, 1231.] On the other hand, the trustor’s mere hope that a lender would release property from the lien, that the property would be sold, and that any additional amount owed would be refinanced is an insufficient tender. [See Karlsen v. American Sav. & Loan Assn., supra, 15 Cal.App.3d 112, 118.)

A proper tender “stops the running of interest on the obligation, and has the same effect upon all its incidents as performance thereof.” [Civ. Code § 1504.] A valid tender of a payment, even if refused, precludes a foreclosure based on the failure to make that payment unless the entire balance of the obligation has been accelerated. [See Bisno v. Sax, supra, 175 Cal.App.2d 714, 724.]

If the entire amount of the obligation is tendered, the lien created by the deed of trust is discharged even if the tender is refused: the creditor maintains the right to collect the amount owed but loses its security interest. [See Civ. Code §§ 1504, 2905; Sondel v. Arnold (1934) 2 Cal.2d 87, 89; 39 P.2d 793; Lichtv v. Whitney, supra, 80 Cal.App.2d 696, 701-02; Wagner v. Shoemaker (1938) 29 Cal.App.2d 654, 657; 85 P.2d 229; Wiemever v. Southern T. & C. Bank (1930) 107 Cal.App. 165, 173-74; 290 P. 70.] As a result of the discharge of the trust deed, the trustee has no power to proceed with a foreclosure. [See Winnett v. Roberts, supra, 179 Cal.App.3d 909, 922; Biusno v. Sax, supra, 175 Cal.App.2d 714, 724; Kleckner v. Bank of America (1950) 97 Cal.App.2d 30, 33; 217 P.2d 28.] Accordingly, any foreclosure sale that has been conducted is void and conveys no title. r Lichtv v. Whitney, supra, 80 Cal.App.2d 696, 702.]

There are, however, several notable exceptions to the rule

requiring tender. Tender is not required if the trustor seeks to rescind the obligation and trust deed on the ground of fraud because payment would be an affirmance of the debt. [See Stockton v. Newman, supra, 148 Cal.App.2d 558, 564.] No tender is required when nothing is owed such as, for example, when the trustor’s obligation is offset by the beneficiary’s obligation to the trustor. [See Hauqer v. Gates, supra, 42 Cal.2d 752, 753; see also In re Worchester. supra, 811 F.2d 1224, 1230 n.6.] Moreover, tender is not required when the amount owed is in dispute and the foreclosure should be stayed to permit an accounting or adjudication of the amount of the debt. [See More v. Calkins, supra, 85 Cal. 177, 188-90; see also Stockton v. Newman, supra, 148 Cal.App.2d 558.] The Supreme Court has also recognized that a tender is not necessary when the trustor is willing to make a tender but is frustrated in doing so by the beneficiary’s bad faith conduct.  [See McCue v. Bradbury (1906) 149 Cal. 108; 84 P. 993.]

5.  Bank Deposit

A tender does not discharge the ultimate obligation to make the payment tendered. Tender is an offer of performance, not performance itself.  [See e.g., Walker v. Houston (1932) 215 Cal.742, 745; 12 P. 2d 952.] However, a tender of full payment accompanied by a deposit of that amount in the name of the creditor with a bank or savings and loan association and notice to the creditor extinguishes the payment obligation. [Id* at 746; Civ. Code § 1500.] The deposit must be unconditional. [See e.g., Gaff rev v. Downey Sav. & Loan Assn., supra, 200 Cal.App.3d 1154, 1167.]

A bank deposit does not have to be made when tender is required to prevent a foreclosure or vacate a sale. For example, the tender of the amount owed to reinstate an obligation is sufficient to cure the default and reinstate the obligation; a bank deposit is not necessary, rMagnus v. Morrison (1949) 93 Cal.App.2d 1, 3; 208 P.2d 407.]

Bond or Undertaking

If an injunction is granted, the law requires that an undertaking be given. [Code of Civ. Proc. § 529(a)(c).] This statutory requirement does not specifically apply to temporary restraining orders. The Supreme Court advises that the “better practice” is for the trial court to require a bond for a temporary restraining order, but such an order is not void if a bond is not required. Biasca v. Superior Court (1924) 194 Cal. 366; 228 P. 861; see River Farms Co. v. Superior Court (1933) 131 Cal.App. 365,

370; 21 P.2d 643.] A bond, however, is required for a preliminary injunction. [Code of Civ. Proc. § 529; Neumann v. Moretti (1905) 146 Cal. 31, 32-33; 79 P. 512.]

Significantly, the court can waive the bond requirement for poor litigants. The party seeking a preliminary injunction without bond need not proceed in forma pauperis; however, the court will use in forma pauperis standards in determining whether to grant the injunction without bond. Conover v. Hall (1974) 11 Cal.3d 842, 850-52; 114 Cal.Rptr. 642.]

If a bond is required, the lawyer representing the homeowner should assure that the bond is not too large, especially because the homeowner likely will be unable to afford any bond, let alone a large one. The purpose of the bond is to protect the defendant against damages in the event the court determines that the injunction should not have been issued. [Code of Civ. Proc. § 529.] The deed of trust, however, covers the trustor’s continuing default and accruing unpaid interest. Therefore, the deed of trust should be ample security for the beneficiary if there is sufficient equity in the property to cover additional interest and other expenses emanating from the delay. As a result, any bond should be nominal unless the equity in the property is insufficient; in that event, the bond should only be large enough to cover anticipated damage not covered by the security.  Moreover, a bond

which is significantly larger than necessary to protect against damages may improperly restrict the trustor’s access to the courts and thus may infringe on the trustor’s due process rights. [See Lindsev v. Normet (1972) 405 U.S. 56, 74-79; 92 S.Ct. 862.]

7.  Appeals

An appeal is allowed from an order of the trial court granting or denying a temporary restraining order, preliminary injunction, or final injunction. [Code of Civ. Proc. §§ 904.1(a), 904.1(f); U.S. Hertz, Inc. v. Niobrara Farms, supra, 41 Cal.App.3d 68, 72.] The trial court may restrain the foreclosure pending appeal even though the court may have denied a final injunction. [See City of Pasadena v. Superior Court (1910) 157 Cal. 781, 787-88; 109 P. 620.]  In City of Pasadena, the Supreme Court observed that:

Common fairness and a sense of justice readily suggests that while plaintiffs were in good faith prosecuting their appeals, they should be in some manner protected in having the subject-matter of the litigation preserved intact until the appellate court could settle the controversy . . . in order that, if it be ultimately decided that the judgment appealed from was erroneous, his property may be saved to him.  (.Id. at 795-96.)

The appellate courts likewise can issue a stay order or writ of supersedeas which is injunctive in nature to preserve the status quo pending appeal. [Code of Civ. Proc. § 923; see generally, Agricultural Labor Relations Board v. Tex-Cal Land Management, Inc. (1987) 43 Cal.3d 696, 708; 238 Cal.Rptr. 780; People ex rel. San Francisco Bay Conserv. & Dev. Comm. v. Emeryville (1968) 69 Cal.2d 533; 72 Cal.Rptr. 790.]

8.  Notice of Rescission and Lis Pendens

If the sale is not enjoined, the trustor is in serious jeopardy of losing the right to regain the property in the event it is sold to a bona fide purchaser or the purchaser uses the property for security for a loan from a bona fide encumbrancer. Although the bona fides doctrine will not vitiate those claims predicated on voidness which the trustor is not barred from asserting after a foreclosure sale, the doctrine will hamper, if not preclude, the ability of the trustor to vacate the sale based on claims that render the obligation, the trust deed, or the sale voidable., “The Status of Bona Fide Purchaser or Encumbrancer”. ] Therefore, a lawyer representing a homeowner in foreclosure should immediately take steps to avert the application of the bona fides doctrine by giving constructive notice of the homeowner’s claims.

Notice of Rescission

Every acknowledged conveyance of real property which is recorded with the County Recorder provides constructive notice to subsequent purchasers and encumbrancers. [Civ. Code § 1213.] A conveyance is defined to include any instrument which affects the title to real property [Civ. Code § 1215], and any instrument affecting title to real property may be recorded. [Gov. Code § 27280.] The effect of the recordation is to make every conveyance, except a lease not exceeding one year, void as to all subsequent purchasers and encumbrancers in good faith and for a valuable consideration who record their conveyance prior to the recordation of the earlier conveyance.  [Civ. Code § 1214.]

In Dreifus v. Marx (1940) 40 Cal.App.2d 461, 466; 104 P.2d 1080, the Court of Appeal held that a recorded notice or rescission of a deed, which had been served on the defendants and which states grounds for rescission based on fraud, undue influence, and lack of consideration, affected title to real property and imparted constructive notice of the rightful owner’s claims and assertions of title. [See Civ. Code § 1215 defining conveyance to include a document affecting title.]  As the court held,

Its effect was to declare to the world that the author of the notice had by delivery of a deed been defrauded by the

party upon whom the notice had been served, or had failed to receive consideration for the deed, which fact was notice of the invalidity of such prior deed. By the presence of said notice upon the official records of the county, appellant [a subsequent encumbrancer] had constructive notice of the contents of the instrument which was her initial step in her rescissory proceedings to nullify the alleged fraudulent transaction. (.Id. at 466.)

Since the notice of rescission becomes effective upon its service on the persons against whom rescission is sought, the notice must be served in addition to being recorded to impart constructive notice. [See Brown v. Johnson (1979) 98 Cal.App.3d 844, 850; 159 Cal.Rptr. 675.] Although not specifically required by the cases, the recordation of a declaration of service along with the notice of rescission appears to be advisable.

The recognition of a recorded and served notice of rescission as a document imparting constructive notice should not be interpreted to mean that any recorded document purporting to affect title will create constructive notice: “It is settled that an instrument which is recorded but which is not authorized to be recorded and given constructive notice effect by statute does not impart constructive notice to subsequent purchasers.” Brown v.

Johnson, supra, 98 Cal.App.3d 844, 849; see e.g., Owens v. Palos Verdes Monaco (1983) 142 Cal.App.3d 855, 868; 191 Cal.Rptr. 381 (partnership statement); Lawyers Title Co. v. Bradbury (1981) 127 Cal.App.3d 41, 45; 179 Cal.Rptr. 363 (court order for child and spousal support); Brown v. Johnson, supra, 98 Cal.App.3d 844; (notice of vendor’s lien); Stearns v. Title Ins. & Trust Co. (1971) 18 Cal.App.3d 162, 169; 95 Cal.Rptr. 682 (surveys); Black v. Solano Co. (1931) 114 Cal.App. 170, 173-74; 299 P. 843 (royalty agreement); Hale v. Penderarast (1919) 42 Cal.App. 104, 107-08; 183 P. 833 (notice of property repurchase agreement); Rowley v. Davis (1917) 34 Cal.App. 184, 190-91; 167 P. 162 (notice that absolute deed intended as mortgage).] Therefore, any document contesting the transaction should be recorded in the form of a notice of rescission.

b.  Lis Pendens

As soon as a complaint is filed, a lis pendens should be recorded. The recordation of this lis pendens gives constructive notice to prospective purchasers and lenders of the claims asserted in the action. [Code of Civ. Proc. § 409(a); see e.g., Putnam Sand & Gravel Co., Inc. v. Albers (1971) 14 Cal.App.3d 722, 725; 92 Cal.Rptr. 636.] Therefore, even if the temporary restraining order or the preliminary injunction is denied, subsequent purchasers and encumbrancers will take their interest subject to the plaintiff’s

claims and will not have a bona fide status.

A lis pendens is simply a notice that there is pending litigation “concerning real property or affecting the title or the right of possession of real property.” [Code of Civ. Proc. § 409(a).] The notice must include the names of the parties, the object of the action, and a description of the property. (Id.) Prior to recording, the notice must be served by registered or certified mail, return receipt requested to all known addresses of the adverse parties and all owners of record as shown in the latest assessment information in the possession of the county assessor’s office. [Code of Civ. Proc. § 409(c).] A copy of the lis pendens must also be filed with the court in which the action is filed. fid.) A proof of service must be recorded with the lis pendens or, in lieu thereof, a declaration under penalty of perjury stating that the address of the adverse party is unknown. [Code of Civ. Proc. § 409(d).] If the service and proof of service requirements are not satisfied, the lis pendens is void.  (Id.)

D.  Attack on the Sale’s Validity

1.  Vacating the Foreclosure Sale and Obtaining Damages

The traditional method of challenging a foreclosure sale is through a suit inequity,  Anderson v. Heart Fed. Sav. & Loan Assn.

(1989) 1989 Cal.App. LEXIS 141.]

The trustor can seek to set aside any improper foreclosure sale:

It is the general rule that courts have power to vacate a foreclosure sale where there has been fraud in the procurement of the foreclosure decree or where the sale has been improperly, unfairly or unlawfully conducted, or is tainted by fraud, or where there has been such a mistake that to allow it to stand would be inequitable to purchaser and parties. Sham bidding and the restriction of competition are condemned, and inadequacy of price when coupled with other circumstances of fraud may also constitute ground for setting aside the sale. Bank of America v. Reidy, supra. 15 Cal.2d 243, 248.

[See e.g., Stirton v. Pastor, supra, 177 Cal.App.2d 232, 234; Brown v. Busch. supra, 152 Cal.App.2d 200, 203-04; Pv v. Pleitner, supra, 70 Cal.App.2d 576, 579.] In a more modern formulation of the rule, the Court of Appeal has stated that —

“The courts scrutinize a sale held under power in a trust deed carefully, and will not sustain it unless it is conducted with fairness, openness, scrupulous integrity, and the trustee exercises sound discretion to protect the rights of all

interested parties and obtain the best possible price.” Bank of Seoul & Trust Co. v. Marcione, supra, 198 Cal.App.3d 113, 119.

The plaintiff bears the burden of proof and, if the action is based on irregularities in the sale process, must show injury from the claimed irregularities. [See e.g., Stevens v. Plumas Eureka Annex Min. Co., supra. 2 Cal.2d 493, 497; Sargent v. Shumaker, supra, 193 Cal. 122; Anderson v. Heart Fed. Sav. & Loan Assn., supra, 1989 Cal.App. LEXIS 141.] The injured trustor does not have to attempt to enjoin the sale before bringing an action to vacate the sale. [See Hauaer v. Gates, supra, 42 Cal.2d 752, 756.] The trustor is not estopped from raising claims concerning the sale’s validity which could have been raised before the sale. (Id. ) However, the trustor’s action may be barred by laches. [See Smith v. Sheffev (1952) 113 Cal.App.2d 741, 744; 248 P.2d 959.]

The trustor may seek damages instead of, or as an alternative to, setting aside the sale. [See Munaer v. Moore, supra, 11 Cal.App.3d 1, 7; Standlev v. Knapp, supra, 113 Cal.App. 91, 100-02; see also Stockton v. Newman, supra, 148 Cal.App.2d 558, 563-64. ] The decision to seek damages and/or the rescission of the trustee’s sale may be influenced by whether a jury trial is desired. An action to vacate a trustee’s sale is equitable in nature and, hence, the trustor would not be entitled to a jury

trial. An action for damages, however, is an action at law in which the right to jury trial ordinarily exists. If the legal and equitable issues are joined, the trial court has the discretion to try the equitable issues first, and if the trial court’s determination of these issues is dispositive, nothing remains to be considered by the jury. [See Raedeke v. Gibraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665, 671; 111 Cal.Rptr. 693.]

2. Grounds for Attacking the Sale

The grounds for attacking the sale are discussed above.

3. Tender

Since the action to set aside the sale is equitable in nature, the trustor seeking equity is compelled to do equity by tendering the amount of the obligation owed. [See e.g., Shimpones v. Sticknev (1934) 219 Cal. 637, 649; 28 P.2d 673; Napue v. Gor-Mev West, Inc. . supra, 175 Cal.App.3d 608, 621; Karlsen v. American Sav. & Loan Assn.. supra, 15 Cal.App.3d 112, 117; Crummer v. Whitehead, supra, 230 Cal.App.2d 264, 268; Foae v. Schmidt (1951) 101 Cal.App.2d 681, 683. Pv v. Pleitner, supra, 70 Cal.App.2d 576, 582.]

For a discussion of tender and the circumstances which excuse tender, A junior lienor seeking to set aside the sale of a senior lienor because of irregularities that impaired the junior lienor’s opportunity to reinstate or redeem must tender the full amount owing on the senior obligation. [See FPCI RE-HAB 01 v. E&G Investments, Ltd. (1989) 207 Cal.App.3d 1018, 1021-22; 255 Cal.Rptr. 157; Arnolds Management Corp. v. Eischen (1984) 158 Cal.App.3d 575; 205 Cal.Rptr. 15 (junior lienor had no notice of sale but its right of reinstatement had elapsed); but see United States Cold Storage v. Great Western Sav. & Loan Assn. (1985) 165 Cal.App.3d 1214, 1223-25; 212 Cal.Rptr. 232.] If the ground for vacating the sale does not involve an irregularity precluding the exercise of the right of reinstatement or redemption, tender is not necessary. [See FPCI RE-HAB 01 v. E&G Investments, Ltd., supra, 207 Cal.App.3d 1018, 1022.]

4.  Conclusiveness of Deed Recitals

Trustee’s deeds routinely contain a series of recitals concerning the propriety of the foreclosure. The recitals usually cover every aspect of the foreclosure and purport to be conclusive evidence that the recited facts occurred. The authority of the trustee to make these recitals which ostensibly bind the trustor

is derived from the trust deed. [See Little v. CFS Service Corp., supra, 188 Cal.App.3d 1354, 1358.] The recitals include such facts as the following: a default occurred and still existed at the time of sale, a properly completed notice of default was properly mailed to all parties, not less than three months elapsed between the recordation of the notice of default and the posting and the first publication of the notice of sale, all posting and mailing requirements specified in the trust deed and by statute for the notice of sale were met, the beneficiary properly demanded that the trustee sell the property, and the trustee properly sold the property in full accordance with the terms of the trust deed and all laws. Obviously, this formidable array of recitals, if conclusively binding on the trustor, would be an insuperable obstacle to setting aside the sale. The courts and the Legislature have traditionally recognized the validity of some of these recitals, but the courts have fashioned important exceptions which must be considered by counsel representing a homeowner trying to vacate a trustee’s sale.

As a general proposition, California courts have historically sustained the validity of trustee’s deed recitals regarding the regularity of sale procedures, such as properly publishing and posting notices, as conclusive evidence of the facts recited. [See e.g., Pacific States Sav. & Loan Co. v. O’Neill, supra, 7 Cal.2d 596, 599; 61 P.2d 1160; Cobb v. California Bank, supra, 6 Cal.2d

389, 390; Central Nat. Bank v. Bell, supra, S Cal.2d 324, 327; Sorensen v. Hall (1934) 219 Cal. 680, 682; 28 P.2d 667; Simson v. Eckstein (1863) 22 Cal. 580, 592; 54 P.2d 1107.] The theory underlying this rule is that the trustee, as the trustor’s agent, has been empowered by the trustor in the terms of the deed of trust to bind the trustor in making conclusive admissions regarding the regularity of the sale process. [See Mersfelder v. Spring (1903) 139 Cal. 593, 595; 73 P. 452; Little v. CFS Service Corp., supra, 188 Cal.App.3d 1354, 1358; Pierson v. Fischer, supra, 131 Cal.App.2d 208, 216-17; 280 P.2d 491.] However, the trustee is not obliged to issue a trustee’s deed containing conclusive presumptions regarding the regularity of sales procedures if the procedures were defective. [See Little v. CFS Service Corp., supra, 188 Cal.App.3d 1354, 1360.]

The Legislature has provided that recitals dealing with compliance with all legal requirements for mailing copies of notices, publishing or personally delivering a copy of the notice of default and posting and publishing the notice of sale are prima facie evidence of compliance and conclusive evidence in favor of a bona fide purchaser. [Civ. Code § 2924; see Garfinkle v. Superior Court, supra, 21 Cal.3d 268, 279 n.16; (Supreme Court withholds opinion on validity and effect of Civ.Code §2924 presumptions); a discussion of what is a “bona fide purchaser” is contained in, “The Status of a Bona Fide Purchaser or Encumbrancer” . ] Thus, recitals regarding the mailing, posting, and publishing of notices are conclusive only as to a bona fide purchaser but are rebuttable as to everyone else. [See Napue v. Gor-Mev West. Inc., supra, 175 Cal.App.3d 608, 620-21; Wolfe v. Lipsev, supra, 163 Cal.App.3d 633, 639-40.] The obvious purpose of the presumption is to protect a bona fide purchaser at a trustee’s sale from certain claims of procedural defects. [See Napue v. Gor-Mev West, Inc.. supra, 175 Cal.App.3d 608, 615.]

The statute does not deal with the effect of purported conclusive recitals regarding matters other than the mailing, posting, and publishing of notices. [See Wolfe v. Lipsev, supra, 163 Cal.App.3d 633, 640 (application of presumptions in Civ.Code §2924 to notices of postponement is “questionable”). The courts, however, recognized that the recitals did not prevent an examination into any fraud or unfairness in the sale process about which the purchaser has notice. Thus, for example, the Supreme Court declared that conclusive recitals “would not, perhaps, preclude the inquiry in an equitable proceeding into the fairness of the sale, or with other matters which on equitable principles might entitle the party injured to relief . . . .” Mersfelder v. Spring, supra, 139 Cal. 593, 595; see e.g., Taliaferro v. Crola (1957) 152 Cal.App’.2d 448, 449-50; 313 P.2d 136; Karrell v. First Thrift of Los Angeles (1951) 104 Cal.App.2d 536, 539; 232 P.2d 1; Seccombe v. Roe (1913) 22 Cal.App. 139, 143; 133 P. 507.]

The courts have also declared that no recitals are conclusive between the beneficiary and the trustor. As the Court of Appeal held,

We are of the opinion that this stipulation as to conclusiveness, reading the whole deed and various requirements together, was only intended and only had the effect to protect an innocent purchaser or a third party to the transaction who acquired at such sale the legal title, but that as between the trustor and the beneficiary, when such beneficiary takes the legal title under a sale made in violation of terms of the trust, the trustor is not estopped to deny the regularity of the sale and to obtain equitable relief through a redemption thereof …. Seccombe v. Roe, supra, 22 Cal.App. 139, 143-44.

[See Beck v. Reinholtz (1956) 138 Cal.App.2d 719, 723; Security-First National Bank v. Crver (1940) 39 Cal.App.2d 757, 762; 104 P.2d 66; see also Tomczak v. Ortega, supra, 240 Cal.App.2d 902, 907; see generally 20th Century Plumbing Co. v. Sfreaola (1981) 126 Cal.App.3d 851, 854; 179 Cal.Rptr. 144 (judgment creditor buying at sale is not a bona fide purchaser).]

Moreover, the trustor may not waive any- rights under Civil Code §§ 2924, 2924b, and 2924c. [Civ. Code § 2953.] Therefore, any provision in the trust deed by which the trustor purportedly authorized the trustee to admit conclusively that the protections afforded by these sections have been extended, when they have not been extended, should be construed as an invalid waiver. [See Tomczak v. Ortega, supra, 240 Cal.App.2d 902, 907; but see Pierson v. Fischer, supra, 131 Cal.App.2d 208, 216-17, which is completely contrary to the public policy expressed in Civ. Code §§ 2924 and 2953; but see also Leonard v. Bank of America, supra, 16 Cal.App.2d 341, 345-46, the analysis of which should be superseded by Civ. Code § 2953 and Tomczak.)

The continued viability of these conclusive presumptions is open to challenge. The California Supreme Court declined to express any opinion on the validity and effect of the conclusive recital provisions of Civil Code § 2924. [See Garfinkle v. Superior Court, supra, 21 Cal.3d 268, 279 n. 16.]

The constitutionality of the conclusiveness of the recitals is also questionable. That issue has heretofore been avoided by California courts. [See Lancaster Security Inv. Corp. v. Kessler, supra, 159 Cal.App.2d 649, 655.] The effect of the conclusive presumption is dramatic: a trustor is irretrievably precluded by the trustee’s recitals from introducing evidence at trial that the

trustee illegally sold the trustor’s property. For example, in attempting to recover possession of the property through unlawful detainer proceedings after sale, a purchaser must prove that the property was “duly sold” and that the purchaser’s title has been “duly perfected.” [See Code of Civ. Proc. § 1161a; see discussion, “Attacking the Sale or Defending Possession in Unlawful Detainer Proceedings.”] Nevertheless, a bona fide purchaser can rely solely on the recitals to prove the case, and the trustor is barred from introducing contrary evidence to prevent being ousted from possession. [See e.g., Cruce v. Stein (1956) 146 Cal.App.2d 688, 693; 304 P.2d 118; Abrahamer v. Parks (1956) 141 Cal.App.2d 82, 84; 296 P.2d 343.]

Although a general discussion of the possible due process and equal protection infirmities to this statutory scheme is beyond the scope of this handbook, a lawyer representing a homeowner in foreclosure should consider several decisions of the United States Supreme Court which declared certain conclusive presumptions unconstitutional. rCleveland Bd. of Education v. LaFleur (1974) 414 U.S. 632; United States Dept. of Agriculture v. Murrv (1973) 413 U.S. 508; Vlandis v. Kline (1973) 412 U.S. 441; Stanley v. Illinois (1972) 405 U.S. 645. ] The gravamen of these cases is that due process forbids the use of irrebuttable presumptions to establish the truth of facts which are neither universally nor necessarily true when the state has reasonable alternative means

to determine the existence of the facts. [See e.g., landis v. Kline (1973) 412 U.S. 441, 452.] Although the Legislature is not prevented from establishing objective, rational criteria for determining the existence or nonexistence of facts, the Legislature cannot make the existence of a fact an issue and then make inadmissible patently relevant evidence tending to prove or disprove the fact. [See Weinberger v. Salfi (1975) 422 U.S. 749, 772.] Even as limited by Salfi, Vlandis and the other similar cases appear to prohibit the state’s predicating the validity of a foreclosure sale and unlawful detainer proceeding on the regularity of the foreclosure sale process and then prohibiting the introduction of admissible evidence to disprove the regularity of the process. [See generally, Western & A.R.R. v. Henderson (1929) 279 U.S. 639 (invalidating arbitrary rebuttable presumption).]

Whether or not the conclusiveness of the presumptions is constitutional, a lawyer representing a homeowner in foreclosure should attempt to prevent the operation of the conclusive presumptions by preventing the execution and delivery of the trustee’s deed. The bona fide purchaser obtains the benefit of the conclusive presumptions from the deed recitals; if the purchaser does not receive a deed, the purchaser will have no conclusive presumptions on which to rely. Little v. CFS Service Corp., supra, 188 Cal.App.3d 1354, 1360-61.] Therefore, if property has been sold through foreclosure but the trustee’s deed has not been

executed and delivered, the lawyer representing the trustor should attempt to enjoin the execution and delivery of the deed on the grounds of whatever irregularity may have existed in the sale and on the ground that the trustor will suffer irreparable injury as a result of the creation of the conclusive presumptions. (See generally, 3 Witkin, Summary of California Law, § 108, at 1577.)

E.  Attacking the Sale or Defending Possession in Unlawful Detainer Proceedings

Generally, the purchaser at a trustee’s sale may institute an unlawful detainer action to obtain possession if the “property has been duly sold in accordance with Section 2924 of the Civil Code” and if “title under the sale has been duly perfected.” [Code of Civ. Proc. § 1161a(b) (3). ] A transferee of the purchaser also has standing to use the unlawful detainer process. [See Evans v. Superior Court (1977) 67 Cal.App.3d 162, 169-70; 136 Cal.Rptr. 596.] The action may be brought after the failure to vacate following the service of a three-day notice to quit. [Code of Civ. Proc. § 116la(b).] However, unlawful detainer proceedings may be used against a tenant or subtenant only after the service of notice to quit at least as long as the periodic tenancy but not exceeding 30 days. [Code Civ. Pro. § 1161a(c).] The remedy is cumulative to common law actions such as ejectment which may be brought to obtain possession.  [See Duckett v. Adolph Wexler Bldg. & Fin.

Corp. (1935) 2 Cal.2d 263, 265-66; 40 P.2d 506; Mutual Bldo. & Loan Assn. v. Corum (1934) 3 Cal.App.2d 56, 58; 38 P.2d 793.] With very rare exceptions, the purchaser will invoke summary unlawful detainer proceedings rather than other proceedings to gain possession.

However, the purchaser is precluded from invoking unlawful detainer if a local ordinance, such as a rent control law, does not permit eviction after foreclosure. [See Gross v. Superior Court (1985) 171 Cal.App.3d 265; 217 Cal.Rptr. 284.] The purchaser may also be bound to rent ceilings. [See People v. Little (1983) 141 Cal.App.3d Supp. 14; 192 Cal.Rptr. 619.]

The courts have charted inconsistent paths in determining what defenses may be raised in unlawful detainer proceedings and to what extent the trustor may be able to attack the purchaser’s title. In the early cases, the courts concluded that the purchaser had the burden of proving that the purchaser acquired the property in the manner expressed in the unlawful detainer statute; i.e., the property was duly sold and the purchaser duly perfected title. No other questions of title could be litigated. [See e.g., Nineteenth Realty Co. v. Diacrs (1933) 134 Cal.App. 278, 288-89; 25 P.2d 522; Hewitt v. Justice’s Court (1933) 131 Cal.App. 439, 443; 21 P.2d 641.]

This rule was adopted by the Supreme Court in Cheney v. Trauzettel (1937) 9 Cal.2d 158; 69 P.2d 832. The Supreme Court held that:

… in the summary proceeding in unlawful detainer the right to possession alone was involved, and the broad question of title could not be raised and litigated by cross-complaint or affirmative defense. [Citations omitted.] It is true that where the purchaser at a trustee’s sale proceeds under section 1161a of the Code of Civil Procedure he must prove his acquisition of title by purchase at the sale; but it is only to this limited extent, as provided by statute, that the title may be litigated in such a proceeding. [Citations omitted.] . . . the plaintiff need only prove a sale in compliance with the statute and deed of trust, followed by purchase at such sale, and the defendant may raise objections only on that phase of the issue of title. Matters affecting the validity of the trust deed or primary obligation itself, or other basic defects in the plaintiff’s title, are neither properly raised in this summary proceeding for possession, nor are they concluded by the judgment. (Id. at 159-60.)

Accordingly, in numerous cases trustors have been forbidden from defending against the unlawful detainer on grounds other than

showing that the sale was not conducted pursuant to Civil Code § 2924. [See e.g., California Livestock Production Credit Assn. v. Sutfin, supra, 165 Cal.App.3d 136, 140 n.2; Evans v. Superior Court, supra, 67 Cal.App.3d 162, 170-71; MCA. Inc. v. Universal Diversified Enterprises Corp. (1972) 27 Cal.App.3d 170, 176-77; 103 Cal.Rptr. 522; Cruce v. Stein, supra, 146 Cal.App.2d 688, 692; Abrahamer v. Parks, supra, 141 Cal.App.2d 82, 84; Hiaoins v. Covne (1946) 75 Cal.App.2d 69, 72-73, 75; 170 P.2d 25; Delov v. Ono (1937) 22 Cal.App.2d 301, 303; 70 P.2d 960.]

Other courts, on the other hand, have considered defenses extrinsic to compliance with statutory foreclosure procedure in determining unlawful detainer matters. In Seidell v. Anglo-California Trust Co. (1942) 55 Cal.App.2d 913, 921; 132 P.2d 12, the Court of Appeal construed Cheney to prohibit only equitable but not legal defenses. Therefore, the Court thought that lack of consideration and other issues going to the validity of the note and the trust deed were proper defenses. (Id. at 922.) Other cases have permitted the unlawful detainer defenses whether or not the grounds were technically legal or equitable. [See e.g., Kartheiser v. Superior Court (1959) 174 Cal.App.2d 617, 621; 345 P.2d 135 (beneficiary’s waiver of default); Freeze v. Salot, supra, 122 Cal.App.2d 561; (no default); Kessler v. Bridge (1958) 161 Cal.App.2d Supp. 837; 327 P.2d 241 (rescission, lack of delivery); Altman v. McCollum. supra, 107 Cal.App.2d Supp. 847; (estoppel to

assert default).]

The issue of what defenses can or should be raised also significantly affects the application of the res judicata doctrine to any action by the trustor after the unlawful detainer to challenge the trustee’s sale. Cases, proceeding from Seidell, which hold that potential defenses are far ranging, have also held that issues which were, or might have been, determined in the unlawful detainer proceeding are barred by res judicata in subsequent proceedings. [See Freeze v. Salot. supra, 122 Cal.App.2d 561, 565-66; Bliss v. Security-First Nat. Bank (1947) 81 Cal.App.2d 50, 58; Seidell v. Analo-California Trust Co., supra, 55 Cal.App.2d 913.]

The Court of Appeal, however, ruled differently in Gonzales v. Gem Properties, Inc., supra, 37 Cal.App.3d 1029, 1036. The court recognized the extreme difficulty of conducting complicated defenses in the context of a summary proceeding; investigation and discovery procedures are limited, and the proceeding is too swift to afford sufficient time for preparation. Therefore, the court denied a res judicata effect to issues such as fraud.

The resolution of the problems raised by these cases appears in Vella v. Hudoins (1977) 20 Cal.3d 251; 142 Cal.Rptr. 414 and Asuncion v. Superior Court (1980) 108 Cal.App.3d 141; 166 Cal.Rptr.

306. In Vella, the Supreme Court held generally that only claims “bearing directly upon the right of immediate possession are permitted; consequently, a judgment in unlawful detainer usually has very limited res judicata effect and will not prevent one who is dispossessed from bringing a subsequent action to resolve questions of title [citations omitted], or to adjudicate other legal and equitable claims between the parties [citations omitted].” (20 Cal.3d at 255.) The purchaser, however, must show that the sale was regularly conducted and that the purchaser’s title was duly perfected.  (Id.)

The court reaffirmed the holding in Cheney that claims dealing with the validity of the trust deed or the obligation or with other basic defects in the purchaser’s title should not be litigated in unlawful detainer proceedings, and that determination made regarding such claims should not be given res judicata effect. (Id. at 257.) Defenses which need not be raised may nonetheless be considered if there is no objection. [See Stephens, Partain & Cunningham v. Hollis, supra, 196 Cal.App.3d 948, 953.] Res judicata will apply only to defenses, including those ordinarily not cognizable but raised without objection, if there is a fair opportunity to litigate, vella v. Hudgins, supra, 20 Cal.3d 251, 256-57.] Since complex claims, such as for fraud, can very rarely be fairly litigated in summary unlawful detainer proceedings, the trustor is not required to raise those issues as a defense.  Although not required and ordinarily not allowed to litigate critical issues involving the obligation, the trust deed, and title, the homeowner-trustor is practically impelled to litigate these issues or be dispossessed since an unlawful detainer hearing will certainly precede a trial on a quiet title action. [See Code of Civ. Proc. § 1179a; Kartheiser v. Superior Court, supra, 174 Cal.App.2d 617, 621-23.] The California Supreme Court, citing Justice Douglas, aptly observed:

. . . the home, even though it be in the slums, is where man’s roots are. To put him into the street . . . deprives the tenant of a fundamental right without any real opportunity to defend. Then he loses the essence of the controversy, being given only empty promises that somehow, somewhere, someone may allow him to litigate the basic question in the case. S. P. Growers Assn. v. Rodriguez (1976) 17 Cal.3d 719, 730; 131 Cal.Rptr. 761.

Accordingly, the Court of Appeal held in Asuncion, supra, that “homeowners cannot be evicted, consistent with due process guaranties, without being permitted to raise the affirmative defenses which if proved would maintain their possession and ownership.”  (108 Cal.App.3d at 146.)  Nonetheless, the Court was

mindful that an unlawful detainer action was “not a suitable vehicle to try complicated ownership issues. …” [Id. at 144; see Mehr v. Superior Court (1983) 139 Cal.App.3d 1044, 1049; 189 Cal.Rptr. 138; Gonzales v. Gem Properties, Inc., supra, 37 Cal.App.3d 1029, 1036.] The Court thus prescribed the following procedure when the trustor had on file a superior court action contesting title: (a) the municipal court should transfer the unlawful detainer proceeding to the superior court because that action ultimately involves the issue of title which is beyond the municipal court’s jurisdiction; and (b) the superior court should stay the eviction action, subject to a bond if appropriate, until trial of the action dealing with title, or (c) the superior court should consolidate the actions.  (Id. at 146-47.)

If the challenge to title is based on fraud in the acquisition of title, improper sales methods, or other improprieties that directly impeach the unlawful detainer plaintiff’s title or the procedures followed in the foreclosure sale, Asuncion and Mehr dictate that the unlawful detainer should be stayed. On the other hand, if the challenge to title is based on a claim unrelated to the specific property in question, such as a fraud not directly related to the obtaining of title to the property that is the subject of the unlawful detainer, the rule in Asuncion does not apply. [See Old National Financial Services, Inc. v. Seibert (1987) 194 Cal.App.3d 460, 464-67.]

Asuncion should also be distinguished from Mobil Oil Corp. v. Superior Court (1978) 79 Cal.App.3d 486; 145 Cal.Rptr. 17, which is frequently cited in opposition to the procedure authorized in Asuncion♦ In Mobil, the court ruled that statutory procedure accorded unlawful detainer proceedings precluded staying the unlawful detainer action until the tenant gas station operator could try his action alleging unfair practices in the termination of his franchise. (Id. at 494.) The Asuncion court noted some procedural distinctions: the commercial lessee did not seek a preliminary injunction and obtained a stay on apparently inadequate factual grounds, while the Asuncions had not yet had the opportunity to present facts on which a preliminary injunction might issue.  (See 108 Cal.App.3d at 146 n. 1.)

In addition, the differences between the interests presented in commercial and residential transactions suggest that different considerations may apply to each. The courts have recognized a distinction between commercial and residential cases and have been more willing to allow affirmative defenses in residential cases. [See S. P. Growers Assn., supra, 17 Cal.3d 719, 730; 131 Cal.Rptr. 761; Custom Parking, Inc. v. Superior Court (1982) 138 Cal.App.3d 90, 96-100; 187 Cal.Rptr. 674; Schulman v. Vera (1980) 108 Cal.App.3d 552, 560-63; 166 Cal.Rptr. 620; Asuncion v. Superior Court, supra, 108 Cal.App.3d 141, 145, 146 n. 1;  Mobil Oil Corp.

v, Handlev (1976) 76 Cal.App.3d 956, 966;- 143 Cal.Rptr. 321; see generally, Union Oil Co. v. Chandler (1970) 4 Cal.App.3d 716, 725; 84 Cal.Rptr. 756.]

The commercial lessee may be able to establish its rights in an action apart from the unlawful detainer. The trustor, however, will lose possession of the trustor’s home. While the lessee’s loss is likely compensable in money, the loss of the home and the attendant adverse impact on the psychological well being of the residents and the family structure will not as easily be amenable to compensation. Moreover, the family cast out onto the streets may be unable to maintain an action which may come to trial years later. [See S. P. Growers Assn. v. Rodriguez, supra, 17 Cal.3d 719, 730.] In addition, the affirmative defenses alleged in the recent commercial lease cases have presented substantial and complex issues [see e.g., Mobil Oil Corp. v. Superior Court, supra, 79 Cal.App.3d 486, 495 (unfair business practice charge involving all Mobil service station operators); Onion Oil Co. v. Chandler, supra, 4 Cal.App.3d 716, 725-26 (antitrust violations)] and would likely consume more trial time than most trustee’ s sale cases.

Moreover, the court’s decision on whether to recognize various affirmative defenses in unlawful detainer proceedings results from a balancing of the public policies furthered by protecting the tenant or property owner from eviction against the state’s interest

in the expediency of a summary proceeding. [See e.g., Barela v. Superior Court (1981) 30 Cal.3d 244, 250; 178 Cal.Rptr. 618; S. P. Growers Assn. v. Rodriguez, supra, 17 Cal.3d 719, 729-30; Custom Parking, Inc. v. Superior Court, supra, 138 Cal.App.3d 90.] There is a strong public policy supporting homeownership and the conservation of neighborhoods from destabilizing influences. [See “Propriety of Injunctive Relief”.] These interests when coupled with the due process concerns mentioned in Asuncion militate for the hearing of affirmative defenses in accord with the procedure set forth in Asuncion.

As an alternative to an Asuncion motion prior to the hearing of the unlawful detainer action, the homeowner’s counsel could file a superior court action to challenge title and to restrain the purchasers from initiating or prosecuting an unlawful detainer. If the homeowner has lost the unlawful detainer, the injunction could be aimed at restraining the purchasers from enforcing the writ of possession or from taking possession of the premises.

Counsel should not direct the injunction against the municipal court or the sheriff or marshall since the superior court has no jurisdiction to enjoin a judicial proceeding or a public officer’s discharge of regular duties. [See e.g., Code of Civ. Proc. § 526.]

The courts have not ruled on whether traditional landlord-tenant defenses could ever be invoked in unlawful detainer

proceedings between the purchaser at the foreclosure sale and the person in possession. However, these defenses do not apply if the person in possession has no independent right to possession after the foreclosure. [See California Livestock Production Credit Assn. v. Sutfin. supra, 165 Cal.App.3d 136, 143.] In Sutfin, for example, the court held that a trustor could not invoke a retaliatory eviction defense because the trustor had no lease agreement giving the trustor a right to possession and the trustor’s only claim to possession derived from his title to the property which was lost at a valid foreclosure sale.  (Id.)

F.  The Status of Bona Fide Purchaser or Encumbrancer

The trustor may be unable to vacate a sale made to a bona fide purchaser for value without notice of the trustor’s claim. The general rules of bona fide purchase apply to trustee’s sales: a “good faith purchaser for value and without notice of the fraud or imposition is not chargeable with the fraud or imposition of his predecessor and takes title free of any equity of the person thus defrauded or imposed upon.” strutt v. Ontario Sav. & Loan Assn. (1970) 11 Cal.App.3d 547, 554; accord, Karrell v. First Thrift of Los Angeles, supra, 104 Cal.App.2d 536, 539; see Gonzales v. Gem Properties, Inc., supra, 37 Cal.App.3d 1029, 1037; 112 Cal.Rptr. 884.]

Notice

The trustor’s best chance for attacking someone’s alleged status as a bona fide purchaser or encumbrancer will be to show that the purchaser had knowledge of the trustor’s claims and equities. The notice can be actual or constructive. (See Civ. Code § 18.)

a.  Actual Notice

The bona fide purchase doctrine does not benefit a subsequent purchaser or encumbrancer who takes with actual notice of a prior, though unrecorded, claim to property. [See e.g., Civ. Code §§ 1214, 1217; Slaker v. McCormick-Saeltzer Co. (1918) 179 Cal. 387, 388; 177 P. 155.] Actual notice may be acquired in many ways including the following: (a) seeing a document relating to someone’s claim [see e.g., Beverly Hills Nat. Bank & Trust Co. v. Seres (1946) 76 Cal.App.2d 255, 264; 172 P.2d 894 (letter)]; (b) being told of someone’s interest [see e.g., Laucrhton v. McDonald (1923) 61 Cal.App. 678, 683; 215 P. 707]; (c) listening to or participating in a conversation regarding someone’s claim [see e.g., Williams v. Miranda (1958) 159 Cal.App.2d 143, 153; 323 P.2d 794]; (d) actually viewing a public record [see e.g., Warden v. Wyandotte Sav. Bank (1941) 47 Cal.App.2d 352, 355; 117 P.2d 910]; (e) actually viewing a recorded document which is not entitled to recordation and which, therefore, would not impart constructive notice [see Parkside Realty Co. v. MacDonald (1913) 166 Cal. 426, 431; 137 P. 21]; (f) viewing a preliminary title report which refers to someone’s interest [see Sain v. Silvestre, supra, 78 Cal.App.3d 461, 469-70; Rice v. Capitol Trailer Sales of Redding (1966) 244 Cal.App.2d 690, 692-94; 53 Cal.Rptr. 384].

Constructive Notice

Subsequent purchasers or encumbrancers have constructive notice of the contents of all acknowledged and recorded conveyances from the time of their recordation. [See Civ. Code § 1213.] A conveyance that is not property indexed does not impart constructive notice [see Rice v. Taylor (1934) 220 Cal. 629, 633-34; 32 P.2d 381]; however, a properly indexed conveyance imparts constructive notice even if the document were recorded in an incorrect book of record. [Gov. Code § 27327.] Not every recorded document imparts constructive notice; if the document is not deemed a conveyance, as broadly defined [see Civ. Code § 1215], its recordation will not give constructive notice. [See discussion in If the document is properly recordable as an instrument which may affect title to real property, the recorded instrument not only gives constructive notice of its own contents but also of the contents of other documents to which the recorded instrument refers.  [See Caito v.United California Bank, supra, 20 Cal.3d 694, 702; American Medical International, Inc. v. Feller (1976) 59 Cal.App.3d 1008, 1020; 131 Cal.Rptr. 270; see also Pacific Trust Co. TTEE v. Fidelity Fed. Sav. & Loan Assn., supra, 184 Cal.App.3d 817, 825.]

If the document is unacknowledged or defectively acknowledged, the document does not impart constructive notice until one year after its recordation. [See Civ. Code § 1207; see e.g., Frederick v. Louis (1935) 10 Cal.App.2d 649, 651; 52 P. 2d 533.] An acknowledgment cannot be properly taken unless the notary “personally knows, or has satisfactory evidence that the person making the acknowledgement is the individual who is described in and who executed the instrument.” (Civ. Code § 1185.) A broad standard has been adopted to satisfy this requirement. For example, the notary may rely on the statement of a “credible witness,” personally known to the notary, that the person making the acknowledgment is personally known to the witness [Civ. Code § 1185(c)(1)]; the notary may also rely on a driver’s license.

[Civ. Code § 1185(c)(2)(A).]

If a trust deed is forged, it is void even in the hands of a person who would otherwise be a bona fide purchaser.  [See e.g., Trout v. Taylor, supra, 220 Cal. 652, 656; see discussion on forgery, Chapter V A 6, “Forgery and Fraud in The Factum”.] infra.1  Therefore, if a notary falsely certifies a forged trust deed, the notary will not be liable to the purported trustor for the amount of the trust deed since the purported trustor has no obligation to pay it.  [See Preder v. Fidelity & Casualty Co. (1931) 116 Cal.App. 17; 2 P.2d 223.]  However, the notary may be liable to the trustor for expenses involved in clearing title (see Preder, supra).  The trustor whose genuine signature is obtained on a document through fraud may be able to recover for the fraud.

Constructive notice is also imputed from known circumstances. Civil Code § 19 provides that:

Every person who has actual notice of circumstances sufficient to put a prudent man upon inquiry as to a particular fact, has constructive notice of the fact itself in all cases in which, by prosecuting such inquiry, he might have learned such fact.

see Olson v. Comwell (1933) 134 Cal.App. 419, 428; 25 P.2d 879.] Thus, the Court of Appeal has held that:

one who purchases at a trustee’ s sale with knowledge, express or implied, that the trustor is contesting the right to sell, is presumed to know the course of the proceedings and state of record from which the title of his grantor proceeded, and he is presumed to know, too, that the right of the defendant is to take an appeal within the statutory period, and also the consequences of the successful prosecution of this right;

notary’s false certification if the trust deed is acquired by a bona fide purchaser.  [See MacBride v. Schoen (1932) 121 Cal.App. 321; 8 P.2d 888.]  Generally, a notary and the notary’s sureties on the notary bond are liable for all the damages sustained by any person injured by the notary’s official misconduct.  (Gov. Code § 8214.)  The notary’s official misconduct must be related to notary duties.  [See e.g., Heidt v. Minor (1891) 89 Cal. 115, 118-19; 26 P. 627.]  The misconduct must also be the proximate cause of the injury.  (See MacBride v. Schoen, supra.)and he must be supposed to purchase with reference to these things. Bisno v. Sax, supra, 175 Cal.App.2d 714, 732; 346 P.2d 814.

Other circumstances will prompt inquiry. For example, if the purchase price of property is grossly disproportionate to its value, the low price is sufficient to put a prudent person on inquiry of a defect in title. [See e.g., Jordan v. Warnke (1962) 205 Cal.App.2d 621, 629; 23 Cal.Rptr. 300; Rabbit v. Atkinson (1944) 44 Cal.App.2d 752, 757; 113 P.2d 14.]

A corollary to this principle of inquiry notice is that “possession of real property is constructive notice to any intending purchaser or encumbrancer of the property of all of the rights and claims of the person in possession which would be disclosed by the inquiry.” Asisten v. Underwood (1960) 183 Cal.App.2d 304, 309; 7 Cal.Rptr. 84.] Although most of the cases involve purchases, the rule applies as well to encumbrances as indicated by the court in Asisten. [See J. R. Garrett Co. v. States (1935) 3 Cal.2d 379; 44 P.2d 538.]

The Supreme Court early noted that “[t]he simple, independent fact of possession is sufficient to raise a presumption of interest in the premises on behalf of the occupant.” Pell v. McElrov (1868) 36 Cal. 268, 273.]   The possession, however, must be

sufficiently open, notorious, and visible to impart the fact of possession. [See e.g., Taber v. Beske (1920) 182 Cal. 214, 217; 187 P. 746; High Fidelity Enterprises. Inc. v. Hull (1962) 210 Cal.App.2d 279, 281; 26 Cal.Rptr. 654.] In addition, the possession must be inconsistent with record title. [See e.g., Evans v. Faught (1965) 231 Cal.App.2d 698, 705; 42 Cal.Rptr. 133.] Thus, for example, a subsequent purchaser from a purchaser at a foreclosure sale could not claim bona fide purchaser status against one in open and notorious possession of the premises. (See Evans v. Superior Court, supra, 67 Cal.App.3d 162, 169.] In addition, possession can be shown by the use of the property by tenants. [See e.g., Manig v. Bachman (1954) 127 Cal.App.2d 216, 221-22; 273 P.2d 596.] Although generally the burden of proof is placed on the person claiming to be a bona fide purchaser [see e.g., Beattie v. Crewdson (1899) 124 Cal. 577, 579; 57 P. 463; Hodges v. Lochhead (1963) 217 Cal.App.2d 199, 203-05; 31 Cal.Rptr. 879], the burden is switched to the party claiming that notice should be implied from possession. [See High Fidelity Enterprises, Inc. v. Hull, supra, 210 Cal.App.2d 279, 281.]

Even though notice may have to be taken, the purchaser is only subject to the facts which would have been uncovered by an inquiry. In Keim v. Roether (1939) 32 Cal.App.2d 70; 89 P.2d 187, the plaintiff was induced to deed property to another knowing that it was going to be used as security for loans to be invested in an

enterprise which the plaintiff did not know to be a sham. The property was subsequently encumbered. After discovering the fraud, plaintiff attempted to invalidate the encumbrance. Plaintiff contended that plaintiff’s possession of the property when the encumbrance was placed on the property by a different owner of record, gave the encumbrancer notice of the plaintiff’s rights. The court rejected plaintiff’s position since any inquiry made by the encumbrancer would not have revealed any fraud because the fraud was then unknown to the plaintiff.

Certain defects in a trust deed will render it void even in the hands of a bona fide purchaser. A forged trust deed is absolutely invalid. However, a bona fide purchaser may still prevail if the grantor or trustor ratified or is estopped to deny the signature. [See Trout v. Tavlor, supra, 220 Cal. 652, 656-57; Blaisdell v. Leach, supra, 101 Cal. 405, 409; Crittenden v. McCloud (1951) 106 Cal.App.2d 42, 50; 234 P.2d 642.] If a trust deed is not delivered, it is invalid. If a trust deed is altered before delivery, it is void; however, if it is altered after delivery, a bona fide purchaser takes the instrument according to its original tenor. (See 2 Miller & Starr, Current Law of California Real Estate 590-91.) If the trust deed was procured through fraud in the factum (as opposed to fraud in the inducement), the trust deed is void. (See discussion in section on fraud in the factum, Chapter V A 6, infra, “Forgery and Fraud in the Factum”.]

A lawyer representing a homeowner in foreclosure should assure that actual or constructive notice of the homeowner’s claims are given to all potential purchasers. If rescission is an appropriate remedy, a notice of rescission should be recorded and served as soon as possible. A lis pendens should also be prepared when the action is commenced. Any temporary restraining order or preliminary injunction enjoining the sale should be recorded. If there is insufficient time to prepare these documents prior to the sale, the lawyer should consider sending the client to the sale with others to inform potential bidders orally and in writing of the trustor’s claims.

state sites for foreclosure help

NEWS

• Speaker Pérez and Assemblymember Fuentes: Helping Homeowners Critical to Recovery
• Assembly Passes Legislation to Help Taxpayers
• Governor Schwarzenegger Signs Mortgage Protection Legislation
• Foreclosure-mediation laws not much help
• Foreclosure Mediation Programs Aren’t Working Because of Net Present Value (NPV) Calculations
• US home foreclosure mediation in jeopardy – report
• State Foreclosure Prevention Ineffective, Study Shows (Update2)
• Report Finds US Foreclosure-Mediation Programs Falter
• More Loan Mod Problems Reported
• Report: BOA Among Worst For Loan Mods
• New head of State Bar of California assails mortgage modification scammers
• Why the foreclosure crisis isn’t improving
• more…

MEDIA CENTER

VIDEO

Home Front: California agency looks at ways to stem defaults ShareThis

Upstairs in Sacramento’s fashionable Senator Office Building, three full-time staffers and a steering committee of 12 are hurriedly crafting solutions to the raging mortgage crisis that neither banks nor the federal government has been able to stop. Read more…

Fighting for Mortgage Reform

http://www.youtube.com/v/PNU6WCSMPV0&hl=en&fs=1&

(Sacramento) One California state lawmaker is fighting to reverse the mortgage meltdown. State Assemblymember Ted Lieu (D-Torrance) says its time for financial institutions that have been bailed out by taxpayer dollars to do more to keep struggling homeowners in their homes. A new law authored by Assemblymember Lieu will force lenders to run a comprehensive loan modification program or face a 90 day foreclosure moratorium. And, Lieu says, his California Foreclosure Prevention Act is just the first step so hes introduced new legislation that will end some of the worst practices of the subprime loan industry. Heres more in this Assembly Web Report.

Foreclosure Relief Bill Headed to Governor’s Desk

http://www.youtube.com/v/XExe0-jcnGA&hl=en&fs=1&rel=0

(Sacramento) – Legislation by Assembly Speaker Karen Bass (D-Los Angeles) and Senate President pro Tem Don Perata (D-Oakland) providing immediate relief to homeowners caught in the mortgage crisis is on its way to the Governor’s desk. As we learn in this Assembly Web Report, SB 1137 would require lenders to contact property owners to attempt to avoid foreclosure, provide tenants additional time to move from a foreclosed property and mandate maintenance of foreclosed properties to diminish the impact on the value of neighboring homes. The legislation is an urgency measure, meaning it will become law once the Governor signs it.

Fixing the Foreclosure Crisis

http://www.youtube.com/v/rF8VKe_vK3g&hl=en&rel=0

(Sacramento) – As the mortgage meltdown in America continues to cause stress and strain for thousands of families, Assembly Democrats in the California State Legislature are working to reform the mortgage industry, hoping the proposed regulations will mitigate the financial pain. Led by Assembly Speaker Karen Bass (D-Los Angeles) and Assemblymember Ted Lieu (D-Torrance), Assembly Democrats have crafted a package of legislation designed  to change the way home loans are prepared and implemented. Here’s more on the Assembly Democrat’s mortgage crisis relief and reform package in this Assembly Web Report.

Assemblymember Caballero Helping Constituents With Mortgage Crisis Issues

http://www.youtube.com/v/R5pLho83XKw&rel=1

(Sacramento) – The sub-prime mortgage crisis continues to ravage families throughout California and the nation. Assemblymember Anna Caballero (D-Salinas) says in 2007 home foreclosures skyrocketed in her 28th Assembly District that includes portions of Monterey, San Benito , Santa Clara  and Santa Cruz counties.  A package of Democratic measures to relieve some of the problems in the mortgage industry  continues to move forward in the Assembly. As we learn in this Assembly Web Report, Assemblywoman Caballero is bringing helpful information directly to her constituents by hosting mortgage crisis forums throughout her district.

Assembly Democrats Take Action to Relieve Sub-prime Mortgage Crisis

http://www.youtube.com/v/QaooIYl2hd4&rel=1

(Sacramento) – As the sub-prime mortgage crisis continues to ravage families throughout the state and the nation Assembly Democrats are moving forward with legislation to help consumers who are in danger of losing their homes. Yesterday afternoon the Assembly Committee on Banking and Finance approved legislation from Assemblymembers Ted Lieu, Karen Bass and Alberto Torrico that will require lenders to report how they’re helping consumers who face possible foreclosure, that will keep “foreclosure consultants” from using predatory methods to take advantage of homeowners and that will require lenders to provide more and better notifications to homeowners of expected mortgage payment hikes.

Assembly Democrats on Mortgage Crisis

http://www.youtube.com/v/xHol_uxp1LQ&rel=0

(Sacramento) — Assembly Democrats, led by Speaker of the Assembly Fabian Núñez, are calling for a special legislative session to address the growing foreclosure crisis. The Speaker and the Assembly Democrats have introduced a package of bills designed to stem the rising tide of foreclosures and keep the problem from happening again in the future. As we learn in this Assembly Web Report the Center for Responsible Lending says nearly 180,000 California homes will be lost to foreclosure from the 826,900 sub-prime loans made in 2005-2006 alone. Thousands of families are suffering and California could lose nearly $3 billion in property tax revenue.

Stockton Foreclosure Rates Worst in Nation

http://mfile.akamai.com/14081/wmv/vod.ibsys.com/2007/1115/14600265.200k.asx

Stockton has the worst foreclosure rates in the nation for the third quarter of this year and Sacramento is not far behind.

Lawmakers Look for Foreclosure Fixes

http://mfile.akamai.com/14081/wmv/vod.ibsys.com/2007/1102/14498802.200k.asx

Part of the government’s new program encourages people to get help before they’re too deep in debt….Nov 02, 2007

Modesto Leads in Foreclosures Nationwide

http://mfile.akamai.com/14081/wmv/vod.ibsys.com/2007/0919/14145823.200k.asx

The sub prime lending mess created a housing bubble in the Sacramento Valley. In August, Modesto had more foreclosures than any other city in the nation….Sep 18, 2007

Bush Announces Initiatives for Mortgage Crisis

http://mfile.akamai.com/14081/wmv/vod.ibsys.com/2007/0831/14024625.200k.asx

President Bush announces several initiatives to address the escalating mortgage crisis and help homeowners who are facing foreclosure….Aug 31, 2007

All Stories on KCRA.com with Foreclosure in the heading

http://www.youtube.com/v/ge5mx3cyNLM&rel=0

Speaker Fabian Núñez on the Home Mortgage Crisis – part 1

http://www.youtube.com/v/t9kRZZxFkzI&rel=0

Speaker Fabian Núñez on the Home Mortgage Crisis – part 2

http://www.youtube.com/v/n1nQgiqHy44&rel=0

Speaker Fabian Núñez on the Home Mortgage Crisis – part 3

http://video.google.com/googleplayer.swf?docId=-6796823761430488459&hl=en

Assembly Banking and Finance Committee Chair Ted Lieu on the Home Mortgage Crisis

http://video.google.com/googleplayer.swf?docId=4566431094117868557&hl=en

Assembly Banking and Finance Committee Chair Ted Lieu on the Home Mortgage Crisis (part 2)

http://video.google.com/googleplayer.swf?docId=6265790924257265530&hl=en

Assemblymember Kevin de León on the Home Mortgage Crisis

http://video.google.com/googleplayer.swf?docId=-5026681319705120773&hl=en

Assembly Labor and Employment Committee Chair Sandré Swanson on the Home Mortgage Crisis

http://video.google.com/googleplayer.swf?docId=6654387921883820208&hl=en

Assembly Judiciary Committee Chair Dave Jones on the Home Mortgage Crisis

http://video.google.com/googleplayer.swf?docId=-9170833597049132957&hl=en

Assemblymember Kevin de León on the Home Mortgage Crisis (In Spanish)

http://video.google.com/googleplayer.swf?docId=7005864128976048040&hl=en

Assemblymember Kevin de León on the Home Mortgage Crisis – (part 2) (In Spanish)

AUDIO

• Assemblymember Ted Lieu, Chair of the Banking and Finance Committee says President’s Bush proposal falls far short of what is needed in California.
• Assemblymember Ted Lieu, Chair of the Banking and Finance Committee  says that what we need to do is take all those borrowers who have sub-prime loans that could have qualified initially and convert them to fixed rate loans.  This is about 55% to 61% of all sub-prime loans
• Assemblymember Ted Lieu, Chair of the Banking and Finance Committee says that in California 12,000 homeowners per week receive foreclosure notices.
• Assemblymember Ted Lieu, Chair of the Banking and Finance Committee says that we need to address the mortage crisis right away on a special session of the legislature.
• Speaker Fabian Núñez says California is being hit extremely hard by the foreclosure crisis.
• Speaker Fabian Núñez says thousands of California families are being hurt by the problem.
• Speaker Fabian Núñez says the foreclosure crisis is hurting the state budget as well.
• Speaker Fabian Núñez says the Governor should call a special session to deal with legislation on the issue.
• Assembly Banking and Finance Committee Chair Ted Lieu (D-Torrance) says the foreclosure crisis will get worse unless action is taken.
• Assembly Judiciary Committee Chair Dave Jones (D-Sacramento) says the foreclosure crisis is turning the American dream of home ownership into a nightmare.
• Assembly Labor and Employment Committee Chair Sandré Swanson (D-Oakland) says the middle class and the economy are being drag down by the foreclosure crisis.

NEWS

• Foreclosure-mediation laws not much help
• Foreclosure Mediation Programs Aren’t Working Because of Net Present Value (NPV) Calculations
• US home foreclosure mediation in jeopardy – report
• State Foreclosure Prevention Ineffective, Study Shows (Update2)
• Report Finds US Foreclosure-Mediation Programs Falter
• More Loan Mod Problems Reported
• Report: BOA Among Worst For Loan Mods
• New head of State Bar of California assails mortgage modification scammers
• Why the foreclosure crisis isn’t improving
• Major Banks Still Grappling With Foreclosures
• EDITORIAL: Try foreclosure solution
• Backlash against banks growing over mortgage modifications
• How One City May Punish Banks for Foreclosures
• Fla. Supreme Court’s foreclosure task force recommends mandatory mediation for primary homes
• Homeowners Avoiding Foreclosure Through State Mediation
• Record Number of Foreclosures Scheduled for Sale
• Bill would make new loan caps permanent
• Number of foreclosures surging in South Bay, throughout state
• Vallejo bankruptcy reveals need for transparent union contracts
• Report: Central Valley foreclosures make California more affordable
• Homeowner association fees, budgets dwindle
• Foreclosure statistics tell different stories to different interpreters
• Home Front: Sacramento-area renters suffer from foreclosures
• Home sales in San Francisco Bay area jump 29 percent
• Home sales hit 8-month high
• Senators reach deal on foreclosure legislation
• Home sales rise in Riverside County
• House, condo renters latest victims of foreclosure crisis
• Home Foreclosure Prevention Workshops – Merced & Los Banos
• Home Foreclosure Prevention Workshop – Tracy
• Torrico Bill Aiding Renters Caught In Foreclosure Squeeze Passes Assembly Committee
• Lieu, Assembly Democrats Introduce Comprehensive Subprime Lending Reform Legislation
• Lieu: Dataquick’s Release of New Foreclosure Data Shows Schwarzenegger and Bush Plans Failing
• Banking Committee Passes Lieu Bill To Force Data Disclosures By Mortgage Lenders
• Lieu Introduces Legislation Forcing Mortgage Lenders To Disclose Data About Efforts To Help Homeowners
• Assembly Banking and Finance Chair Lieu and Assembly Labor and Employment Chair Swanson Issue Statement in Response to Governor Schwarzenegger’s Latest Proposal to Tackle Subprime Mortgage Crisis
• California Assembly Banking and Finance Chair Ted Lieu’s Statement in Response to President Bush’s Most Recent Subprime Mortgage Plan
• California Assembly Banking and Finance Chair Ted Lieu on President Bush’s Proposal to Address the Subprime Mortgage Crisis
• Falling rates raise interest in home sales
• Faces of foreclosure
• Lawmakers plan to tackle housing crisis
• Assemblyman Solorio Calls Upon Countrywide To Freeze Interest Rates And Forclosures
• Assembly Democrats Take the Lead on the Subprime Mortage Crisis, While the GOP “Yacht Caucus” Sees Nothing but Calm Seas Ahead
• Calif. Democrats seek special legislative session on foreclosures
• Success fails to keep ‘yacht tax’ afloat
• Subprime measures proposed in California Assembly
• Democrats seek action on lending issues
• Plea for foreclosure help
• Help urged on foreclosures
• Officials act to forestall foreclosures, Nuñez urges legislative session, Schwarzenegger touts homeowner services and Paulson seeks breaks on rates.
• Núñez calls on governor to declare special session on subprime lending
• Foreclosures to have ‘profound’ impact, report warns
• Help urged on foreclosures
• State Democrats draft bills on subprime crisis
• Núñez calls on governor to declare special session on subprime lending
• Officials act to forestall foreclosures
• Calif. Democrats seek special legislative session on foreclosures
• Plea for foreclosure help
• Newsom asks lenders to offer more help to those facing foreclosure
• A Sea Change in California on the Sub Prime Mortgage Crisis
• Subprime measures proposed in California Assembly
• State Democratic lawmakers pitch new subprime lending laws
• Democrats unveil bills to slow foreclosure rate
• State lawmakers wade into sub-prime crisis
• Assembly Democrats to One Up Schwarzenegger on Sub-Prime Loan Crisis
• Countrywide Public Foreclosure Protests Held in Santa Ana … More to Follow
• Assembly Democrats Call for Special Session, Introduce Broadbased Legislative Package to Help Address Subprime Mortgage Foreclosures
• Sacramento Bee: A plan to avoid foreclosures and aid borrowers
• Governor touts loan relief role
• Homeowners’ big question
• $1.5 billion could be lost in county
• Markets drop on recession concerns
• Home sales at lowest level in 20 years
• Mortgage crisis expected to cost Bay Area $5.4 billion next

Assembly Democratic Caucus : Disclaimer : © 2009 California State Assembly

Brown Asks for Halt to All GMAC/Ally Financial Evictions in California

By: David Dayen Saturday September 25, 2010 7:37 am	Tweet8 Share4

When Ally Financial, formerly GMAC Mortgage, appeared to suspend foreclosure evictions in 23 states, they left out the ones where a judge is not required to sign off on foreclosures, including California, one of the four “sand states” with a massive amount of delinquencies and defaults. However, Attorney General Jerry Brown, who is running for Governor, has found a reason to demand a delay to any Ally/GMAC foreclosures:

California officials today demanded that Ally Financial Inc. stop foreclosing on homes in the state, citing reports indicating the big mortgage lender is violating the law.

The cease-and-desist letter, issued by Attorney General Jerry Brown, came as officials in several other states began investigating Ally’s operations […]

According to Brown, California law forbids a lender from issuing a notice of default – the first step toward foreclosure – unless it can show it has tried to contact the borrower. The law covers mortgages originated between 2003 and 2007.

If Jeffrey Stephan, the robo-signer who processed thousands of Ally/GMAC foreclosure affadavits with the courts, spent around a minute on each set of documentation, he cannot possibly say with any certainty that the lender contacted the borrowers. As Yves Smith says, Stephan could also have been engaged in a cover-up, knowingly signing off on documents where the lender never made the contact.

The New York Times has finally jumped in on this, assigning the article to David Streitfeld, who has revealed his bias against homeowners in previous stories. Streitfeld generally gets this one right, although you can see his slip showing at various points.

Florida lawyers representing borrowers in default said they would start filing motions as early as next week to have hundreds of foreclosure actions dismissed.

While GMAC is the first big lender to publicly acknowledge that its practices might have been improper, defense lawyers and consumer advocates have long argued that numerous lenders have used inaccurate or incomplete documents to remove delinquent owners from their houses.

The issue has broad consequences for the millions of buyers of foreclosed homes, some of whom might not have clear title to their bargain property. And it may offer unforeseen opportunities for those who were evicted.

“You know those billboards that lawyers put up seeking divorcing or bankrupt clients?” asked Greg Clark, a Florida real estate lawyer. “It’s only a matter of time until they start putting up signs that say, ‘You might be entitled to cash payment for wrongful foreclosure.’”

I hope he’s not intimating that the borrowers are taking advantage of the poor lenders and servicers, and using fly-by-night ambulance chasers to boot. GMAC/Ally, and many other lenders, broke the rules, lied to the judges, forged signatures, and took people’s homes under false pretenses. I know this isn’t normal practice in this country anymore, but they’re supposed to face the consequences.

Streitfeld also gets the Treasury Department on the record. The federal government is the majority owner in GMAC during the bank bailout.

“We have discussed the current situation with GMAC and expect them to take prompt action to correct any errors,” said Mark Paustenbach, a spokesman for the Treasury Department.

Sounds pretty hands-off to me. But they’re going to have to face up to this problem soon, because it’s about to spread nationwide.

YOU MAY BE ENTITLED TO CASH PAYMENT FOR WRONGFUL FORECLOSURE — Coming to a Billboard Near YOU

Posted on September 25, 2010 by Foreclosureblues

YOU MAY BE ENTITLED TO CASH PAYMENT FOR WRONGFUL FORECLOSURE — Coming to a Billboard Near YOU

Posted on September 25, 2010 by Neil Garfield

GARFIELD’S NOTE: Well it has finally happened. Three years ago I couldn’t get a single lawyer anywhere to consider this line of work. I predicted that this area of expertise in their practice would dwarf anything they were currently doing including personal injury and malpractice. I even tried to guarantee fees to lawyers and they wouldn’t take it. Now there are hundreds, if not thousands of lawyers who are either practicing in this field or are about to take the plunge. The early adopters who attended my workshops and read my materials, workbooks and bought the DVD’s are making some serious money and have positioned themselves perfectly ahead of the crowd.

Congratulations, everyone, it was the readers who made this happen. Without your support I would not have been able to reach the many thousands of homeowners and lawyers and government officials whoa re now turning the corner in their understanding of this mess and their willingness to do something about it.

The article below from Streitfeld sounds like it was written by me. No attribution though. No matter. The message is out. The foreclosures were and are wrongful, illegal, immoral and the opposite of any notion we have of justice. They were dressed up to look right and they got way with it for years because so many homeowners simply gave up convinced they had only to blame themselves for getting into a raw deal. Those homeowners who gave up were wrong and now they will find themselves approached by lawyers who will promise them return of the house they lost or damages for the wrongful foreclosure. When you left, you thought your loan had not been paid and that the notice you received was legitimate. You were wrong on both counts. The loan had been paid, there were other people who had signed up for liability along with you to justify the price on steroids that was sold to your lender (investor).

For those who are just catching up, here it is in a nutshell: Borrower signs a note to ABC Corp., which says it is the lender but isn’t. So you start right away with the wrong party named on the note and mortgage (deed of trust) PLUS the use of a meaningless nominee on the mortgage (deed of trust) which completely invalidates the documents and clouds the title. Meanwhile the lender gets a mortgage bond NOT SIGNED BY THE BORROWER. The bond says that this new “entity” (which usually they never bothered to actually form) will pay them from “receivables.” The receivables include but ARE NOT LIMITED TO the payments from the borrower who accepted funding of a loan. These other parties are there to justify the fact that the loan was sold at a huge premium to the lender without disclosure to either the borrower or the lender. (The tier 2 Yield Spread Premium that raises some really juicy causes of action under TILA, RESPA and the 10b-5 actions, including treble damages, attorney fees and restitution).

And and by the way for the more sophisticated lawyers, now would be the time to sharpen up your defense skills and your knowledge of administrative laws. Hundreds of thousands of disciplinary actions are going to filed against the professionally licensed people who attended the borrower’s “closing” and who attended the closing with the “lender.” With their livelihood at stake, their current arrogance will morph into abject fear. Here is your line when you quote them fees: “Remember that rainy day you were saving up for? Well, it’s raining!” Many lawyers and homeowners are going to realize that they have easy pickings when they bring administrative grievances in quasi criminal proceedings (don’t threaten it, that’s a crime, just do it) which results in restitution funded by the professional liability insurer. careful about the way you word the grievance. Don’t go overboard or else the insurance carrier will deny coverage based upon the allegation of an intentional act. You want to allege gross negligence.

EVERYBODY in the securitization structure gets paid premium money to keep their mouth shut and money changes hands faster than one of those street guys who moves shells or cards around on a table. Yes everyone gets paid — except the borrower who never got the benefit of his the bargain he signed up for — a home worth whatever they said it was worth at closing. It wasn’t worth that and it will never be worth that and everyone except the borrower knew it with the possible exception of some lenders who didn’t care because the other people who the borrower knew nothing about, had “guaranteed” the value of the lender’s investment and minimized the risk to the level of “cash equivalent” AAA-rated.

The securitization “partners” did not dot their “i’s” nor cross their “t’s.” And that is what the article below is about. But they failed to do that for a reason. They didn’t care about the documents because they never had any intention of using them anyway. It was all a scam cleverly disguised as a legitimate part of the home mortgage industry. It was instead a Ponzi scheme without any of the attributes of real appraisals, real underwriting reviews and committees and decisions. They bought the signature of the borrowers by promising the moon and they sold the apparent existence of signature (which in many cases) did not even exist) to Lenders by promising the stars.

And now, like it wasn’t news three years ago when we first brought it up, suddenly mainstream media is picking up the possibility that  the foreclosures were all fraudulent also. The pretender lenders were intentionally and knowingly misrepresenting themselves as lenders in order to grab property that didn’t belong to them and to which they had no rights — to the detriment of both the borrowers and the lenders. And some judges, government officials and even lawyers appear to be surprised by that, are you?

———–

GMAC’s Errors Leave Foreclosures in Question

By DAVID STREITFELD

The recent admission by a major mortgage lender that it had filed dubious foreclosure documents is likely to fuel a furor against hasty foreclosures, which have prompted complaints nationwide since housing prices collapsed.

Lawyers for distressed homeowners and law enforcement officials in several states on Friday seized on revelations by GMAC Mortgage, the country’s fourth-largest home loan lender, that it had violated legal rules in its rush to file many foreclosures as quickly as possible.

Attorneys general in Iowa and North Carolina said they were beginning separate investigations of the lender, and the attorney general in California directed the company to suspend all foreclosures in that state until it “proves that it’s following the letter of the law.”

The federal government, which became the majority owner of GMAC after supplying $17 billion to prevent the lender’s failure, said Friday that it had told the company to clean up its act.

Florida lawyers representing borrowers in default said they would start filing motions as early as next week to have hundreds of foreclosure actions dismissed.

While GMAC is the first big lender to publicly acknowledge that its practices might have been improper, defense lawyers and consumer advocates have long argued that numerous lenders have used inaccurate or incomplete documents to remove delinquent owners from their houses.

The issue has broad consequences for the millions of buyers of foreclosed homes, some of whom might not have clear title to their bargain property. And it may offer unforeseen opportunities for those who were evicted.

“You know those billboards that lawyers put up seeking divorcing or bankrupt clients?” asked Greg Clark, a Florida real estate lawyer. “It’s only a matter of time until they start putting up signs that say, ‘You might be entitled to cash payment for wrongful foreclosure.’ ”

The furor has already begun in Florida, which is one of the 23 states where foreclosures must be approved by courts. Nearly half a million foreclosures are in the Florida courts, overwhelming the system.

J. Thomas McGrady, chief judge in the foreclosure hotbed of St. Petersburg, said the problems went far beyond GMAC. Four major law firms doing foreclosures for lenders are under investigation by the Florida attorney general.

“Some of what the lenders are submitting in court is incompetent, some is just sloppy,” said Judge McGrady of the Sixth Judicial Circuit in Clearwater, Fla. “And somewhere in there could be a fraudulent element.”

In many cases, the defaulting homeowners do not hire lawyers, making problems generated by the lenders hard to detect.

“Documents are submitted, and there’s no one to really contest whether it is accurate or not,” the judge said. “We have an affidavit that says it is, so we rely on that. But then later we may find out that someone lost their home when they shouldn’t have. We don’t like that.”

GMAC, which is based in Detroit and is now a subsidiary of Ally Financial, first put the spotlight on its procedures when it told real estate agents and brokers last week that it was immediately and indefinitely stopping all evictions and sales of foreclosed property in the states — generally on the East Coast and in the Midwest — where foreclosures must be approved by courts.

That was a highly unusual move. So was the lender’s simultaneous withdrawal of important affidavits in pending cases. The affidavits were sworn statements by GMAC officials that they had personal knowledge of the foreclosure documents.

The company played down its actions, saying the defects in its foreclosure filings were “technical.” It has declined to say how many cases might be affected.

A GMAC spokeswoman also declined to say Friday whether the company would stop foreclosures in California as the attorney general, Jerry Brown, demanded. Foreclosures in California are not judicial.

GMAC’s vague explanations have been little comfort to some states.

“We cannot allow companies to systematically flout the rules of civil procedure,” said one of Iowa’s assistant attorneys general, Patrick Madigan. “They’re either going to have to hire more people or the foreclosure process is going to have to slow down.”

GMAC began as the auto financing arm of General Motors. During the housing boom, it made a heavy bet on subprime borrowers, giving loans to many people who could not afford a house.

“We have discussed the current situation with GMAC and expect them to take prompt action to correct any errors,” said Mark Paustenbach, a spokesman for the Treasury Department.

GMAC appears to have been forced to reveal its problems in the wake of several depositions given by Jeffrey Stephan, the team leader of the document execution unit in the lender’s Fort Washington, Pa., offices.

Mr. Stephan, 41, said in one deposition that he signed as many as 10,000 affidavits and other foreclosure documents a month; in another he said it was 6,000 to 8,000.

The affidavits state that Mr. Stephan, in his capacity as limited signing officer for GMAC, had examined “all books, records and documents” involved in the foreclosure and that he had “personal knowledge” of the relevant facts.

In the depositions, Mr. Stephan said he did not do this.

In a June deposition, a lawyer representing a foreclosed household put it directly: “So other than the due date and the balances due, is it correct that you do not know whether any other part of the affidavit that you sign is true?”

“That could be correct,” Mr. Stephan replied.

Mr. Stephan also said in depositions that his signature had not been notarized when he wrote it, but only later, or even the next day.

GMAC said Mr. Stephan was not available for an interview. The lender said its “failures” did not “reflect any disrespect for our courts or the judicial processes.”

Margery Golant, a Boca Raton, Fla., foreclosure defense lawyer, said GMAC “has cracked open the door.”

“Judges used to look at us strangely when we tried to tell them all these major financial institutions are lying,” said Ms. Golant, a former associate general counsel for the lender Ocwen Financial.

Her assistants were reviewing all of the law firm’s cases Friday to see whether GMAC had been involved. “Lawyers all over Florida and I’m sure all over the country are drafting pleadings,” she said. “We’ll file motions for sanctions and motions to dismiss the case for fraud on the court.”

For homeowners in foreclosure, the admissions by GMAC are bringing hope for resolution.

One such homeowner is John Turner, a commercial airline pilot based near Detroit. Three years ago he bought a Florida condo, thinking he would move down there with a girlfriend. The relationship fizzled, his finances dwindled, and the place went into foreclosure.

GMAC called several times a week, seeking its $195,000. Mr. Turner says he tried to meet the lender halfway but failed. Last week it put his case in limbo by withdrawing the affidavit.

“We should be able to come to an agreement that’s beneficial to both of us,” Mr. Turner said. “I feel like I’m due something.”

Foreclosure code

“Mortgage” Defined
2920.  (a) A mortgage is a contract by which specific property,
including an estate for years in real property, is hypothecated for the performance of an act, without the
necessity of a change of possession.
(b) For purposes of Sections 2924 to 2924h, inclusive, “mortgage” also means any security device or
instrument, other than a deed of trust, that confers a power of sale affecting real property or an estate
for years therein, to be exercised after breach of the obligation so secured, including a real property
sales contract, as defined in Section 2985, which contains such a provision.

Property in possession of adverse claimant
2921.  A mortgage may be created upon property held adversely to the mortgagor.

Writing-Formalities
2922.  A mortgage can be created, renewed, or extended, only by writing, executed with the formalities
required in the case of a grant of real property.

Lien-Special-Possession
2923.
The lien of a mortgage is special, unless otherwise expressly agreed, and is independent of
possession.

Broker’s Duty to Borrower
2923.1.
(a) A mortgage broker providing mortgage brokerage services to a borrower is the fiduciary of the
borrower, and any violation of the broker’s fiduciary duties shall be a violation of the mortgage broker’s
license law. This fiduciary duty includes a requirement that the mortgage broker place the economic
interest of the borrower ahead of his or her own economic interest. A mortgage broker who provides
mortgage brokerage services to the borrower owes this fiduciary duty to the borrower regardless of
whether the mortgage broker is acting as an agent for any other party in connection with the residential
mortgage loan transaction.
(b) For purposes of this section, the following definitions apply:
(1) “Licensed person” means a real estate broker licensed under the Real Estate Law (Part 1
(commencing with Section 10000) of Division 4 of the Business and Professions Code), a finance
lender or broker licensed under the California Finance Lenders Law (Division 9 (commencing with
Section 22000) of the Financial Code), a residential mortgage lender licensed under the California
Residential Mortgage Lending Act (Division 20 (commencing with Section 50000) of the Financial
Code), a commercial or industrial bank organized under the Banking Law (Division 1 (commencing with
Section 99) of the Financial Code), a savings association organized under the Savings Association
Law (Division 2 (commencing with Section 5000) of the Financial Code), and a credit union organized
under the California Credit Union Law (Division 5 (commencing with Section 14000) of the Financial
Code).
(2) “Mortgage broker” means a licensed person who provides
mortgage brokerage services. For purposes of this section, a licensed person who makes a residential
mortgage loan is a “mortgage broker,”and subject to the requirements of this section applicable to
mortgage brokers, only with respect to transactions in which the
licensed person provides mortgage brokerage services.
(3) “Mortgage brokerage services” means arranging or attempting to arrange, as exclusive agent for
the borrower or as dual agent for the borrower and lender, for compensation or in expectation of
compensation, paid directly or indirectly, a residential mortgage loan made by an unaffiliated third party.
(4) “Residential mortgage loan” means a consumer credit
transaction that is secured by residential real property that is
improved by four or fewer residential units.
(c) The duties set forth in this section shall not be construed to limit or narrow any other fiduciary duty of
a mortgage broker.

Pre-Foreclosure – Required Notice and Duty to Confer with Borrower –
2923.5.
(a) (1) A mortgagee, trustee, beneficiary, or authorized
agent may not file a notice of default pursuant to Section 2924 until 30 days after initial contact is made
as required by paragraph (2) or 30 days after satisfying the due diligence requirements as described in
subdivision (g).
(2) A mortgagee, beneficiary, or authorized agent shall contact the borrower in person or by telephone
in order to assess the borrower’s financial situation and explore options for the borrower to avoid
foreclosure. During the initial contact, the mortgagee, beneficiary, or authorized agent shall advise the
borrower that he or she has the right to request a subsequent meeting and, if requested, the mortgagee,
beneficiary, or authorized agent shall schedule the
meeting to occur within 14 days. The assessment of the borrower’s financial situation and discussion
of options may occur during the first contact, or at the subsequent meeting scheduled for that purpose.
In either case, the borrower shall be provided the toll-free telephone number made available by the
United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing
counseling agency. Any meeting may occur telephonically.
(b) A notice of default filed pursuant to Section 2924 shall
include a declaration that the mortgagee, beneficiary, or authorized agent has contacted the borrower,
has tried with due diligence to contact the borrower as required by this section, or that no contact was
required pursuant to subdivision (h).
(c) If a mortgagee, trustee, beneficiary, or authorized agent had already filed the notice of default prior to
the enactment of this section and did not subsequently file a notice of rescission, then the mortgagee,
trustee, beneficiary, or authorized agent shall, as part of the notice of sale filed pursuant to Section
2924f, include a declaration that either:
(1) States that the borrower was contacted to assess the borrower’s financial situation and to explore
options for the borrower to avoid foreclosure.
(2) Lists the efforts made, if any, to contact the borrower in the
event no contact was made.
(d) A mortgagee’s, beneficiary’s, or authorized agent’s loss
mitigation personnel may participate by telephone during any contact required by this section.
(e) For purposes of this section, a “borrower” shall include a
mortgagor or trustor.
(f) A borrower may designate, with consent given in writing, a
HUD-certified housing counseling agency, attorney, or other advisor to discuss with the mortgagee,
beneficiary, or authorized agent, on the borrower’s behalf, the borrowers financial situation and options
for the borrower to avoid foreclosure. That contact made at the direction of the borrower shall satisfy
the contact requirements of paragraph (2) of subdivision (a). Any loan modification or workout plan
offered at the meeting by the mortgagee, beneficiary, or authorized agent is subject to approval by the
borrower.
(g) A notice of default may be filed pursuant to Section 2924 when a mortgagee, beneficiary, or
authorized agent has not contacted a borrower as required by paragraph (2) of subdivision (a) provided
that the failure to contact the borrower occurred despite the due diligence of the mortgagee,
beneficiary, or authorized agent. For purposes of this section, “due diligence” shall require and mean
all of the following:
(1) A mortgagee, beneficiary, or authorized agent shall first
attempt to contact a borrower by sending a first-class letter that
includes the toll-free telephone number made available by HUD to find a HUD-certified housing
counseling agency.
(2) (A) After the letter has been sent, the mortgagee,
beneficiary, or authorized agent shall attempt to contact the
borrower by telephone at least three times at different hours and on different days. Telephone calls
shall be made to the primary telephone number on file.
(B) A mortgagee, beneficiary, or authorized agent may attempt to contact a borrower using an automated
system to dial borrowers, provided that, if the telephone call is answered, the call is connected to a
live representative of the mortgagee, beneficiary, or authorized agent.
(C) A mortgagee, beneficiary, or authorized agent satisfies the
telephone contact requirements of this paragraph if it determines, after attempting contact pursuant to
this paragraph, that the borrower’s primary telephone number and secondary telephone number or
numbers on file, if any, have been disconnected.
(3) If the borrower does not respond within two weeks after the telephone call requirements of
paragraph (2) have been satisfied, the mortgagee, beneficiary, or authorized agent shall then send a
certified letter, with return receipt requested.
(4) The mortgagee, beneficiary, or authorized agent shall provide a means for the borrower to contact it
in a timely manner, including a toll-free telephone number that will provide access to a live
representative during business hours.
(5) The mortgagee, beneficiary, or authorized agent has posted a prominent link on the homepage of its
Internet Web site, if any, to the following information:
(A) Options that may be available to borrowers who are unable to afford their mortgage payments and
who wish to avoid foreclosure, and instructions to borrowers advising them on steps to take to explore
those options.
(B) A list of financial documents borrowers should collect and be prepared to present to the mortgagee,
beneficiary, or authorized agent when discussing options for avoiding foreclosure.
(C) A toll-free telephone number for borrowers who wish to discuss options for avoiding foreclosure
with their mortgagee, beneficiary, or authorized agent.
(D) The toll-free telephone number made available by HUD to find a HUD-certified housing counseling
agency.
(h) Subdivisions (a), (c), and (g) shall not apply if any of the
following occurs:
(1) The borrower has surrendered the property as evidenced by either a letter confirming the surrender
or delivery of the keys to the property to the mortgagee, trustee, beneficiary, or authorized agent.
(2) The borrower has contracted with an organization, person, or entity whose primary business is
advising people who have decided to leave their homes on how to extend the foreclosure process and
avoid their contractual obligations to mortgagees or beneficiaries.
(3) A case has been filed by the borrower under Chapter 7, 11, 12, or 13 of Title 11 of the United States
Code and the bankruptcy court has not entered an order closing or dismissing the bankruptcy case, or
granting relief from a stay of foreclosure.
(i) This section shall apply only to mortgages or deeds of trust
recorded from January 1, 2003, to December 31, 2007, inclusive, that are secured by owner-occupied
residential real property containing no more than four dwelling units. For purposes of this subdivision,
“owner-occupied” means that the residence is the principal residence of the borrower as indicated to
the lender in loan documents.
(j) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends that date.

Notice of Sale – Additional 90 Days
2923.52.  (a) Notwithstanding paragraph (3) of subdivision (a) of
Section 2924, a mortgagee, trustee, or other person authorized to take sale shall not give notice of sale
until at least 90 days after the lapse of three months as set forth in paragraph (2) of
subdivision (a) of Section 2924, in order to allow the parties to
pursue a loan modification to prevent foreclosure, if all of the
following conditions exist:
(1) The loan was recorded during the period of January 1, 2003, to January 1, 2008, inclusive, and is
secured by residential real property.
(2) The loan at issue is the first mortgage or deed of trust that
the property secures.
(3) The borrower occupied the property as the borrower’s principal residence at the time the loan
became delinquent.
(4) The notice of default has been recorded on the property.
(b) This section does not apply to loans serviced by a mortgage loan servicer if that mortgage loan
servicer has obtained a temporary or final order of exemption pursuant to Section 2923.53 that is
current and valid at the time the notice of sale is given.
(c) This section does not apply to loans made, purchased, or
serviced by:
(1) A California state or local public housing agency or
authority, including state or local housing finance agencies
established under Division 31 (commencing with Section 50000) of the Health and Safety Code and
Chapter 6 (commencing with Section 980) of Division 4 of the Military and Veterans Code.
(2) Loans that are collateral for securities purchased by an
agency or authority described in paragraph (1).
(d) This section shall become operative 14 days after the issuance of regulations, which shall include
the form of the application for mortgage loan servicers, by the commissioner pursuant to subdivision
(d) of Section 2923.53.(e) This section shall remain in effect only until January 1, 2011, and as of that
date is repealed, unless a later enacted statute, that is enacted before January 1, 2011, deletes or
extends that date.

Loan Modification
2923.53.  (a) A mortgage loan servicer that has implemented a
comprehensive loan modification program that meets the requirements of this section shall have the
loans that it services exempted from the provisions of Section 2923.52, upon order of the
commissioner. A comprehensive loan modification program shall include all of the
following features:
(1) The loan modification program is intended to keep borrowers whose principal residences are
homes located in California in those homes when the anticipated recovery under the loan modification
or workout plan exceeds the anticipated recovery through foreclosure on a net present value basis.
(2) The loan modification program targets a ratio of the borrower’s housing-related debt to the
borrower’s gross income of 38 percent or less, on an aggregate basis in the program.
(3) The loan modification program includes some combination of the following features:
(A) An interest rate reduction, as needed, for a fixed term of at
least five years.
(B) An extension of the amortization period for the loan term, to no more than 40 years from the original
date of the loan.
(C) Deferral of some portion of the principal amount of the unpaid principal balance until maturity of the
loan.
(D) Reduction of principal.
(E) Compliance with a federally mandated loan modification
program.
(F) Other factors that the commissioner determines are
appropriate. In determining those factors, the commissioner may consider efforts implemented in other
jurisdictions that have resulted in a reduction in foreclosures.
(4) When determining a loan modification solution for a borrower under the loan modification program,
the servicer seeks to achieve long-term sustainability for the borrower.
(b) (1) A mortgage loan servicer may apply to the commissioner for an order exempting loans that it
services from Section 2923.52. If the mortgage loan servicer elects to apply for an order, the
application shall be in the form and manner determined by the commissioner.
(2) Upon receipt of an initial application for exemption under
this section, the commissioner shall immediately notify the applicant of the date of receipt of the
application and shall issue a temporary order, effective from that date of receipt, exempting the
mortgage loan servicer from the provisions of subdivision (a) of Section 2923.52. The temporary order
shall remain in effect until a final order has been issued by the commissioner pursuant to paragraph
(3). If the initial application for exemption is denied pursuant to
paragraph (3), the temporary order shall remain in effect for 30 days after the date of denial.
(3) Within 30 days of receipt of an initial or revised application, the commissioner shall make a final
determination on whether the application meets the criteria of subdivision (a). If, after review of the
application, the commissioner concludes that the mortgage loan servicer has a comprehensive loan
modification program that meets the requirements of subdivision (a), the commissioner shall issue a
final order exempting the mortgage loan servicer from the requirements of Section 2923.52. If the
commissioner concludes that the loan modification program does not meet the requirements of
subdivision (a), the application for exemption shall be denied and a final order shall not be issued.
(4) A mortgage loan servicer may submit a revised application if its application for exemption is denied.
(c) The commissioner may revoke a final order, upon reasonable notice and an opportunity to be heard,
if the mortgage loan servicer has submitted a materially false or misleading application or if the
approved loan modification program has been materially altered from the loan modification program on
which the exemption was based. A revocation by the commissioner shall not be retroactive.
(d) The commissioner shall adopt, no later than 10 days after the date this section takes effect,
emergency and final regulations to clarify the application of this section and Section 2923.52, including
the creation of the application for mortgage loan servicers and requirements regarding the reporting of
loan modification data by mortgage loan servicers.
(e) Three months after the first exemption is issued pursuant to subdivision (b) by order of any
commissioner specified in paragraph (1) of subdivision (j), the Secretary of Business, Transportation
and Housing shall submit a report to the Legislature regarding the details of the actions taken to
implement this section and the numbers of applications received and orders issued. The secretary
shall submit an additional report six months from the date of the submission of the first report and
every six months thereafter.
Within existing resources, the commissioners shall collect, from some or all mortgage loan servicers,
data regarding loan modifications accomplished pursuant to this section and shall make the data
available on an Internet Web site at least quarterly.
(f) The Secretary of Business, Transportation and Housing shall maintain on an Internet Web site a
publicly available list disclosing the final orders granting exemptions, the date of each order, and a link
to Internet Web sites describing the loan modification programs.
(g) Until January 1, 2010, the commissioner is authorized to
contract for goods and services necessary to implement the provisions of this section and Section
2923.52, and any such contract shall be exempt from Chapter 2 (commencing with Section 10290) of
Part 2 of Division 2 of the Public Contract Code. Not less than 30 days prior to awarding any contract
under this section, the commissioner shall provide the pending contract documents to the Joint
Legislative
Budget Committee.
(h) Any person who violates any provision of this section or
Section 2923.52 shall be deemed to have violated his or her license law as it relates to these
provisions.
(i) Nothing in this section or Section 2923.52 shall require a
servicer to violate contractual agreements for investor-owned loans or provide a modification to a
borrower who is not willing or able to pay under the modification.
(j) The submission of an application for an exemption under this section, the reliance upon such an
exemption, or the provision to the commissioner of data related to the loan modification program shall
not confer on the commissioner visitorial authority over a federally chartered financial institution.
Nothing in this subdivision is intended to affect the authority of the commissioner over a federally
chartered financial institution pursuant to federal law or regulation.
(k) For purposes of this section and Sections 2923.52 and 2923.54:
(1) “Commissioner” means any of the following:
(A) The Commissioner of Corporations for licensed residential mortgage lenders and servicers and
licensed finance lenders and brokers servicing mortgage loans and any other entities servicing
mortgage loans that are not described in subparagraph (B) or (C).
(B) The Commissioner of Financial Institutions for commercial and industrial banks and savings
associations and credit unions organized in this state servicing mortgage loans.
(C) The Real Estate Commissioner for licensed real estate brokers servicing mortgage loans.
(2) “Housing-related debt” means debt that includes loan
principal, interest, property taxes, hazard insurance, flood
insurance, mortgage insurance, and homeowner association fees.
(3) “Mortgage loan servicer” means a person or entity that
receives or has the right to receive installment payments of
principal, interest, or other amounts placed in escrow, pursuant to the terms of a mortgage loan or deed
of trust, and performs services relating to that receipt or enforcement as the holder of the note or on
behalf of the holder of the note evidencing that loan.(l) This section shall remain in effect only until
January 1, 2011, and as of that date is repealed, unless a later enacted statute, that is enacted before
January 1, 2011, deletes or extends that date.

Notice of Sale
2923.54.  (a) A notice of sale filed pursuant to Section 2924f shall include a declaration from the
mortgage loan servicer stating both of the following:
(1) Whether or not the mortgage loan servicer has obtained from the commissioner a final or temporary
order of exemption pursuant to Section 2923.53 that is current and valid on the date the notice of sale
is filed.
(2) Whether the timeframe for giving notice of sale specified in
subdivision (a) of Section 2923.52 does not apply pursuant to Section 2923.52 or 2923.55.
(b) Failure to comply with Section 2923.52 or 2923.53 shall not
invalidate any sale that would otherwise be valid under Section
2924f.(c) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2011, deletes or extends that date.

2923.55.  Section 2923.52 shall not apply if any of the following
occurs:
(a) The borrower has surrendered the property, as evidenced by either a letter confirming the surrender
or delivery of the keys to the property to the mortgagee, trustee, beneficiary, or authorized agent.
(b) The borrower has contracted with an organization, person, or entity whose primary business is
advising people who have decided to leave their homes regarding how to extend the foreclosure
process and avoid their contractual obligations to mortgagees or beneficiaries.
(c) A case has been filed by the borrower under Chapter 7, 11, 12, or 13 of Title 11 of the United States
Code, and the bankruptcy court has not entered an order closing or dismissing the bankruptcy case or
granting relief from a stay of foreclosure.(d) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1,
2011, deletes or extends that date.

Duty to Maximize Net Present Value Owed to All Parties
2923.6.  (a) The Legislature finds and declares that any duty
servicers may have to maximize net present value under their pooling and servicing agreements is
owed to all parties in a loan pool, or to all investors under a pooling and servicing agreement, not to
any particular party in the loan pool or investor under a polling and servicing agreement, and that a
servicer acts in the best interests of all parties to the loan pool or investors in the pooling and
servicing agreement if it agrees to or implements a loan modification or workout plan for which both of
the following apply:
(1) The loan is in payment default, or payment default is
reasonably foreseeable.
(2) Anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery
through foreclosure on a net present value basis.
(b) It is the intent of the Legislature that the mortgagee,
beneficiary, or authorized agent offer the borrower a loan
modification or workout plan if such a modification or plan is
consistent with its contractual or other authority.
(c) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends that date.

Trust Deed Exception – Exercise of Power of Sale in Trust Deed or Mortgage
2924.  (a) Every transfer of an interest in property, other than in
trust, made only as a security for the performance of another act, is to be deemed a mortgage, except
when in the case of personal property it is accompanied by actual change of possession, in which
case it is to be deemed a pledge. Where, by a mortgage created after July 27, 1917, of any estate in real
property, other than an estate at will or for years, less than two, or in any transfer in trust made after
July 27, 1917, of a like estate to secure the performance of an obligation, a power of sale is conferred
upon the mortgagee, trustee, or any other person, to be exercised after a breach of the obligation for
which that mortgage or transfer is a security, the power shall not be exercised except where the
mortgage or transfer is
made pursuant to an order, judgment, or decree of a court of record, or to secure the payment of bonds
or other evidences of indebtedness authorized or permitted to be issued by the Commissioner of
Corporations, or is made by a public utility subject to the provisions of the Public Utilities Act, until all
of the following apply:
(1) The trustee, mortgagee, or beneficiary, or any of their
authorized agents shall first file for record, in the office of the
recorder of each county wherein the mortgaged or trust property or some part or parcel thereof is
situated, a notice of default. That notice of default shall include all of the following:
(A) A statement identifying the mortgage or deed of trust by
stating the name or names of the trustor or trustors and giving the book and page, or instrument
number, if applicable, where the mortgage or deed of trust is recorded or a description of the
mortgaged or trust property.
(B) A statement that a breach of the obligation for which the
mortgage or transfer in trust is security has occurred.
(C) A statement setting forth the nature of each breach actually known to the beneficiary and of his or
her election to sell or cause to be sold the property to satisfy that obligation and any other obligation
secured by the deed of trust or mortgage that is in
default.
(D) If the default is curable pursuant to Section 2924c, the
statement specified in paragraph (1) of subdivision (b) of Section 2924c.
(2) Not less than three months shall elapse from the filing of the notice of default.
(3) Except as provided in Section 2923.52, after the lapse of the three months described in paragraph
(2), the mortgagee, trustee or other person authorized to take the sale shall give notice of sale, stating
the time and place thereof, in the manner and for a time not less than that set forth in Section 2924f.
(b) In performing acts required by this article, the trustee shall
incur no liability for any good faith error resulting from reliance
on information provided in good faith by the beneficiary regarding the nature and the amount of the
default under the secured obligation, deed of trust, or mortgage. In performing the acts required by this
article, a trustee shall not be subject to Title 1.6c (commencing with Section 1788) of Part 4.
(c) A recital in the deed executed pursuant to the power of sale of compliance with all requirements of
law regarding the mailing of copies of notices or the publication of a copy of the notice of default or the
personal delivery of the copy of the notice of default or the posting of copies of the notice of sale or the
publication of a copy thereof shall constitute prima facie evidence of compliance with these
requirements and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for
value and without notice.
(d) All of the following shall constitute privileged
communications pursuant to Section 47:
(1) The mailing, publication, and delivery of notices as required by this section.
(2) Performance of the procedures set forth in this article.
(3) Performance of the functions and procedures set forth in this article if those functions and
procedures are necessary to carry out the duties described in Sections 729.040, 729.050, and 729.080
of the Code of Civil Procedure.
(e) There is a rebuttable presumption that the beneficiary
actually knew of all unpaid loan payments on the obligation owed to the beneficiary and secured by the
deed of trust or mortgage subject to the notice of default. However, the failure to include an actually
known default shall not invalidate the notice of sale and the beneficiary shall not be precluded from
asserting a claim to this omitted default or defaults in a separate notice of default.
(f) This section shall remain in effect only until January 1, 2011, and as of that date is repealed, unless a
later enacted statute, that is enacted before January 1, 2011, deletes or extends that date.

2924.3.  (a) Except as provided in subdivisions (b) and (c), a
person who has undertaken as an agent of a mortgagee, beneficiary, or owner of a promissory note
secured directly or collaterally by a mortgage or deed of trust on real property or an estate for years
therein, to make collections of payments from an obligor under the note, shall mail the following
notices, postage prepaid, to each mortgagee, beneficiary or owner for whom the agent has agreed to
make collections from the obligor under the note:
(1) A copy of the notice of default filed in the office of the
county recorder pursuant to Section 2924 on account of a breach of obligation under the promissory
note on which the agent has agreed to make collections of payments, within 15 days after recordation.
(2) Notice that a notice of default has been recorded pursuant to Section 2924 on account of a breach of
an obligation secured by a mortgage or deed of trust against the same property or estate for years
therein having priority over the mortgage or deed of trust securing the obligation described in
paragraph (1), within 15 days after recordation or within three business days after the agent receives
the information, whichever is later.
(3) Notice of the time and place scheduled for the sale of the
real property or estate for years therein pursuant to Section 2924f under a power of sale in a mortgage
or deed of trust securing an obligation described in paragraphs (1) or (2), not less than 15 days before
the scheduled date of the sale or not later than the next business day after the agent receives the
information, whichever is later.
(b) An agent who has undertaken to make collections on behalf of mortgagees, beneficiaries or owners
of promissory notes secured by mortgages or deeds of trust on real property or an estate for years
therein shall not be required to comply with the provisions of subdivision (a) with respect to a
mortgagee, beneficiary or owner who is entitled to receive notice pursuant to subdivision (c) of Section
2924b or for whom a request for notice has been recorded pursuant to
subdivision (b) of Section 2924b if the agent reasonably believes that the address of the mortgagee,
beneficiary, or owner described in Section 2924b is the current business or residence address of that
person.
(c) An agent who has undertaken to make collections on behalf of mortgagees, beneficiaries or owners
of promissory notes secured by mortgages or deeds of trust on real property or an estate for years
therein shall not be required to comply with the provisions of paragraph (1) or (2) of subdivision (a) if
the agent knows or reasonably believes that the default has already been cured by or on behalf of the
obligor.
(d) Any failure to comply with the provisions of this section
shall not affect the validity of a sale in favor of a bona fide
purchaser or the rights of an encumbrancer for value and without notice.

Acceleration Clauses – Notice of
2924.5.  No clause in any deed of trust or mortgage on property
containing four or fewer residential units or on which four or fewer residential units are to be
constructed or in any obligation secured by any deed of trust or mortgage on property containing four or
fewer residential units or on which four or fewer residential units are to be constructed that provides
for the acceleration of the due date of the obligation upon the sale, conveyance, alienation, lease,
succession, assignment or other transfer of the property subject to
the deed of trust or mortgage shall be valid unless the clause is set forth, in its entirety in both the body
of the deed of trust or
mortgage and the promissory note or other document evidencing the secured obligation. This section
shall apply to all such deeds of trust, mortgages, and obligations secured thereby executed on or after
July 1, 1972.

Acceleration Clause – Limitations
2924.6.  (a) An obligee may not accelerate the maturity date of the principal and accrued interest on any
loan secured by a mortgage or deed of trust on residential real property solely by reason of any one or
more of the following transfers in the title to the real property:
(1) A transfer resulting from the death of an obligor where the
transfer is to the spouse who is also an obligor.
(2) A transfer by an obligor where the spouse becomes a coowner of the property.
(3) A transfer resulting from a decree of dissolution of the
marriage or legal separation or from a property settlement agreement incidental to such a decree which
requires the obligor to continue to make the loan payments by which a spouse who is an obligor
becomes the sole owner of the property.
(4) A transfer by an obligor or obligors into an inter vivos trust
in which the obligor or obligors are beneficiaries.
(5) Such real property or any portion thereof is made subject to a junior encumbrance or lien.
(b) Any waiver of the provisions of this section by an obligor is void and unenforceable and is contrary
to public policy.
(c) For the purposes of this section, “residential real property” means any real property which contains
at least one but not more than four housing units.
(d) This act applies only to loans executed or refinanced on or
after January 1, 1976.

Acceleration Clause – Disbursement of Insurance Proceeds – Enforceability
2924.7.  (a) The provisions of any deed of trust or mortgage on real property which authorize any
beneficiary, trustee, mortgagee, or his or her agent or successor in interest, to accelerate the maturity
date of the principal and interest on any loan secured thereby or to exercise any power of sale or other
remedy contained therein upon the failure of the trustor or mortgagor to pay, at the times provided  for
under the terms of the deed of trust or mortgage, any taxes, rents, assessments, or insurance
premiums with respect to the property or the loan, or any advances made by the beneficiary,
mortgagee, or his or her agent or successor in interest shall be enforceable whether or not impairment
of the security interest in the
property has resulted from the failure of the trustor or mortgagor to pay the taxes, rents, assessments,
insurance premiums, or advances.
(b) The provisions of any deed of trust or mortgage on real
property which authorize any beneficiary, trustee, mortgagee, or his or her agent or successor in
interest, to receive and control the disbursement of the proceeds of any policy of fire, flood, or other
hazard insurance respecting the property shall be enforceable whether or not impairment of the
security interest in the property has resulted from the event that caused the proceeds of the insurance
policy to become payable.

Foreclosure – Additional Notice to Occupants
2924.8.  (a) Upon posting a notice of sale pursuant to Section
2924f, a trustee or authorized agent shall also post the following notice, in the manner required for
posting the notice of sale on the property to be sold, and a mortgagee, trustee, beneficiary, or
authorized agent, concurrently with the mailing of the notice of sale pursuant to Section 2924b, shall
send by first-class mail in an envelope addressed to the “Resident of property subject to foreclosure
sale” the following notice in English and the languages described in Section 1632: “Foreclosure
process has begun on this property, which may affect your right to continue to live in this
property. Twenty days or more after the date of this notice, this
property may be sold at foreclosure. If you are renting this
property, the new property owner may either give you a new lease or rental agreement or provide you
with a 60-day eviction notice.
However, other laws may prohibit an eviction in this circumstance or provide you with a longer notice
before eviction. You may wish to contact a lawyer or your local legal aid or housing counseling agency
to discuss any rights you may have.”
(b) It shall be an infraction to tear down the notice described in subdivision (a) within 72 hours of
posting. Violators shall be
subject to a fine of one hundred dollars ($100).
(c) A state government entity shall make available translations of the notice described in subdivision
(a) which may be used by a mortgagee, trustee, beneficiary, or authorized agent to satisfy the
requirements of this section.
(d) This section shall only apply to loans secured by residential real property, and if the billing address
for the mortgage note is different than the property address.
(e) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends that date.

Attorney for Trustee May Conduct Sale and Act as Auctioneer
2924a.  If, by the terms of any trust or deed of trust a power of
sale is conferred upon the trustee, the attorney for the trustee, or any duly authorized agent, may
conduct the sale and act in the sale as the auctioneer for the trustee.

Copies of Notice of Sale and Default – How Procured
2924b.  (a) Any person desiring a copy of any notice of default and of any notice of sale under any deed
of trust or mortgage with power of sale upon real property or an estate for years therein, as to which
deed of trust or mortgage the power of sale cannot be exercised until these notices are given for the
time and in the manner provided in Section 2924 may, at any time subsequent to recordation of the
deed of trust or mortgage and prior to recordation of notice of default thereunder, cause to be filed for
record in the office of
the recorder of any county in which any part or parcel of the real property is situated, a duly
acknowledged request for a copy of the notice of default and of sale. This request shall be signed and
acknowledged by the person making the request, specifying the name and address of the person to
whom the notice is to be mailed, shall identify the deed of trust or mortgage by stating the names of the
parties thereto, the date of recordation thereof, and the book and page where the deed of trust or
mortgage is recorded or the recorder’s number, and shall be in substantially the following form:

“In accordance with Section 2924b, Civil Code,  request is  hereby  made that a copy of any notice of
default and a  copy of any notice of  sale  under the deed of trust (or mortgage) recorded  ______, ____,
in  Book  _____ page ____ records of ____ County, (or  filed for record  with  recorder’s serial number
____, _______County)  California,  executed  by ____ as trustor (or mortgagor) in which  ________ is
named  as
beneficiary (or mortgagee) and ______________ as  trustee be mailed to  _________________ at
___________________________.
Name                    Address
NOTICE: A copy of any notice of default and of  any notice of sale will  be  sent only to the address
contained in this  recorded request. If your address changes, a new  request must be
recorded.
Signature _________________”

Upon the filing for record of the request, the recorder shall
index in the general index of grantors the names of the trustors (or mortgagor) recited therein and the
names of persons requesting copies.
(b) The mortgagee, trustee, or other person authorized to record the notice of default or the notice of
sale shall do each of the following:
(1) Within 10 business days following recordation of the notice of default, deposit or cause to be
deposited in the United States mail an envelope, sent by registered or certified mail with postage
prepaid, containing a copy of the notice with the recording date shown thereon, addressed to each
person whose name and address are set forth in a duly recorded request therefor, directed to the
address designated in the request and to each trustor or mortgagor at his or her last known address if
different than the address specified in the deed of trust or mortgage with power of sale.
(2) At least 20 days before the date of sale, deposit or cause to
be deposited in the United States mail an envelope, sent by
registered or certified mail with postage prepaid, containing a copy of the notice of the time and place
of sale, addressed to each person whose name and address are set forth in a duly recorded request
therefor, directed to the address designated in the request and to each trustor or mortgagor at his or her
last known address if different than the address specified in the deed of trust or mortgage with power
of sale.
(3) As used in paragraphs (1) and (2), the “last known address” of each trustor or mortgagor means the
last business or residence physical address actually known by the mortgagee, beneficiary, trustee, or
other person authorized to record the notice of default.
For the purposes of this subdivision, an address is “actually known” if it is contained in the original
deed of trust or mortgage, or in any subsequent written notification of a change of physical address
from the trustor or mortgagor pursuant to the deed of trust or mortgage. For the purposes of this
subdivision, “physical address” does not include an e-mail or any form of electronic address for a
trustor or mortgagor. The beneficiary shall inform the trustee of the
trustor’s last address actually known by the beneficiary. However, the trustee shall incur no liability for
failing to send any notice to the last address unless the trustee has actual knowledge of it.
(4) A “person authorized to record the notice of default or the
notice of sale” shall include an agent for the mortgagee or
beneficiary, an agent of the named trustee, any person designated in an executed substitution of
trustee, or an agent of that substituted trustee.
(c) The mortgagee, trustee, or other person authorized to record the notice of default or the notice of
sale shall do the following:
(1) Within one month following recordation of the notice of
default, deposit or cause to be deposited in the United States mail an envelope, sent by registered or
certified mail with postage prepaid, containing a copy of the notice with the recording date shown
thereon, addressed to each person set forth in paragraph (2), provided that the estate or interest of any
person entitled to receive notice under this subdivision is acquired by an instrument sufficient to
impart constructive notice of the estate or interest in the land or portion thereof that is subject to the
deed of trust or mortgage being foreclosed, and provided the instrument is recorded in
the office of the county recorder so as to impart that constructive notice prior to the recording date of
the notice of default and provided the instrument as so recorded sets forth a mailing address that the
county recorder shall use, as instructed within the instrument, for the return of the instrument after
recording, and which address shall be the address used for the purposes of mailing notices herein.
(2) The persons to whom notice shall be mailed under this
subdivision are:
(A) The successor in interest, as of the recording date of the
notice of default, of the estate or interest or any portion thereof
of the trustor or mortgagor of the deed of trust or mortgage being foreclosed.
(B) The beneficiary or mortgagee of any deed of trust or mortgage recorded subsequent to the deed of
trust or mortgage being foreclosed, or recorded prior to or concurrently with the deed of trust or
mortgage being foreclosed but subject to a recorded agreement or a recorded statement of
subordination to the deed of trust or mortgage being foreclosed.
(C) The assignee of any interest of the beneficiary or mortgagee described in subparagraph (B), as of the
recording date of the notice of default.
(D) The vendee of any contract of sale, or the lessee of any
lease, of the estate or interest being foreclosed that is recorded
subsequent to the deed of trust or mortgage being foreclosed, or recorded prior to or concurrently with
the deed of trust or mortgage being foreclosed but subject to a recorded agreement or statement of
subordination to the deed of trust or mortgage being foreclosed.
(E) The successor in interest to the vendee or lessee described in subparagraph (D), as of the
recording date of the notice of default.
(F) The office of the Controller, Sacramento, California, where,
as of the recording date of the notice of default, a “Notice of Lien for Postponed Property Taxes” has
been recorded against the real property to which the notice of default applies.
(3) At least 20 days before the date of sale, deposit or cause to
be deposited in the United States mail an envelope, sent by
registered or certified mail with postage prepaid, containing a copy of the notice of the time and place
of sale addressed to each person to whom a copy of the notice of default is to be mailed as provided in
paragraphs (1) and (2), and addressed to the office of any state taxing agency, Sacramento, California,
that has recorded, subsequent to the deed of trust or mortgage being foreclosed, a notice of tax lien
prior to the recording date of the notice of default against the real property to which the notice of default
applies.
(4) Provide a copy of the notice of sale to the Internal Revenue Service, in accordance with Section
7425 of the Internal Revenue Code and any applicable federal regulation, if a “Notice of Federal Tax
Lien under Internal Revenue Laws” has been recorded, subsequent to the deed of trust or mortgage
being foreclosed, against the real property to which the notice of sale applies. The failure to provide the
Internal Revenue Service with a copy of the notice of sale pursuant to this paragraph shall be sufficient
cause to rescind the
trustee’s sale and invalidate the trustee’s deed, at the option of
either the successful bidder at the trustee’s sale or the trustee,
and in either case with the consent of the beneficiary. Any option to rescind the trustee’s sale pursuant
to this paragraph shall be exercised prior to any transfer of the property by the successful bidder to a
bona fide purchaser for value. A rescission of the trustee’s sale pursuant to this paragraph may be
recorded in a notice of rescission pursuant to Section 1058.5.
(5) The mailing of notices in the manner set forth in paragraph
(1) shall not impose upon any licensed attorney, agent, or employee of any person entitled to receive
notices as herein set forth any duty to communicate the notice to the entitled person from the fact that
the mailing address used by the county recorder is the address of the attorney, agent, or employee.
(d) Any deed of trust or mortgage with power of sale hereafter
executed upon real property or an estate for years therein may
contain a request that a copy of any notice of default and a copy of any notice of sale thereunder shall
be mailed to any person or party thereto at the address of the person given therein, and a copy of any
notice of default and of any notice of sale shall be mailed to each of these at the same time and in the
same manner required as though a separate request therefor had been filed by each of these persons
as herein authorized. If any deed of trust or mortgage with power of
sale executed after September 19, 1939, except a deed of trust or mortgage of any of the classes
excepted from the provisions of Section 2924, does not contain a mailing address of the trustor or
mortgagor therein named, and if no request for special notice by the trustor or mortgagor in
substantially the form set forth in this section has subsequently been recorded, a copy of the notice of
default shall be published once a week for at least four weeks in a newspaper of general circulation in
the county in which the property is situated, the publication to commence within 10 business days after
the filing of the notice of default. In lieu of publication, a copy of the notice of default may be delivered
personally to the trustor or mortgagor within the 10 business days or at any time before publication is
completed, or by posting the notice of default in a conspicuous place on the property and mailing the
notice to the last known address of the trustor or mortgagor.
(e) Any person required to mail a copy of a notice of default or
notice of sale to each trustor or mortgagor pursuant to subdivision (b) or (c) by registered or certified
mail shall simultaneously cause to be deposited in the United States mail, with postage prepaid and
mailed by first-class mail, an envelope containing an additional copy of the required notice addressed
to each trustor or mortgagor at the same address to which the notice is sent by registered or certified
mail pursuant to subdivision (b) or (c). The person shall execute and retain an affidavit identifying the
notice mailed, showing the name
and residence or business address of that person, that he or she is over the age of 18 years, the date
of deposit in the mail, the name and address of the trustor or mortgagor to whom sent, and that the
envelope was sealed and deposited in the mail with postage fully prepaid. In the absence of fraud, the
affidavit required by this subdivision shall establish a conclusive presumption of mailing.
(f) With respect to separate interests governed by an association, as defined in subdivision (a) of
Section 1351, the association may cause to be filed in the office of the recorder in the county in which
the separate interests are situated a request that a mortgagee, trustee, or other person authorized to
record a notice of default regarding any of those separate interests mail to the association a copy of any
trustee’s deed upon sale concerning a separate interest. The request shall include a legal description
or the assessor’s parcel number of the separate interests. A request recorded pursuant to this
subdivision shall include the name and address of the association and a statement that it is a
homeowners’ association.  Subsequent requests of an association shall supersede prior requests.  A
request pursuant to this subdivision shall be recorded before the filing of a notice of default. The
mortgagee, trustee, or other authorized person shall mail the requested information to the association
within 15 business days following the date the trustee’s deed is recorded. Failure to mail the request,
pursuant to this
subdivision, shall not affect the title to real property.
(g) No request for a copy of any notice filed for record pursuant to this section, no statement or
allegation in the request, and no record thereof shall affect the title to real property or be deemed notice
to any person that any person requesting copies of notice has or claims any right, title, or interest in, or
lien or charge upon the property described in the deed of trust or mortgage referred to therein.
(h) “Business day,” as used in this section, has the meaning
specified in Section 9.

Reinstatement After Default in Payment – Notice
2924c.  (a) (1) Whenever all or a portion of the principal sum of
any obligation secured by deed of trust or mortgage on real property or an estate for years therein
hereafter executed has, prior to the maturity date fixed in that obligation, become due or been declared
due by reason of default in payment of interest or of any installment of principal, or by reason of failure
of trustor or mortgagor to pay, in accordance with the terms of that obligation or of the deed of trust or
mortgage, taxes, assessments, premiums for insurance, or advances made by beneficiary or
mortgagee in accordance with the
terms of that obligation or of the deed of trust or mortgage, the
trustor or mortgagor or his or her successor in interest in the
mortgaged or trust property or any part thereof, or any beneficiary under a subordinate deed of trust or
any other person having a subordinate lien or encumbrance of record thereon, at any time within the
period specified in subdivision (e), if the power of sale therein is to be exercised, or, otherwise at any
time prior to entry of the decree of foreclosure, may pay to the beneficiary or the mortgagee or their
successors in interest, respectively, the entire amount due, at the time payment is tendered, with
respect to (A) all amounts of principal, interest, taxes, assessments, insurance premiums, or advances
actually known by the beneficiary to be, and
that are, in default and shown in the notice of default, under the
terms of the deed of trust or mortgage and the obligation secured thereby, (B) all amounts in default on
recurring obligations not shown in the notice of default, and (C) all reasonable costs and expenses,
subject to subdivision (c), which are actually incurred in enforcing the terms of the obligation, deed of
trust, or mortgage, and trustee’s or attorney’s fees, subject to subdivision (d), other than the portion of
principal as would not then be due had no default
occurred, and thereby cure the default theretofore existing, and
thereupon, all proceedings theretofore had or instituted shall be dismissed or discontinued and the
obligation and deed of trust or mortgage shall be reinstated and shall be and remain in force and effect,
the same as if the acceleration had not occurred. This section does not apply to bonds or other
evidences of indebtedness authorized or permitted to be issued by the Commissioner of Corporations
or made by a public utility subject to the Public Utilities Code. For the purposes of this subdivision, the
term “recurring obligation” means all amounts of principal and interest on the loan, or rents, subject to
the deed of trust or mortgage in default due after the notice of default is recorded; all amounts of
principal and interest or rents advanced on senior liens or leaseholds which are advanced after the
recordation of the notice of
default; and payments of taxes, assessments, and hazard insurance advanced after recordation of the
notice of default. Where the beneficiary or mortgagee has made no advances on defaults which would
constitute recurring obligations, the beneficiary or mortgagee may require the trustor or mortgagor to
provide reliable written evidence that the amounts have been paid prior to reinstatement.
(2) If the trustor, mortgagor, or other person authorized to cure the default pursuant to this subdivision
does cure the default, the beneficiary or mortgagee or the agent for the beneficiary or mortgagee shall,
within 21 days following the reinstatement, execute and deliver to the trustee a notice of rescission
which rescinds the declaration of default and demand for sale and advises the trustee of the date of
reinstatement. The trustee shall cause the notice of
rescission to be recorded within 30 days of receipt of the notice of rescission and of all allowable fees
and costs.
No charge, except for the recording fee, shall be made against the trustor or mortgagor for the
execution and recordation of the notice which rescinds the declaration of default and demand for sale.
(b) (1) The notice, of any default described in this section,
recorded pursuant to Section 2924, and mailed to any person pursuant to Section 2924b, shall begin
with the following statement, printed or typed thereon:
“IMPORTANT NOTICE [14-point boldface type if printed or in
capital letters if typed]
IF YOUR PROPERTY IS IN FORECLOSURE BECAUSE YOU ARE BEHIND IN YOUR PAYMENTS, IT MAY
BE SOLD WITHOUT ANY COURT ACTION, [14-point boldface type if printed or in capital letters if typed]
and you may have the
legal right to bring your account in good standing by paying all of your past due payments plus permitted
costs and expenses within the time permitted by law for reinstatement of your account, which is
normally five business days prior to the date set for the sale of your property. No sale date may be set
until three months from the date this notice of default may be recorded (which date of recordation
appears on this notice).

This amount is ____________ as of ______________ (Date)
and will increase until your account becomes current.

While your property is in foreclosure, you still must pay other
obligations (such as insurance and taxes) required by your note and deed of trust or mortgage. If you
fail to make future payments on the loan, pay taxes on the property, provide insurance on the property,
or pay other obligations as required in the note and deed of trust or mortgage, the beneficiary or
mortgagee may insist that you do so in order to reinstate your account in good standing. In addition, the
beneficiary or mortgagee may require as a condition to reinstatement
that you provide reliable written evidence that you paid all senior liens, property taxes, and hazard
insurance premiums.
Upon your written request, the beneficiary or mortgagee will give you a written itemization of the entire
amount you must pay. You may not have to pay the entire unpaid portion of your account, even though
full payment was demanded, but you must pay all amounts in default at the time payment is made.
However, you and your beneficiary or mortgagee may mutually agree in writing prior to the time the
notice of sale is posted (which may not be earlier than the end of the three-month period stated above)
to, among other things, (1) provide additional time in which to cure the default by transfer
of the property or otherwise; or (2) establish a schedule of payments in order to cure your default; or
both (1) and (2).
Following the expiration of the time period referred to in the
first paragraph of this notice, unless the obligation being
foreclosed upon or a separate written agreement between you and your creditor permits a longer
period, you have only the legal right to stop the sale of your property by paying the entire amount
demanded by your creditor.
To find out the amount you must pay, or to arrange for payment to stop the foreclosure, or if your
property is in foreclosure for any other reason, contact:

____________________________________
(Name of beneficiary or mortgagee)
____________________________________
(Mailing address)
____________________________________
(Telephone)

If you have any questions, you should contact a lawyer or the
governmental agency which may have insured your loan.
Notwithstanding the fact that your property is in foreclosure, you may offer your property for sale,
provided the sale is concluded prior to the conclusion of the foreclosure.
Remember, YOU MAY LOSE LEGAL RIGHTS IF YOU DO NOT TAKE PROMPT ACTION. [14-point boldface
type if printed or in capital letters if typed]”

Unless otherwise specified, the notice, if printed, shall appear
in at least 12-point boldface type.
If the obligation secured by the deed of trust or mortgage is a
contract or agreement described in paragraph (1) or (4) of
subdivision (a) of Section 1632, the notice required herein shall be in Spanish if the trustor requested a
Spanish language translation of the contract or agreement pursuant to Section 1632. If the obligation
secured by the deed of trust or mortgage is contained in a home improvement contract, as defined in
Sections 7151.2 and 7159 of the Business and Professions Code, which is subject to Title 2
(commencing with Section 1801), the seller shall specify on the contract whether or not the contract
was principally negotiated in Spanish and if the contract was principally negotiated in Spanish, the
notice required herein shall be in Spanish. No assignee of the
contract or person authorized to record the notice of default shall incur any obligation or liability for
failing to mail a notice in
Spanish unless Spanish is specified in the contract or the assignee or person has actual knowledge
that the secured obligation was  principally negotiated in Spanish. Unless specified in writing to the
contrary, a copy of the notice required by subdivision (c) of Section 2924b shall be in English.
(2) Any failure to comply with the provisions of this subdivision shall not affect the validity of a sale in
favor of a bona fide purchaser or the rights of an encumbrancer for value and without notice.
(c) Costs and expenses which may be charged pursuant to Sections 2924 to 2924i, inclusive, shall be
limited to the costs incurred for recording, mailing, including certified and express mail charges,
publishing, and posting notices required by Sections 2924 to 2924i, inclusive, postponement pursuant
to Section 2924g not to exceed fifty dollars ($50) per postponement and a fee for a trustee’s sale
guarantee or, in the event of judicial foreclosure, a litigation guarantee. For purposes of this
subdivision, a trustee or beneficiary
may purchase a trustee’s sale guarantee at a rate meeting the
standards contained in Sections 12401.1 and 12401.3 of the Insurance Code.
(d) Trustee’s or attorney’s fees which may be charged pursuant to subdivision (a), or until the notice of
sale is deposited in the mail to the trustor as provided in Section 2924b, if the sale is by power of sale
contained in the deed of trust or mortgage, or, otherwise at any time prior to the decree of foreclosure,
are hereby authorized to be in a base amount that does not exceed three hundred dollars ($300) if the
unpaid principal sum secured is one hundred fifty thousand dollars ($150,000) or less, or two hundred
fifty dollars ($250) if the unpaid principal sum secured exceeds one hundred fifty
thousand dollars ($150,000), plus one-half of 1 percent of the unpaid principal sum secured exceeding
fifty thousand dollars ($50,000) up to and including one hundred fifty thousand dollars ($150,000), plus
one-quarter of 1 percent of any portion of the unpaid principal sum secured exceeding one hundred fifty
thousand dollars ($150,000) up to and including five hundred thousand dollars ($500,000), plus one-
eighth of 1 percent of any portion of the unpaid principal sum secured exceeding five hundred thousand
dollars ($500,000). Any
charge for trustee’s or attorney’s fees authorized by this
subdivision shall be conclusively presumed to be lawful and valid where the charge does not exceed
the amounts authorized herein. For purposes of this subdivision, the unpaid principal sum secured
shall determined as of the date the notice of default is recorded.
(e) Reinstatement of a monetary default under the terms of an
obligation secured by a deed of trust, or mortgage may be made at any time within the period
commencing with the date of recordation of the notice of default until five business days prior to the
date of sale set forth in the initial recorded notice of sale.
In the event the sale does not take place on the date set forth in the initial recorded notice of sale or a
subsequent recorded notice of sale is required to be given, the right of reinstatement shall be revived
as of the date of recordation of the subsequent notice of sale, and shall continue from that date until
five business days prior to the date of sale set forth in the subsequently recorded notice of sale.
In the event the date of sale is postponed on the date of sale set forth in either an initial or any
subsequent notice of sale, or is postponed on the date declared for sale at an immediately preceding
postponement of sale, and, the postponement is for a period which exceeds five business days from
the date set forth in the notice of sale, or declared at the time of postponement, then the right of
reinstatement is revived as of the date of postponement and shall continue from that date until five
business days prior to the date of sale declared at the time of the postponement.
Nothing contained herein shall give rise to a right of
reinstatement during the period of five business days prior to the date of sale, whether the date of sale
is noticed in a notice of sale or declared at a postponement of sale.
Pursuant to the terms of this subdivision, no beneficiary,
trustee, mortgagee, or their agents or successors shall be liable in any manner to a trustor, mortgagor,
their agents or successors or any beneficiary under a subordinate deed of trust or mortgage or any
other person having a subordinate lien or encumbrance of record thereon for the failure to allow a
reinstatement of the obligation secured by a deed of trust or mortgage during the period of five
business days prior to the sale of the security property, and no such right of reinstatement during this
period is created by this section. Any right of reinstatement created by this section is terminated five
business days prior to the date of sale set forth in the initial date of sale, and is revived only as
prescribed herein and only as of the date set forth herein.
As used in this subdivision, the term “business day” has the same meaning as specified in Section 9.

Payment of Costs and Expenses — Payment of Trustee’s and Attorney’s Fees —
Prohibition Against Rebate or Kickback
2924d.  (a) Commencing with the date that the notice of sale is
deposited in the mail, as provided in Section 2924b, and until the property is sold pursuant to the power
of sale contained in the mortgage or deed of trust, a beneficiary, trustee, mortgagee, or his
or her agent or successor in interest, may demand and receive from a
trustor, mortgagor, or his or her agent or successor in interest, or
any beneficiary under a subordinate deed of trust, or any other
person having a subordinate lien or encumbrance of record those
reasonable costs and expenses, to the extent allowed by subdivision
(c) of Section 2924c, which are actually incurred in enforcing the
terms of the obligation and trustee’s or attorney’s fees which are
hereby authorized to be in a base amount which does not exceed four
hundred twenty-five dollars ($425) if the unpaid principal sum
secured is one hundred fifty thousand dollars ($150,000) or less, or
three hundred sixty dollars ($360) if the unpaid principal sum
secured exceeds one hundred fifty thousand dollars ($150,000), plus 1
percent of any portion of the unpaid principal sum secured exceeding
fifty thousand dollars ($50,000) up to and including one hundred
fifty thousand dollars ($150,000), plus one-half of 1 percent of any
portion of the unpaid principal sum secured exceeding one hundred
fifty thousand dollars ($150,000) up to and including five hundred
thousand dollars ($500,000), plus one-quarter of 1 percent of any
portion of the unpaid principal sum secured exceeding five hundred
thousand dollars ($500,000). For purposes of this subdivision, the
unpaid principal sum secured shall be determined as of the date the
notice of default is recorded. Any charge for trustee’s or attorney’s
fees authorized by this subdivision shall be conclusively presumed
to be lawful and valid where that charge does not exceed the amounts
authorized herein. Any charge for trustee’s or attorney’s fees made
pursuant to this subdivision shall be in lieu of and not in addition
to those charges authorized by subdivision (d) of Section 2924c.
(b) Upon the sale of property pursuant to a power of sale, a
trustee, or his or her agent or successor in interest, may demand and
receive from a beneficiary, or his or her agent or successor in
interest, or may deduct from the proceeds of the sale, those
reasonable costs and expenses, to the extent allowed by subdivision
(c) of Section 2924c, which are actually incurred in enforcing the
terms of the obligation and trustee’s or attorney’s fees which are
hereby authorized to be in an amount which does not exceed four
hundred twenty-five dollars ($425) or one percent of the unpaid
principal sum secured, whichever is greater. For purposes of this
subdivision, the unpaid principal sum secured shall be determined as
of the date the notice of default is recorded. Any charge for trustee’
s or attorney’s fees authorized by this subdivision shall be
conclusively presumed to be lawful and valid where that charge does
not exceed the amount authorized herein. Any charges for trustee’s or
attorney’s fees made pursuant to this subdivision shall be in lieu
of and not in addition to those charges authorized by subdivision (a)
of this section and subdivision (d) of Section 2924c.
(c) (1) No person shall pay or offer to pay or collect any rebate
or kickback for the referral of business involving the performance of
any act required by this article.
(2) Any person who violates this subdivision shall be liable to
the trustor for three times the amount of any rebate or kickback,
plus reasonable attorney’s fees and costs, in addition to any other
remedies provided by law.
(3) No violation of this subdivision shall affect the validity of
a sale in favor of a bona fide purchaser or the rights of an
encumbrancer for value without notice.
(d) It shall not be unlawful for a trustee to pay or offer to pay
a fee to an agent or subagent of the trustee for work performed by
the agent or subagent in discharging the trustee’s obligations under
the terms of the deed of trust. Any payment of a fee by a trustee to
an agent or subagent of the trustee for work performed by the agent
or subagent in discharging the trustee’s obligations under the terms
of the deed of trust shall be conclusively presumed to be lawful and
valid if the fee, when combined with other fees of the trustee, does
not exceed in the aggregate the trustee’s fee authorized by
subdivision (d) of Section 2924c or subdivision (a) or (b) of this
section.
(e) When a court issues a decree of foreclosure, it shall have
discretion to award attorney’s fees, costs, and expenses as are
reasonable, if provided for in the note, deed of trust, or mortgage,
pursuant to Section 580c of the Code of Civil Procedure.

Request for Written Notice of Delinquencies — Requirements
2924e.  (a) The beneficiary or mortgagee of any deed of trust or
mortgage on real property either containing one to four residential
units or given to secure an original obligation not to exceed three
hundred thousand dollars ($300,000) may, with the written consent of
the trustor or mortgagor that is either effected through a signed and
dated agreement which shall be separate from other loan and security
documents or disclosed to the trustor or mortgagor in at least
10-point type, submit a written request by certified mail to the
beneficiary or mortgagee of any lien which is senior to the lien of
the requester, for written notice of any or all delinquencies of four
months or more, in payments of principal or interest on any
obligation secured by that senior lien notwithstanding that the loan
secured by the lien of the requester is not then in default as to
payments of principal or interest.
The request shall be sent to the beneficiary or mortgagee, or
agent which it might designate for the purpose of receiving loan
payments, at the address specified for the receipt of these payments,
if known, or, if not known, at the address shown on the recorded
deed of trust or mortgage.
(b) The request for notice shall identify the ownership or
security interest of the requester, the date on which the interest of
the requester will terminate as evidenced by the maturity date of
the note of the trustor or mortgagor in favor of the requester, the
name of the trustor or mortgagor and the name of the current owner of
the security property if different from the trustor or mortgagor,
the street address or other description of the security property, the
loan number (if available to the requester) of the loan secured by
the senior lien, the name and address to which notice is to be sent,
and shall include or be accompanied by the signed written consent of
the trustor or mortgagor, and a fee of forty dollars ($40). For
obligations secured by residential properties, the request shall
remain valid until withdrawn in writing and shall be applicable to
all delinquencies as provided in this section, which occur prior to
the date on which the interest of the requester will terminate as
specified in the request or the expiration date, as appropriate. For
obligations secured by nonresidential properties, the request shall
remain valid until withdrawn in writing and shall be applicable to
all delinquencies as provided in this section, which occur prior to
the date on which the interest of the requester will terminate as
specified in the request or the expiration date, as appropriate. The
beneficiary or mortgagee of obligations secured by nonresidential
properties that have sent five or more notices prior to the
expiration of the effective period of the request may charge a fee up
to fifteen dollars ($15) for each subsequent notice. A request for
notice shall be effective for five years from the mailing of the
request or the recording of that request, whichever occurs later, and
may be renewed within six months prior to its expiration date by
sending the beneficiary or mortgagee, or agent, as the case may be,
at the address to which original requests for notice are to be sent,
a copy of the earlier request for notice together with a signed
statement that the request is renewed and a renewal fee of fifteen
dollars ($15). Upon timely submittal of a renewal request for notice,
the effectiveness of the original request is continued for five
years from the time when it would otherwise have lapsed. Succeeding
renewal requests may be submitted in the same manner. The request for
notice and renewals thereof shall be recorded in the office of the
county recorder of the county in which the security real property is
situated. The rights and obligations specified in this section shall
inure to the benefit of, or pass to, as the case may be, successors
in interest of parties specified in this section. Any successor in
interest of a party entitled to notice under this section shall file
a request for that notice with any beneficiary or mortgagee of the
senior lien and shall pay a processing fee of fifteen dollars ($15).
No new written consent shall be required from the trustor or
mortgagor.
(c) Unless the delinquency has been cured, within 15 days
following the end of four months from any delinquency in payments of
principal or interest on any obligation secured by the senior lien
which delinquency exists or occurs on or after 10 days from the
mailing of the request for notice or the recording of that request,
whichever occurs later, the beneficiary or mortgagee shall give
written notice to the requester of the fact of any delinquency and
the amount thereof.
The notice shall be given by personal service, or by deposit in
the mail, first-class postage paid. Following the recording of any
notice of default pursuant to Section 2924 with respect to the same
delinquency, no notice or further notice shall be required pursuant
to this section.
(d) If the beneficiary or mortgagee of any such senior lien fails
to give notice to the requester as required in subdivision (c), and a
subsequent foreclosure or trustee’s sale of the security property
occurs, the beneficiary or mortgagee shall be liable to the requester
for any monetary damage due to the failure to provide notice within
the time period specified in subdivision (c) which the requester has
sustained from the date on which notice should have been given to the
earlier of the date on which the notice is given or the date of the
recording of the notice of default under Section 2924, and shall also
forfeit to the requester the sum of three hundred dollars ($300). A
showing by the beneficiary or mortgagee by a preponderance of the
evidence that the failure to provide timely notice as required by
subdivision (c) resulted from a bona fide error notwithstanding the
maintenance of procedures reasonably adapted to avoid any such error
shall be a defense to any liability for that failure.
(e) If any beneficiary or mortgagee, or agent which it had
designated for the purpose of receiving loan payments, has been
succeeded in interest by any other person, any request for notice
received pursuant to this section shall be transmitted promptly to
that person.
(f) Any failure to comply with the provisions of this section
shall not affect the validity of a sale in favor of a bona fide
purchaser or the rights of an encumbrancer for value and without
notice.
(g) Upon satisfaction of an obligation secured by a junior lien
with respect to which a notice request was made pursuant to this
section, the beneficiary or mortgagee that made the request shall
communicate that fact in writing to the senior lienholder to whom the
request was made. The communication shall specify that provision of
notice pursuant to the prior request under this section is no longer
required.

Notice of Sale of Property under Power of Sale in Deed of Trust or Mortgage
2924f.  (a) As used in this section and Sections 2924g and 2924h,
“property” means real property or a leasehold estate therein, and
“calendar week” means Monday through Saturday, inclusive.
(b) (1) Except as provided in subdivision (c), before any sale of
property can be made under the power of sale contained in any deed of
trust or mortgage, or any resale resulting from a rescission for a
failure of consideration pursuant to subdivision (c) of Section
2924h, notice of the sale thereof shall be given by posting a written
notice of the time of sale and of the street address and the
specific place at the street address where the sale will be held, and
describing the property to be sold, at least 20 days before the date
of sale in one public place in the city where the property is to be
sold, if the property is to be sold in a city, or, if not, then in
one public place in the judicial district in which the property is to
be sold, and publishing a copy once a week for three consecutive
calendar weeks, the first publication to be at least 20 days before
the date of sale, in a newspaper of general circulation published in
the city in which the property or some part thereof is situated, if
any part thereof is situated in a city, if not, then in a newspaper
of general circulation published in the judicial district in which
the property or some part thereof is situated, or in case no
newspaper of general circulation is published in the city or judicial
district, as the case may be, in a newspaper of general circulation
published in the county in which the property or some part thereof is
situated, or in case no newspaper of general circulation is
published in the city or judicial district or county, as the case may
be, in a newspaper of general circulation published in the county in
this state that (A) is contiguous to the county in which the
property or some part thereof is situated and (B) has, by comparison
with all similarly contiguous counties, the highest population based
upon total county population as determined by the most recent federal
decennial census published by the Bureau of the Census. A copy of
the notice of sale shall also be posted in a conspicuous place on the
property to be sold at least 20 days before the date of sale, where
possible and where not restricted for any reason. If the property is
a single-family residence the posting shall be on a door of the
residence, but, if not possible or restricted, then the notice shall
be posted in a conspicuous place on the property; however, if access
is denied because a common entrance to the property is restricted by
a guard gate or similar impediment, the property may be posted at
that guard gate or similar impediment to any development community.
Additionally, the notice of sale shall conform to the minimum
requirements of Section 6043 of the Government Code and be recorded
with the county recorder of the county in which the property or some
part thereof is situated at least 20 days prior to the date of sale.
The notice of sale shall contain the name, street address in this
state, which may reflect an agent of the trustee, and either a
toll-free telephone number or telephone number in this state of the
trustee, and the name of the original trustor, and also shall contain
the statement required by paragraph (3) of subdivision (c). In
addition to any other description of the property, the notice shall
describe the property by giving its street address, if any, or other
common designation, if any, and a county assessor’s parcel number;
but if the property has no street address or other common
designation, the notice shall contain a legal description of the
property, the name and address of the beneficiary at whose request
the sale is to be conducted, and a statement that directions may be
obtained pursuant to a written request submitted to the beneficiary
within 10 days from the first publication of the notice. Directions
shall be deemed reasonably sufficient to locate the property if
information as to the location of the property is given by reference
to the direction and approximate distance from the nearest
crossroads, frontage road, or access road. If a legal description or
a county assessor’s parcel number and either a street address or
another common designation of the property is given, the validity of
the notice and the validity of the sale shall not be affected by the
fact that the street address, other common designation, name and
address of the beneficiary, or the directions obtained therefrom are
erroneous or that the street address, other common designation, name
and address of the beneficiary, or directions obtained therefrom are
omitted. The term “newspaper of general circulation,” as used in this
section, has the same meaning as defined in Article 1 (commencing
with Section 6000) of Chapter 1 of Division 7 of Title 1 of the
Government Code.
The notice of sale shall contain a statement of the total amount
of the unpaid balance of the obligation secured by the property to be
sold and reasonably estimated costs, expenses, advances at the time
of the initial publication of the notice of sale, and, if republished
pursuant to a cancellation of a cash equivalent pursuant to
subdivision (d) of Section 2924h, a reference of that fact; provided,
that the trustee shall incur no liability for any good faith error
in stating the proper amount, including any amount provided in good
faith by or on behalf of the beneficiary. An inaccurate statement of
this amount shall not affect the validity of any sale to a bona fide
purchaser for value, nor shall the failure to post the notice of sale
on a door as provided by this subdivision affect the validity of any
sale to a bona fide purchaser for value.
(2) If the sale of the property is to be a unified sale as
provided in subparagraph (B) of paragraph (1) of subdivision (a) of
Section 9604 of the Commercial Code, the notice of sale shall also
contain a description of the personal property or fixtures to be
sold. In the case where it is contemplated that all of the personal
property or fixtures are to be sold, the description in the notice of
the personal property or fixtures shall be sufficient if it is the
same as the description of the personal property or fixtures
contained in the agreement creating the security interest in or
encumbrance on the personal property or fixtures or the filed
financing statement relating to the personal property or fixtures. In
all other cases, the description in the notice shall be sufficient
if it would be a sufficient description of the personal property or
fixtures under Section 9108 of the Commercial Code. Inclusion of a
reference to or a description of personal property or fixtures in a
notice of sale hereunder shall not constitute an election by the
secured party to conduct a unified sale pursuant to subparagraph (B)
of paragraph (1) of subdivision (a) of Section 9604 of the Commercial
Code, shall not obligate the secured party to conduct a unified sale
pursuant to subparagraph (B) of paragraph (1) of subdivision (a) of
Section 9604 of the Commercial Code, and in no way shall render
defective or noncomplying either that notice or a sale pursuant to
that notice by reason of the fact that the sale includes none or less
than all of the personal property or fixtures referred to or
described in the notice. This paragraph shall not otherwise affect
the obligations or duties of a secured party under the Commercial
Code.
(c) (1) This subdivision applies only to deeds of trust or
mortgages which contain a power of sale and which are secured by real
property containing a single-family, owner-occupied residence, where
the obligation secured by the deed of trust or mortgage is contained
in a contract for goods or services subject to the provisions of the
Unruh Act (Chapter 1 (commencing with Section 1801) of Title 2 of
Part 4 of Division 3).
(2) Except as otherwise expressly set forth in this subdivision,
all other provisions of law relating to the exercise of a power of
sale shall govern the exercise of a power of sale contained in a deed
of trust or mortgage described in paragraph (1).
(3) If any default of the obligation secured by a deed of trust or
mortgage described in paragraph (1) has not been cured within 30
days after the recordation of the notice of default, the trustee or
mortgagee shall mail to the trustor or mortgagor, at his or her last
known address, a copy of the following statement:

YOU ARE IN DEFAULT UNDER A
_______________________________________________,
(Deed of trust or mortgage)
DATED ____. UNLESS YOU TAKE ACTION TO PROTECT
YOUR PROPERTY, IT MAY BE SOLD AT A PUBLIC SALE.
IF
YOU NEED AN EXPLANATION OF THE NATURE OF THE
PROCEEDING AGAINST YOU, YOU SHOULD CONTACT A
LAWYER.

(4) All sales of real property pursuant to a power of sale
contained in any deed of trust or mortgage described in paragraph (1)
shall be held in the county where the residence is located and shall
be made to the person making the highest offer. The trustee may
receive offers during the 10-day period immediately prior to the date
of sale and if any offer is accepted in writing by both the trustor
or mortgagor and the beneficiary or mortgagee prior to the time set
for sale, the sale shall be postponed to a date certain and prior to
which the property may be conveyed by the trustor to the person
making the offer according to its terms. The offer is revocable until
accepted. The performance of the offer, following acceptance,
according to its terms, by a conveyance of the property to the
offeror, shall operate to terminate any further proceeding under the
notice of sale and it shall be deemed revoked.
(5) In addition to the trustee fee pursuant to Section 2924c, the
trustee or mortgagee pursuant to a deed of trust or mortgage subject
to this subdivision shall be entitled to charge an additional fee of
fifty dollars ($50).
(6) This subdivision applies only to property on which notices of
default were filed on or after the effective date of this
subdivision.

Procedure for Sale of Property — Postponement of Sale
2924g.  (a) All sales of property under the power of sale contained
in any deed of trust or mortgage shall be held in the county where
the property or some part thereof is situated, and shall be made at
auction, to the highest bidder, between the hours of 9 a.m. and 5
p.m. on any business day, Monday through Friday.
The sale shall commence at the time and location specified in the
notice of sale. Any postponement shall be announced at the time and
location specified in the notice of sale for commencement of the sale
or pursuant to paragraph (1) of subdivision (c).
If the sale of more than one parcel of real property has been
scheduled for the same time and location by the same trustee, (1) any
postponement of any of the sales shall be announced at the time
published in the notice of sale, (2) the first sale shall commence at
the time published in the notice of sale or immediately after the
announcement of any postponement, and (3) each subsequent sale shall
take place as soon as possible after the preceding sale has been
completed.
(b) When the property consists of several known lots or parcels,
they shall be sold separately unless the deed of trust or mortgage
provides otherwise. When a portion of the property is claimed by a
third person, who requires it to be sold separately, the portion
subject to the claim may be thus sold. The trustor, if present at the
sale, may also, unless the deed of trust or mortgage otherwise
provides, direct the order in which property shall be sold, when the
property consists of several known lots or parcels which may be sold
to advantage separately, and the trustee shall follow that direction.
After sufficient property has been sold to satisfy the indebtedness,
no more can be sold.
If the property under power of sale is in two or more counties,
the public auction sale of all of the property under the power of
sale may take place in any one of the counties where the property or
a portion thereof is located.
(c) (1) There may be a postponement or postponements of the sale
proceedings, including a postponement upon instruction by the
beneficiary to the trustee that the sale proceedings be postponed, at
any time prior to the completion of the sale for any period of time
not to exceed a total of 365 days from the date set forth in the
notice of sale. The trustee shall postpone the sale in accordance
with any of the following:
(A) Upon the order of any court of competent jurisdiction.
(B) If stayed by operation of law.
(C) By mutual agreement, whether oral or in writing, of any
trustor and any beneficiary or any mortgagor and any mortgagee.
(D) At the discretion of the trustee.
(2) In the event that the sale proceedings are postponed for a
period or periods totaling more than 365 days, the scheduling of any
further sale proceedings shall be preceded by giving a new notice of
sale in the manner prescribed in Section 2924f. New fees incurred for
the new notice of sale shall not exceed the amounts specified in
Sections 2924c and 2924d, and shall not exceed reasonable costs that
are necessary to comply with this paragraph.
(d) The notice of each postponement and the reason therefor shall
be given by public declaration by the trustee at the time and place
last appointed for sale. A public declaration of postponement shall
also set forth the new date, time, and place of sale and the place of
sale shall be the same place as originally fixed by the trustee for
the sale. No other notice of postponement need be given. However, the
sale shall be conducted no sooner than on the seventh day after the
earlier of (1) dismissal of the action or (2) expiration or
termination of the injunction, restraining order, or stay that
required postponement of the sale, whether by entry of an order by a
court of competent jurisdiction, operation of law, or otherwise,
unless the injunction, restraining order, or subsequent order
expressly directs the conduct of the sale within that seven-day
period. For purposes of this subdivision, the seven-day period shall
not include the day on which the action is dismissed, or the day on
which the injunction, restraining order, or stay expires or is
terminated. If the sale had been scheduled to occur, but this
subdivision precludes its conduct during that seven-day period, a new
notice of postponement shall be given if the sale had been scheduled
to occur during that seven-day period. The trustee shall maintain
records of each postponement and the reason therefor.
(e) Notwithstanding the time periods established under subdivision
(d), if postponement of a sale is based on a stay imposed by Title
11 of the United States Code (bankruptcy), the sale shall be
conducted no sooner than the expiration of the stay imposed by that
title and the seven-day provision of subdivision (d) shall not apply.

Trustee’s Sale — Bidding Rules
2924h.  (a) Each and every bid made by a bidder at a trustee’s sale
under a power of sale contained in a deed of trust or mortgage shall
be deemed to be an irrevocable offer by that bidder to purchase the
property being sold by the trustee under the power of sale for the
amount of the bid. Any second or subsequent bid by the same bidder or
any other bidder for a higher amount shall be a cancellation of the
prior bid.
(b) At the trustee’s sale the trustee shall have the right (1) to
require every bidder to show evidence of the bidder’s ability to
deposit with the trustee the full amount of his or her final bid in
cash, a cashier’s check drawn on a state or national bank, a check
drawn by a state or federal credit union, or a check drawn by a state
or federal savings and loan association, savings association, or
savings bank specified in Section 5102 of the Financial Code and
authorized to do business in this state, or a cash equivalent which
has been designated in the notice of sale as acceptable to the
trustee prior to, and as a condition to, the recognizing of the bid,
and to conditionally accept and hold these amounts for the duration
of the sale, and (2) to require the last and highest bidder to
deposit, if not deposited previously, the full amount of the bidder’s
final bid in cash, a cashier’s check drawn on a state or national
bank, a check drawn by a state or federal credit union, or a check
drawn by a state or federal savings and loan association, savings
association, or savings bank specified in Section 5102 of the
Financial Code and authorized to do business in this state, or a cash
equivalent which has been designated in the notice of sale as
acceptable to the trustee, immediately prior to the completion of the
sale, the completion of the sale being so announced by the fall of
the hammer or in another customary manner. The present beneficiary of
the deed of trust under foreclosure shall have the right to offset
his or her bid or bids only to the extent of the total amount due the
beneficiary including the trustee’s fees and expenses.
(c) In the event the trustee accepts a check drawn by a credit
union or a savings and loan association pursuant to this subdivision
or a cash equivalent designated in the notice of sale, the trustee
may withhold the issuance of the trustee’s deed to the successful
bidder submitting the check drawn by a state or federal credit union
or savings and loan association or the cash equivalent until funds
become available to the payee or endorsee as a matter of right.
For the purposes of this subdivision, the trustee’s sale shall be
deemed final upon the acceptance of the last and highest bid, and
shall be deemed perfected as of 8 a.m. on the actual date of sale if
the trustee’s deed is recorded within 15 calendar days after the
sale, or the next business day following the 15th day if the county
recorder in which the property is located is closed on the 15th day.
However, the sale is subject to an automatic rescission for a failure
of consideration in the event the funds are not “available for
withdrawal” as defined in Section 12413.1 of the Insurance Code. The
trustee shall send a notice of rescission for a failure of
consideration to the last and highest bidder submitting the check or
alternative instrument, if the address of the last and highest bidder
is known to the trustee.
If a sale results in an automatic right of rescission for failure
of consideration pursuant to this subdivision, the interest of any
lienholder shall be reinstated in the same priority as if the
previous sale had not occurred.
(d) If the trustee has not required the last and highest bidder to
deposit the cash, a cashier’s check drawn on a state or national
bank, a check drawn by a state or federal credit union, or a check
drawn by a state or federal savings and loan association, savings
association, or savings bank specified in Section 5102 of the
Financial Code and authorized to do business in this state, or a cash
equivalent which has been designated in the notice of sale as
acceptable to the trustee in the manner set forth in paragraph (2) of
subdivision (b), the trustee shall complete the sale. If the last
and highest bidder then fails to deliver to the trustee, when
demanded, the amount of his or her final bid in cash, a cashier’s
check drawn on a state or national bank, a check drawn by a state or
federal credit union, or a check drawn by a state or federal savings
and loan association, savings association, or savings bank specified
in Section 5102 of the Financial Code and authorized to do business
in this state, or a cash equivalent which has been designated in the
notice of sale as acceptable to the trustee, that bidder shall be
liable to the trustee for all damages which the trustee may sustain
by the refusal to deliver to the trustee the amount of the final bid,
including any court costs and reasonable attorneys’ fees.
If the last and highest bidder willfully fails to deliver to the
trustee the amount of his or her final bid in cash, a cashier’s check
drawn on a state or national bank, a check drawn by a state or
federal credit union, or a check drawn by a state or federal savings
and loan association, savings association, or savings bank specified
in Section 5102 of the Financial Code and authorized to do business
in this state, or a cash equivalent which has been designated in the
notice of sale as acceptable to the trustee, or if the last and
highest bidder cancels a cashiers check drawn on a state or national
bank, a check drawn by a state or federal credit union, or a check
drawn by a state or federal savings and loan association, savings
association, or savings bank specified in Section 5102 of the
Financial Code and authorized to do business in this state, or a cash
equivalent that has been designated in the notice of sale as
acceptable to the trustee, that bidder shall be guilty of a
misdemeanor punishable by a fine of not more than two thousand five
hundred dollars ($2,500).
In the event the last and highest bidder cancels an instrument
submitted to the trustee as a cash equivalent, the trustee shall
provide a new notice of sale in the manner set forth in Section 2924f
and shall be entitled to recover the costs of the new notice of sale
as provided in Section 2924c.
(e) Any postponement or discontinuance of the sale proceedings
shall be a cancellation of the last bid.
(f) In the event that this section conflicts with any other
statute, then this section shall prevail.
(g) It shall be unlawful for any person, acting alone or in
concert with others, (1) to offer to accept or accept from another,
any consideration of any type not to bid, or (2) to fix or restrain
bidding in any manner, at a sale of property conducted pursuant to a
power of sale in a deed of trust or mortgage. However, it shall not
be unlawful for any person, including a trustee, to state that a
property subject to a recorded notice of default or subject to a sale
conducted pursuant to this chapter is being sold in an “as-is”
condition.
In addition to any other remedies, any person committing any act
declared unlawful by this subdivision or any act which would operate
as a fraud or deceit upon any beneficiary, trustor, or junior lienor
shall, upon conviction, be fined not more than ten thousand dollars
($10,000) or imprisoned in the county jail for not more than one
year, or be punished by both that fine and imprisonment.

Secured Obligations — Balloon Payments
2924i.  (a) This section applies to loans secured by a deed of trust
or mortgage on real property containing one to four residential
units at least one of which at the time the loan is made is or is to
be occupied by the borrower if the loan is for a period in excess of
one year and is a balloon payment loan.
(b) This section shall not apply to (1) open end credit as defined
in Regulation Z, whether or not the transaction is otherwise subject
to Regulation Z, (2) transactions subject to Section 2956, or (3)
loans made for the principal purpose of financing the construction of
one or more residential units.
(c) At least 90 days but not more than 150 days prior to the due
date of the final payment on a loan that is subject to this section,
the holder of the loan shall deliver or mail by first-class mail,
with a certificate of mailing obtained from the United States Postal
Service, to the trustor, or his or her successor in interest, at the
last known address of that person, a written notice which shall
include all of the following:
(1) A statement of the name and address of the person to whom the
final payment is required to be paid.
(2) The date on or before which the final payment is required to
be paid.
(3) The amount of the final payment, or if the exact amount is
unknown, a good faith estimate of the amount thereof, including
unpaid principal, interest and any other charges, such amount to be
determined assuming timely payment in full of all scheduled
installments coming due between the date the notice is prepared and
the date when the final payment is due.
(4) If the borrower has a contractual right to refinance the final
payment, a statement to that effect.
If the due date of the final payment of a loan subject to this
section is extended prior to the time notice is otherwise required
under this subdivision, this notice requirement shall apply only to
the due date as extended (or as subsequently extended).
(d) For purposes of this section:
(1) 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
or which contains a call provision; provided, however, that if the
call provision is not exercised by the holder of the loan, the
existence of the unexercised call provision shall not cause the loan
to be deemed to be a balloon payment loan.
(2) “Call provision” means a loan contract term that provides the
holder of the loan with the right to call the loan due and payable
either after a specified period has elapsed following closing or
after a specified date.
(3) “Regulation Z” means any rule, regulation, or interpretation
promulgated by the Board of Governors of the Federal Reserve System
under the Federal Truth in Lending Act, as amended (15 U.S.C. Sec.
1601 et seq.), and any interpretation or approval thereof issued by
an official or employee of the Federal Reserve System duly authorized
by the board under the Truth in Lending Act, as amended, to issue
such interpretations or approvals.
(e) Failure to provide notice as required by subdivision (a) does
not extinguish any obligation of payment by the borrower, except that
the due date for any balloon payment shall be the date specified in
the balloon payment note, or 90 days from the date of delivery or
mailing of the notice required by subdivision (a), or the due date
specified in the notice required by subdivision (a), whichever date
is later. If the operation of this section acts to extend the term of
any note, interest shall continue to accrue for the extended term at
the contract rate and payments shall continue to be due at any
periodic interval and on any payment schedule specified in the note
and shall be credited to principal or interest under the terms of the
note. Default in any extended periodic payment shall be considered a
default under terms of the note or security instrument.
(f) (1) The validity of any credit document or of any security
document subject to the provisions of this section shall not be
invalidated solely because of the failure of any person to comply
with this section. However, any person who willfully violates any
provision of this section shall be liable in the amount of actual
damages suffered by the debtor as the proximate result of the
violation, and, if the debtor prevails in any suit to recover that
amount, for reasonable attorney’s fees.
(2) No person may be held liable in any action under this section
if it is shown by a preponderance of the evidence that the violation
was not intentional and resulted from a bona fide error
notwithstanding the maintenance of procedures reasonably adopted to
avoid any such error.
(g) The provisions of this section shall apply to any note
executed on or after January 1, 1984.

Conflicting Claims to Proceeds — Trustee’s Notice; Procedure
2924j.  (a) Unless an interpleader action has been filed, within 30
days of the execution of the trustee’s deed resulting from a sale in
which there are proceeds remaining after payment of the amounts
required by paragraphs (1) and (2) of subdivision (a) of Section
2924k, the trustee shall send written notice to all persons with
recorded interests in the real property as of the date immediately
prior to the trustee’s sale who would be entitled to notice pursuant
to subdivisions (b) and (c) of Section 2924b. The notice shall be
sent by first-class mail in the manner provided in paragraph (1) of
subdivision (c) of Section 2924b and inform each entitled person of
each of the following:
(1) That there has been a trustee’s sale of the described real
property.
(2) That the noticed person may have a claim to all or a portion
of the sale proceeds remaining after payment of the amounts required
by paragraphs (1) and (2) of subdivision (a) of Section 2924k.
(3) The noticed person may contact the trustee at the address
provided in the notice to pursue any potential claim.
(4) That before the trustee can act, the noticed person may be
required to present proof that the person holds the beneficial
interest in the obligation and the security interest therefor. In the
case of a promissory note secured by a deed of trust, proof that the
person holds the beneficial interest may include the original
promissory note and assignment of beneficial interests related
thereto. The noticed person shall also submit a written claim to the
trustee, executed under penalty of perjury, stating the following:
(A) The amount of the claim to the date of trustee’s sale.
(B) An itemized statement of the principal, interest, and other
charges.
(C) That claims must be received by the trustee at the address
stated in the notice no later than 30 days after the date the trustee
sends notice to the potential claimant.
(b) The trustee shall exercise due diligence to determine the
priority of the written claims received by the trustee to the trustee’
s sale surplus proceeds from those persons to whom notice was sent
pursuant to subdivision (a). In the event there is no dispute as to
the priority of the written claims submitted to the trustee, proceeds
shall be paid within 30 days after the conclusion of the notice
period. If the trustee has failed to determine the priority of
written claims within 90 days following the 30-day notice period,
then within 10 days thereafter the trustee shall deposit the funds
with the clerk of the court pursuant to subdivision (c) or file an
interpleader action pursuant to subdivision (e). Nothing in this
section shall preclude any person from pursuing other remedies or
claims as to surplus proceeds.
(c) If, after due diligence, the trustee is unable to determine
the priority of the written claims received by the trustee to the
trustee’s sale surplus of multiple persons or if the trustee
determines there is a conflict between potential claimants, the
trustee may file a declaration of the unresolved claims and deposit
with the clerk of the superior court of the county in which the sale
occurred, that portion of the sales proceeds that cannot be
distributed, less any fees charged by the clerk pursuant to this
subdivision. The declaration shall specify the date of the trustee’s
sale, a description of the property, the names and addresses of all
persons sent notice pursuant to subdivision (a), a statement that the
trustee exercised due diligence pursuant to subdivision (b), that
the trustee provided written notice as required by subdivisions (a)
and (d) and the amount of the sales proceeds deposited by the trustee
with the court. Further, the trustee shall submit a copy of the
trustee’s sales guarantee and any information relevant to the
identity, location, and priority of the potential claimants with the
court and shall file proof of service of the notice required by
subdivision (d) on all persons described in subdivision (a).
The clerk shall deposit the amount with the county treasurer or,
if a bank account has been established for moneys held in trust under
paragraph (2) of subdivision (a) of Section 77009 of the Government
Code, in that account, subject to order of the court upon the
application of any interested party. The clerk may charge a
reasonable fee for the performance of activities pursuant to this
subdivision equal to the fee for filing an interpleader action
pursuant to Chapter 5.8 (commencing with Section 70600) of Title 8 of
the Government Code. Upon deposit of that portion of the sale
proceeds that cannot be distributed by due diligence, the trustee
shall be discharged of further responsibility for the disbursement of
sale proceeds. A deposit with the clerk of the court pursuant to
this subdivision may be either for the total proceeds of the trustee’
s sale, less any fees charged by the clerk, if a conflict or
conflicts exist with respect to the total proceeds, or that portion
that cannot be distributed after due diligence, less any fees charged
by the clerk.
(d) Before the trustee deposits the funds with the clerk of the
court pursuant to subdivision (c), the trustee shall send written
notice by first-class mail, postage prepaid, to all persons described
in subdivision (a) informing them that the trustee intends to
deposit the funds with the clerk of the court and that a claim for
the funds must be filed with the court within 30 days from the date
of the notice, providing the address of the court in which the funds
were deposited, and a telephone number for obtaining further
information.
Within 90 days after deposit with the clerk, the court shall
consider all claims filed at least 15 days before the date on which
the hearing is scheduled by the court, the clerk shall serve written
notice of the hearing by first-class mail on all claimants identified
in the trustee’s declaration at the addresses specified therein.
Where the amount of the deposit is twenty-five thousand dollars
($25,000) or less, a proceeding pursuant to this section is a limited
civil case. The court shall distribute the deposited funds to any
and all claimants entitled thereto.
(e) Nothing in this section restricts the ability of a trustee to
file an interpleader action in order to resolve a dispute about the
proceeds of a trustee’s sale. Once an interpleader action has been
filed, thereafter the provisions of this section do not apply.
(f) “Due diligence,” for the purposes of this section means that
the trustee researched the written claims submitted or other evidence
of conflicts and determined that a conflict of priorities exists
between two or more claimants which the trustee is unable to resolve.
(g) To the extent required by the Unclaimed Property Law, a
trustee in possession of surplus proceeds not required to be
deposited with the court pursuant to subdivision (b) shall comply
with the Unclaimed Property Law (Chapter 7 (commencing with Section
1500) of Title 10 of Part 3 of the Code of Civil Procedure).
(h) The trustee, beneficiary, or counsel to the trustee or
beneficiary, is not liable for providing to any person who is
entitled to notice pursuant to this section, information set forth
in, or a copy of, subdivision (h) of Section 2945.3.

Trustee’s Sale – Distribution of Proceeds; Charges for Costs and Expenses
2924k.  (a) The trustee, or the clerk of the court upon order to the
clerk pursuant to subdivision (d) of Section 2924j, shall distribute
the proceeds, or a portion of the proceeds, as the case may be, of
the trustee’s sale conducted pursuant to Section 2924h in the
following order of priority:
(1) To the costs and expenses of exercising the power of sale and
of sale, including the payment of the trustee’s fees and attorney’s
fees permitted pursuant to subdivision (b) of Section 2924d and
subdivision (b) of this section.
(2) To the payment of the obligations secured by the deed of trust
or mortgage which is the subject of the trustee’s sale.
(3) To satisfy the outstanding balance of obligations secured by
any junior liens or encumbrances in the order of their priority.
(4) To the trustor or the trustor’s successor in interest. In the
event the property is sold or transferred to another, to the vested
owner of record at the time of the trustee’s sale.
(b) A trustee may charge costs and expenses incurred for such
items as mailing and a reasonable fee for services rendered in
connection with the distribution of the proceeds from a trustee’s
sale, including, but not limited to, the investigation of priority
and validity of claims and the disbursement of funds. If the fee
charged for services rendered pursuant to this subdivision does not
exceed one hundred dollars ($100), or one hundred twenty-five dollars
($125) where there are obligations specified in paragraph (3) of
subdivision (a), the fee is conclusively presumed to be reasonable.

Filing Declaration of Nonmonetary Status by Trustee; 15 Day Objection Period
2924l.  (a) In the event that a trustee under a deed of trust is
named in an action or proceeding in which that deed of trust is the
subject, and in the event that the trustee maintains a reasonable
belief that it has been named in the action or proceeding solely in
its capacity as trustee, and not arising out of any wrongful acts or
omissions on its part in the performance of its duties as trustee,
then, at any time, the trustee may file a declaration of nonmonetary
status. The declaration shall be served on the parties in the manner
set forth in Chapter 5 (commencing with Section 1010) of Title 14 of
the Code of Civil Procedure.
(b) The declaration of nonmonetary status shall set forth the
status of the trustee as trustee under the deed of trust that is the
subject of the action or proceeding, that the trustee knows or
maintains a reasonable belief that it has been named as a defendant
in the proceeding solely in its capacity as a trustee under the deed
of trust, its reasonable belief that it has not been named as a
defendant due to any acts or omissions on its part in the performance
of its duties as trustee, the basis for that knowledge or reasonable
belief, and that it agrees to be bound by whatever order or judgment
is issued by the court regarding the subject deed of trust.
(c) The parties who have appeared in the action or proceeding
shall have 15 days from the service of the declaration by the trustee
in which to object to the nonmonetary judgment status of the
trustee. Any objection shall set forth the factual basis on which the
objection is based and shall be served on the trustee.
(d) In the event that no objection is served within the 15-day
objection period, the trustee shall not be required to participate
any further in the action or proceeding, shall not be subject to any
monetary awards as and for damages, attorneys’ fees or costs, shall
be required to respond to any discovery requests as a nonparty, and
shall be bound by any court order relating to the subject deed of
trust that is the subject of the action or proceeding.
(e) In the event of a timely objection to the declaration of
nonmonetary status, the trustee shall thereafter be required to
participate in the action or proceeding.
Additionally, in the event that the parties elect not to, or fail
to, timely object to the declaration of nonmonetary status, but later
through discovery, or otherwise, determine that the trustee should
participate in the action because of the performance of its duties as
a trustee, the parties may file and serve on all parties and the
trustee a motion pursuant to Section 473 of the Code of Civil
Procedure that specifies the factual basis for the demand. Upon the
court’s granting of the motion, the trustee shall thereafter be
required to participate in the action or proceeding, and the court
shall provide sufficient time prior to trial for the trustee to be
able to respond to the complaint, to conduct discovery, and to bring
other pretrial motions in accordance with the Code of Civil
Procedure.
(f) Upon the filing of the declaration of nonmonetary status, the
time within which the trustee is required to file an answer or other
responsive pleading shall be tolled for the period of time within
which the opposing parties may respond to the declaration. Upon the
timely service of an objection to the declaration on nonmonetary
status, the trustee shall have 30 days from the date of service
within which to file an answer or other responsive pleading to the
complaint or cross-complaint.
(g) For purposes of this section, “trustee” includes any agent or
employee of the trustee who performs some or all of the duties of a
trustee under this article, and includes substituted trustees and
agents of the beneficiary or trustee.

Absolute Deed as Mortgage
2925.  The fact that a transfer was made subject to defeasance on a
condition, may, for the purpose of showing such transfer to be a
mortgage, be proved (except as against a subsequent purchaser or
incumbrancer for value and without notice), though the fact does not
appear by the terms of the instrument.

Lien of Mortgage; Extent
2926.  A mortgage is a lien upon everything that would pass by a
grant of the property.

Possession Remains in Mortgagor
2927.  A mortgage does not entitle the mortgagee to the possession
of the property, unless authorized by the express terms of the
mortgage; but after the execution of the mortgage the mortgagor may
agree to such change of possession without a new consideration.

Personal Liability of Mortgagor
2928.  A mortgage does not bind the mortgagor personally to perform
the act for the performance of which it is a security, unless there
is an express covenant therein to that effect.

Impairment of Security
2929.  No person whose interest is subject to the lien of a mortgage
may do any act which will substantially impair the mortgagee’s
security.

Duty to Maintain Vacant Residential Property; Fines
2929.3.  (a) (1) A legal owner shall maintain vacant residential
property purchased by that owner at a foreclosure sale, or acquired
by that owner through foreclosure under a mortgage or deed of trust.
A governmental entity may impose a civil fine of up to one thousand
dollars ($1,000) per day for a violation. If the governmental entity
chooses to impose a fine pursuant to this section, it shall give
notice of the alleged violation, including a description of the
conditions that gave rise to the allegation, and notice of the entity’
s intent to assess a civil fine if action to correct the violation is
not commenced within a period of not less than 14 days and completed
within a period of not less than 30 days. The notice shall be mailed
to the address provided in the deed or other instrument as specified
in subdivision (a) of Section 27321.5 of the Government Code, or, if
none, to the return address provided on the deed or other
instrument.
(2) The governmental entity shall provide a period of not less
than 30 days for the legal owner to remedy the violation prior to
imposing a civil fine and shall allow for a hearing and opportunity
to contest any fine imposed. In determining the amount of the fine,
the governmental entity shall take into consideration any timely and
good faith efforts by the legal owner to remedy the violation. The
maximum civil fine authorized by this section is one thousand dollars
($1,000) for each day that the owner fails to maintain the property,
commencing on the day following the expiration of the period to
remedy the violation established by the governmental entity.
(3) Subject to the provisions of this section, a governmental
entity may establish different compliance periods for different
conditions on the same property in the notice of alleged violation
mailed to the legal owner.
(b) For purposes of this section, “failure to maintain” means
failure to care for the exterior of the property, including, but not
limited to, permitting excessive foliage growth that diminishes the
value of surrounding properties, failing to take action to prevent
trespassers or squatters from remaining on the property, or failing
to take action to prevent mosquito larvae from growing in standing
water or other conditions that create a public nuisance.
(c) Notwithstanding subdivisions (a) and (b), a governmental
entity may provide less than 30 days’ notice to remedy a condition
before imposing a civil fine if the entity determines that a specific
condition of the property threatens public health or safety and
provided that notice of that determination and time for compliance is
given.
(d) Fines and penalties collected pursuant to this section shall
be directed to local nuisance abatement programs.
(e) A governmental entity may not impose fines on a legal owner
under both this section and a local ordinance.
(f) These provisions shall not preempt any local ordinance.
(g) This section shall only apply to residential real property.
(h) The rights and remedies provided in this section are
cumulative and in addition to any other rights and remedies provided
by law.
(i) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.

Permission to Inspect for Hazardous Substance
2929.5.  (a) A secured lender may enter and inspect the real
property security for the purpose of determining the existence,
location, nature, and magnitude of any past or present release or
threatened release of any hazardous substance into, onto, beneath, or
from the real property security on either of the following:
(1) Upon reasonable belief of the existence of a past or present
release or threatened release of any hazardous substance into, onto,
beneath, or from the real property security not previously disclosed
in writing to the secured lender in conjunction with the making,
renewal, or modification of a loan, extension of credit, guaranty, or
other obligation involving the borrower.
(2) After the commencement of nonjudicial or judicial foreclosure
proceedings against the real property security.
(b) The secured lender shall not abuse the right of entry and
inspection or use it to harass the borrower or tenant of the
property. Except in case of an emergency, when the borrower or tenant
of the property has abandoned the premises, or if it is
impracticable to do so, the secured lender shall give the borrower or
tenant of the property reasonable notice of the secured lender’s
intent to enter, and enter only during the borrower’s or tenant’s
normal business hours. Twenty-four hours’ notice shall be presumed to
be reasonable notice in the absence of evidence to the contrary.
(c) The secured lender shall reimburse the borrower for the cost
of repair of any physical injury to the real property security caused
by the entry and inspection.
(d) If a secured lender is refused the right of entry and
inspection by the borrower or tenant of the property, or is otherwise
unable to enter and inspect the property without a breach of the
peace, the secured lender may, upon petition, obtain an order from a
court of competent jurisdiction to exercise the secured lender’s
rights under subdivision (a), and that action shall not constitute an
action within the meaning of subdivision (a) of Section 726 of the
Code of Civil Procedure.
(e) For purposes of this section:
(1) “Borrower” means the trustor under a deed of trust, or a
mortgagor under a mortgage, where the deed of trust or mortgage
encumbers real property security and secures the performance of the
trustor or mortgagor under a loan, extension of credit, guaranty, or
other obligation. The term includes any successor-in-interest of the
trustor or mortgagor to the real property security before the deed of
trust or mortgage has been discharged, reconveyed, or foreclosed
upon.
(2) “Hazardous substance” includes all of the following:
(A) Any “hazardous substance” as defined in subdivision (h) of
Section 25281 of the Health and Safety Code.
(B) Any “waste” as defined in subdivision (d) of Section 13050 of
the Water Code.
(C) Petroleum, including crude oil or any fraction thereof,
natural gas, natural gas liquids, liquefied natural gas, or synthetic
gas usable for fuel, or any mixture thereof.
(3) “Real property security” means any real property and
improvements, other than a separate interest and any related interest
in the common area of a residential common interest development, as
the terms “separate interest,” “common area,” and “common interest
development” are defined in Section 1351, or real property consisting
of one acre or less which contains 1 to 15 dwelling units.
(4) “Release” means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing into the environment, including continuing
migration, of hazardous substances into, onto, or through soil,
surface water, or groundwater.
(5) “Secured lender” means the beneficiary under a deed of trust
against the real property security, or the mortgagee under a mortgage
against the real property security, and any successor-in-interest of
the beneficiary or mortgagee to the deed of trust or mortgage.

After-Acquired Title
[2930.]  Section Twenty-nine Hundred and Thirty. Title acquired by
the mortgagor subsequent to the execution of the mortgage, inures to
the mortgagee as security for the debt in like manner as if acquired
before the execution.

Foreclosure — Code of Civil Procedure Governs
2931.  A mortgagee may foreclose the right of redemption of the
mortgagor in the manner prescribed by the CODE OF CIVIL PROCEDURE.

State of California may be Made a Party to Case
2931a.  In any action brought to determine conflicting claims to
real property, or for partition of real property or an estate for
years therein, or to foreclose a deed of trust, mortgage, or other
lien upon real property, or in all eminent domain proceedings under
Section 1250.110 et seq., of the Code of Civil Procedure against real
property upon which exists a lien to secure the payment of taxes or
other obligations to an agency of the State of California, other than
ad valorem taxes upon the real property, the state agency charged
with the collection of the tax obligation may be made a party. In
such an action, the court shall have jurisdiction to determine the
priority and effect of the liens described in the complaint in or
upon the real property or estate for years therein, but the
jurisdiction of the court in the action shall not include a
determination of the validity of the tax giving rise to the lien or
claim of lien. The complaint or petition in the action shall contain
a description of the lien sufficient to enable the tax or other
obligation, payment of which it secures, to be identified with
certainty, and shall include the name and address of the person owing
the tax or other obligation, the name of the state agency that
recorded the lien, and the date and place where the lien was
recorded. Services of process in the action shall be made upon the
agency, officer, board, commission, department, division, or other
body charged with the collection of the tax or obligation. It shall
be the duty of the Attorney General to represent the state agency in
the action.

State may Bid on Properrty
2931b.  In all actions in which the State of California is named a
party pursuant to the provisions of Section 2931a and in which real
property or an estate for years therein is sought to be sold, the
Attorney General may, with the consent of the Department of Finance,
bid upon and purchase that real property or estate for years.

Actions to Foreclose Tax Liens
2931c.  The Attorney General may bring an action in the courts of
this or any other state or of the United States to enforce any lien
to secure the payment of taxes or other obligations to the State of
California under the Unemployment Insurance Code, the Revenue and
Taxation Code, or Chapter 6 (commencing with Section 16180) of Part 1
of Division 4 of Title 2 of the Government Code or to subject to
payment of the liability giving rise to the lien any property in
which the debtor has any right, title, or interest. In any action
brought under this section the court shall have jurisdiction to
determine the priority and effect of the lien in or upon the
property, but the jurisdiction of the court in such action shall not
extend to a determination of the validity of the liability giving
rise to the lien.

Power of Sale in Mortgage
2932.  A power of sale may be conferred by a mortgage upon the
mortgagee or any other person, to be exercised after a breach of the
obligation for which the mortgage is a security.

Power of Sale under Assigned Mortgage
2932.5.  Where a power to sell real property is given to a
mortgagee, or other encumbrancer, in an instrument intended to secure
the payment of money, the power is part of the security and vests in
any person who by assignment becomes entitled to payment of the
money secured by the instrument. The power of sale may be exercised
by the assignee if the assignment is duly acknowledged and recorded.

Financial Institutions — Repair of Property After Foreclosure
2932.6.  (a) Notwithstanding any other provision of law, a financial
institution may undertake to repair any property acquired through
foreclosure under a mortgage or deed of trust.
(b) As used in this section, the term “financial institution”
includes, but is not limited to, banks, savings associations, credit
unions, and industrial loan companies.
(c) The rights granted to a financial institution by this section
are in addition to, and not in derogation of, the rights of a
financial institution which otherwise exist.

Power of Attorney to Execute Mortgage
2933.  A power of attorney to execute a mortgage must be in writing,
subscribed, acknowledged, or proved, certified, and recorded in like
manner as powers of attorney for grants of real property.

Record of Assignment of Mortgage
2934.  Any assignment of a mortgage and any assignment of the
beneficial interest under a deed of trust may be recorded, and from
the time the same is filed for record operates as constructive notice
of the contents thereof to all persons; and any instrument by which
any mortgage or deed of trust of, lien upon or interest in real
property, (or by which any mortgage of, lien upon or interest in
personal property a document evidencing or creating which is required
or permitted by law to be recorded), is subordinated or waived as to
priority may be recorded, and from the time the same is filed for
record operates as constructive notice of the contents thereof, to
all persons.

Substitution of Trustees in Trust Deeds
2934a.  (a) (1) The trustee under a trust deed upon real property or
an estate for years therein given to secure an obligation to pay
money and conferring no other duties upon the trustee than those
which are incidental to the exercise of the power of sale therein
conferred, may be substituted by the recording in the county in which
the property is located of a substitution executed and acknowledged
by: (A) all of the beneficiaries under the trust deed, or their
successors in interest, and the substitution shall be effective
notwithstanding any contrary provision in any trust deed executed on
or after January 1, 1968; or (B) the holders of more than 50 percent
of the record beneficial interest of a series of notes secured by the
same real property or of undivided interests in a note secured by
real property equivalent to a series transaction, exclusive of any
notes or interests of a licensed real estate broker that is the
issuer or servicer of the notes or interests or of any affiliate of
that licensed real estate broker.
(2) A substitution executed pursuant to subparagraph (B) of
paragraph (1) is not effective unless all the parties signing the
substitution sign, under penalty of perjury, a separate written
document stating the following:
(A) The substitution has been signed pursuant to subparagraph (B)
of paragraph (1).
(B) None of the undersigned is a licensed real estate broker or an
affiliate of the broker that is the issuer or servicer of the
obligation secured by the deed of trust.
(C) The undersigned together hold more than 50 percent of the
record beneficial interest of a series of notes secured by the same
real property or of undivided interests in a note secured by real
property equivalent to a series transaction.
(D) Notice of the substitution was sent by certified mail, postage
prepaid, with return receipt requested to each holder of an interest
in the obligation secured by the deed of trust who has not joined in
the execution of the substitution or the separate document.
The separate document shall be attached to the substitution and be
recorded in the office of the county recorder of each county in
which the real property described in the deed of trust is located.
Once the document required by this paragraph is recorded, it shall
constitute conclusive evidence of compliance with the requirements of
this paragraph in favor of substituted trustees acting pursuant to
this section, subsequent assignees of the obligation secured by the
deed of trust, and subsequent bona fide purchasers or encumbrancers
for value of the real property described therein.
(3) For purposes of this section, “affiliate of the licensed real
estate broker” includes any person as defined in Section 25013 of the
Corporations Code that is controlled by, or is under common control
with, or who controls, a licensed real estate broker. “Control” means
the possession, direct or indirect, of the power to direct or cause
the direction of management and policies.
(4) The substitution shall contain the date of recordation of the
trust deed, the name of the trustor, the book and page or instrument
number where the trust deed is recorded, and the name of the new
trustee. From the time the substitution is filed for record, the new
trustee shall succeed to all the powers, duties, authority, and title
granted and delegated to the trustee named in the deed of trust. A
substitution may be accomplished, with respect to multiple deeds of
trust which are recorded in the same county in which the substitution
is being recorded and which all have the same trustee and
beneficiary or beneficiaries, by recording a single document,
complying with the requirements of this section, substituting
trustees for all those deeds of trust.
(b) If the substitution is effected after a notice of default has
been recorded but prior to the recording of the notice of sale, the
beneficiary or beneficiaries shall cause a copy of the substitution
to be mailed, prior to the recording thereof, in the manner provided
in Section 2924b, to the trustee then of record and to all persons to
whom a copy of the notice of default would be required to be mailed
by the provisions of Section 2924b. An affidavit shall be attached to
the substitution that notice has been given to those persons and in
the manner required by this subdivision.
(c) Notwithstanding any provision of this section or any provision
in any deed of trust, unless a new notice of sale containing the
name, street address, and telephone number of the substituted trustee
is given pursuant to Section 2924f, any sale conducted by the
substituted trustee shall be void.
(d) This section shall remain in effect only until January 1,
1998, and shall have no force or effect after that date, unless a
later enacted statute, which is enacted before January 1, 1998,
deletes or extends that date.

Substitution of Trustees
2934a.  (a) (1) The trustee under a trust deed upon real property or
an estate for years therein given to secure an obligation to pay
money and conferring no other duties upon the trustee than those
which are incidental to the exercise of the power of sale therein
conferred, may be substituted by the recording in the county in which
the property is located of a substitution executed and acknowledged
by: (A) all of the beneficiaries under the trust deed, or their
successors in interest, and the substitution shall be effective
notwithstanding any contrary provision in any trust deed executed on
or after January 1, 1968; or (B) the holders of more than 50 percent
of the record beneficial interest of a series of notes secured by the
same real property or of undivided interests in a note secured by
real property equivalent to a series transaction, exclusive of any
notes or interests of a licensed real estate broker that is the
issuer or servicer of the notes or interests or of any affiliate of
that licensed real estate broker.
(2) A substitution executed pursuant to subparagraph (B) of
paragraph (1) is not effective unless all the parties signing the
substitution sign, under penalty of perjury, a separate written
document stating the following:
(A) The substitution has been signed pursuant to subparagraph (B)
of paragraph (1).
(B) None of the undersigned is a licensed real estate broker or an
affiliate of the broker that is the issuer or servicer of the
obligation secured by the deed of trust.
(C) The undersigned together hold more than 50 percent of the
record beneficial interest of a series of notes secured by the same
real property or of undivided interests in a note secured by real
property equivalent to a series transaction.
(D) Notice of the substitution was sent by certified mail, postage
prepaid, with return receipt requested to each holder of an interest
in the obligation secured by the deed of trust who has not joined in
the execution of the substitution or the separate document.
The separate document shall be attached to the substitution and be
recorded in the office of the county recorder of each county in
which the real property described in the deed of trust is located.
Once the document required by this paragraph is recorded, it shall
constitute conclusive evidence of compliance with the requirements of
this paragraph in favor of substituted trustees acting pursuant to
this section, subsequent assignees of the obligation secured by the
deed of trust and subsequent bona fide purchasers or encumbrancers
for value of the real property described therein.
(3) For purposes of this section, “affiliate of the licensed real
estate broker” includes any person as defined in Section 25013 of the
Corporations Code that is controlled by, or is under common control
with, or who controls, a licensed real estate broker. “Control” means
the possession, direct or indirect, of the power to direct or cause
the direction of management and policies.
(4) The substitution shall contain the date of recordation of the
trust deed, the name of the trustor, the book and page or instrument
number where the trust deed is recorded, and the name of the new
trustee. From the time the substitution is filed for record, the new
trustee shall succeed to all the powers, duties, authority, and title
granted and delegated to the trustee named in the deed of trust. A
substitution may be accomplished, with respect to multiple deeds of
trust which are recorded in the same county in which the substitution
is being recorded and which all have the same trustee and
beneficiary or beneficiaries, by recording a single document,
complying with the requirements of this section, substituting
trustees for all those deeds of trust.
(b) If the substitution is executed, but not recorded, prior to or
concurrently with the recording of the notice of default, the
beneficiary or beneficiaries or their authorized agents shall cause
notice of the substitution to be mailed prior to or concurrently with
the recording thereof, in the manner provided in Section 2924b, to
all persons to whom a copy of the notice of default would be required
to be mailed by the provisions of Section 2924b. An affidavit shall
be attached to the substitution that notice has been given to those
persons and in the manner required by this subdivision.
(c) If the substitution is effected after a notice of default has
been recorded but prior to the recording of the notice of sale, the
beneficiary or beneficiaries or their authorized agents shall cause a
copy of the substitution to be mailed, prior to, or concurrently
with, the recording thereof, in the manner provided in Section 2924b,
to the trustee then of record and to all persons to whom a copy of
the notice of default would be required to be mailed by the
provisions of Section 2924b. An affidavit shall be attached to the
substitution that notice has been given to those persons and in the
manner required by this subdivision.
(d) A trustee named in a recorded substitution of trustee shall be
deemed to be authorized to act as the trustee under the mortgage or
deed of trust for all purposes from the date the substitution is
executed by the mortgagee, beneficiaries, or by their authorized
agents. Nothing herein requires that a trustee under a recorded
substitution accept the substitution. Once recorded, the substitution
shall constitute conclusive evidence of the authority of the
substituted trustee or his or her agents to act pursuant to this
section.
(e) Notwithstanding any provision of this section or any provision
in any deed of trust, unless a new notice of sale containing the
name, street address, and telephone number of the substituted trustee
is given pursuant to Section 2924f after execution of the
substitution, any sale conducted by the substituted trustee shall be
void.
(f) This section shall become operative on January 1, 1998.

Vacation of Office of Trustee under Deed of Trust
2934b.  Sections 15643 and 18102 of the Probate Code apply to
trustees under deeds of trust given to secure obligations.

Execution of Security Not Notice to Debtor
2935.  When a mortgage or deed of trust is executed as security for
money due or to become due, on a promissory note, bond, or other
instrument, designated in the mortgage or deed of trust, the record
of the assignment of the mortgage or of the assignment of the
beneficial interest under the deed of trust, is not of itself notice
to the debtor, his heirs, or personal representatives, so as to
invalidate any payment made by them, or any of them, to the person
holding such note, bond, or other instrument.

Assignment of Debt Carries Security
2936.  The assignment of a debt secured by mortgage carries with it
the security.

Transfer of Servicing of Debt Secured by Real Property Mortgage
2937.  (a) The Legislature hereby finds and declares that borrowers
or subsequent obligors have the right to know when a person holding a
promissory note, bond, or other instrument transfers servicing of
the indebtedness secured by a mortgage or deed of trust on real
property containing one to four residential units located in this
state. The Legislature also finds that notification to the borrower
or subsequent obligor of the transfer may protect the borrower or
subsequent obligor from fraudulent business practices and may ensure
timely payments.
It is the intent of the Legislature in enacting this section to
mandate that a borrower or subsequent obligor be given written notice
when a person transfers the servicing of the indebtedness on notes,
bonds, or other instruments secured by a mortgage or deed of trust on
real property containing one to four residential units and located
in this state.
(b) Any person transferring the servicing of indebtedness as
provided in subdivision (a) to a different servicing agent and any
person assuming from another responsibility for servicing the
instrument evidencing indebtedness, shall give written notice to the
borrower or subsequent obligor before the borrower or subsequent
obligor becomes obligated to make payments to a new servicing agent.
(c) In the event a notice of default has been recorded or a
judicial foreclosure proceeding has been commenced, the person
transferring the servicing of the indebtedness and the person
assuming from another the duty of servicing the indebtedness shall
give written notice to the trustee or attorney named in the notice of
default or judicial foreclosure of the transfer. A notice of
default, notice of sale, or judicial foreclosure shall not be
invalidated solely because the servicing agent is changed during the
foreclosure process.
(d) Any person transferring the servicing of indebtedness as
provided in subdivision (a) to a different servicing agent shall
provide to the new servicing agent all existing insurance policy
information that the person is responsible for maintaining,
including, but not limited to, flood and hazard insurance policy
information.
(e) The notices required by subdivision (b) shall be sent by
first-class mail, postage prepaid, to the borrower’s or subsequent
obligor’s address designated for loan payment billings, or if escrow
is pending, as provided in the escrow, and shall contain each of the
following:
(1) The name and address of the person to which the transfer of
the servicing of the indebtedness is made.
(2) The date the transfer was or will be completed.
(3) The address where all payments pursuant to the transfer are to
be made.
(f) Any person assuming from another responsibility for servicing
the instrument evidencing indebtedness shall include in the notice
required by subdivision (b) a statement of the due date of the next
payment.
(g) The borrower or subsequent obligor shall not be liable to the
holder of the note, bond, or other instrument or to any servicing
agent for payments made to the previous servicing agent or for late
charges if these payments were made prior to the borrower or
subsequent obligor receiving written notice of the transfer as
provided by subdivision (e) and the payments were otherwise on time.
(h) For purposes of this section, the term servicing agent shall
not include a trustee exercising a power of sale pursuant to a deed
of trust.

Service of Process on Trustee — Effect on Transfer of Beneficiary
2937.7.  In any action affecting the interest of any trustor or
beneficiary under a deed of trust or mortgage, service of process to
the trustee does not constitute service to the trustor or beneficiary
and does not impose any obligation on the trustee to notify the
trustor or beneficiary of the action.

Effect of Assignment of Interest in Leases, Rents, Issues or Profits — Recordation —
Alternative Methods of Enforcement
2938.  (a) A written assignment of an interest in leases, rents,
issues, or profits of real property made in connection with an
obligation secured by real property, irrespective of whether the
assignment is denoted as absolute, absolute conditioned upon default,
additional security for an obligation, or otherwise, shall, upon
execution and delivery by the assignor, be effective to create a
present security interest in existing and future leases, rents,
issues, or profits of that real property. As used in this section,
“leases, rents, issues, and profits of real property” includes the
cash proceeds thereof. “Cash proceeds” means cash, checks, deposit
accounts, and the like.
(b) An assignment of an interest in leases, rents, issues, or
profits of real property may be recorded in the records of the county
recorder in the county in which the underlying real property is
located in the same manner as any other conveyance of an interest in
real property, whether the assignment is in a separate document or
part of a mortgage or deed of trust, and when so duly recorded in
accordance with the methods, procedures, and requirements for
recordation of conveyances of other interests in real property, (1)
the assignment shall be deemed to give constructive notice of the
content of the assignment with the same force and effect as any other
duly recorded conveyance of an interest in real property and (2) the
interest granted by the assignment shall be deemed fully perfected
as of the time of recordation with the same force and effect as any
other duly recorded conveyance of an interest in real property,
notwithstanding a provision of the assignment or a provision of law
that would otherwise preclude or defer enforcement of the rights
granted the assignee under the assignment until the occurrence of a
subsequent event, including, but not limited to, a subsequent default
of the assignor, or the assignee’s obtaining possession of the real
property or the appointment of a receiver.
(c) Upon default of the assignor under the obligation secured by
the assignment of leases, rents, issues, and profits, the assignee
shall be entitled to enforce the assignment in accordance with this
section. On and after the date the assignee takes one or more of the
enforcement steps described in this subdivision, the assignee shall
be entitled to collect and receive all rents, issues, and profits
that have accrued but remain unpaid and uncollected by the assignor
or its agent or for the assignor’s benefit on that date, and all
rents, issues, and profits that accrue on or after the date. The
assignment shall be enforced by one or more of the following:
(1) The appointment of a receiver.
(2) Obtaining possession of the rents, issues, or profits.
(3) Delivery to any one or more of the tenants of a written demand
for turnover of rents, issues, and profits in the form specified in
subdivision (k), a copy of which demand shall also be delivered to
the assignor; and a copy of which shall be mailed to all other
assignees of record of the leases, rents, issues, and profits of the
real property at the address for notices provided in the assignment
or, if none, to the address to which the recorded assignment was to
be mailed after recording.
(4) Delivery to the assignor of a written demand for the rents,
issues, or profits, a copy of which shall be mailed to all other
assignees of record of the leases, rents, issues, and profits of the
real property at the address for notices provided in the assignment
or, if none, to the address to which the recorded assignment was to
be mailed after recording.
Moneys received by the assignee pursuant to this subdivision, net
of amounts paid pursuant to subdivision (g), if any, shall be applied
by the assignee to the debt or otherwise in accordance with the
assignment or the promissory note, deed of trust, or other instrument
evidencing the obligation, provided, however, that neither the
application nor the failure to so apply the rents, issues, or profits
shall result in a loss of any lien or security interest that the
assignee may have in the underlying real property or any other
collateral, render the obligation unenforceable, constitute a
violation of Section 726 of the Code of Civil Procedure, or otherwise
limit a right available to the assignee with respect to its
security.
(d) If an assignee elects to take the action provided for under
paragraph (3) of subdivision (c), the demand provided for therein
shall be signed under penalty of perjury by the assignee or an
authorized agent of the assignee and shall be effective as against
the tenant when actually received by the tenant at the address for
notices provided under the lease or other contractual agreement under
which the tenant occupies the property or, if no address for notices
is so provided, at the property. Upon receipt of this demand, the
tenant shall be obligated to pay to the assignee all rents, issues,
and profits that are past due and payable on the date of receipt of
the demand, and all rents, issues, and profits coming due under the
lease following the date of receipt of the demand, unless either of
the following occurs:
(1) The tenant has previously received a demand that is valid on
its face from another assignee of the leases, issues, rents, and
profits sent by the other assignee in accordance with this
subdivision and subdivision (c).
(2) The tenant, in good faith and in a manner that is not
inconsistent with the lease, has previously paid, or within 10 days
following receipt of the demand notice pays, the rent to the
assignor.
Payment of rent to an assignee following a demand under an
assignment of leases, rents, issues, and profits shall satisfy the
tenant’s obligation to pay the amounts under the lease. If a tenant
pays rent to the assignor after receipt of a demand other than under
the circumstances described in this subdivision, the tenant shall not
be discharged of the obligation to pay rent to the assignee, unless
the tenant occupies the property for residential purposes. The
obligation of a tenant to pay rent pursuant to this subdivision and
subdivision (c) shall continue until receipt by the tenant of a
written notice from a court directing the tenant to pay the rent in a
different manner or receipt by the tenant of a written notice from
the assignee from whom the demand was received canceling the demand,
whichever occurs first. This subdivision does not affect the
entitlement to rents, issues, or profits as between assignees as set
forth in subdivision (h).
(e) An enforcement action of the type authorized by subdivision
(c), and a collection, distribution, or application of rents, issues,
or profits by the assignee following an enforcement action of the
type authorized by subdivision (c), shall not do any of the
following:
(1) Make the assignee a mortgagee in possession of the property,
except if the assignee obtains actual possession of the real
property, or an agent of the assignor.
(2) Constitute an action, render the obligation unenforceable,
violate Section 726 of the Code of Civil Procedure, or, other than
with respect to marshaling requirements, otherwise limit any rights
available to the assignee with respect to its security.
(3) Be deemed to create a bar to a deficiency judgment pursuant to
a provision of law governing or relating to deficiency judgments
following the enforcement of any encumbrance, lien, or security
interest, notwithstanding that the action, collection, distribution,
or application may reduce the indebtedness secured by the assignment
or by a deed of trust or other security instrument.
The application of rents, issues, or profits to the secured
obligation shall satisfy the secured obligation to the extent of
those rents, issues, or profits, and, notwithstanding any provisions
of the assignment or other loan documents to the contrary, shall be
credited against any amounts necessary to cure any monetary default
for purposes of reinstatement under Section 2924c.
(f) If cash proceeds of rents, issues, or profits to which the
assignee is entitled following enforcement as set forth in
subdivision (c) are received by the assignor or its agent for
collection or by another person who has collected such rents, issues,
or profits for the assignor’s benefit, or for the benefit of a
subsequent assignee under the circumstances described in subdivision
(h), following the taking by the assignee of either of the
enforcement actions authorized in paragraph (3) or (4) of subdivision
(c), and the assignee has not authorized the assignor’s disposition
of the cash proceeds in a writing signed by the assignee, the rights
to the cash proceeds and to the recovery of the cash proceeds shall
be determined by the following:
(1) The assignee shall be entitled to an immediate turnover of the
cash proceeds received by the assignor or its agent for collection
or any other person who has collected the rents, issues, or profits
for the assignor’s benefit, or for the benefit of a subsequent
assignee under the circumstances described in subdivision (h), and
the assignor or other described party in possession of those cash
proceeds shall turn over the full amount of cash proceeds to the
assignee, less any amount representing payment of expenses authorized
by the assignee in writing. The assignee shall have a right to bring
an action for recovery of the cash proceeds, and to recover the cash
proceeds, without the necessity of bringing an action to foreclose a
security interest that it may have in the real property. This action
shall not violate Section 726 of the Code of Civil Procedure or
otherwise limit a right available to the assignee with respect to its
security.
(2) As between an assignee with an interest in cash proceeds
perfected in the manner set forth in subdivision (b) and enforced in
accordance with paragraph (3) or (4) of subdivision (c) and another
person claiming an interest in the cash proceeds, other than the
assignor or its agent for collection or one collecting rents, issues,
and profits for the benefit of the assignor, and subject to
subdivision (h), the assignee shall have a continuously perfected
security interest in the cash proceeds to the extent that the cash
proceeds are identifiable. For purposes hereof, cash proceeds are
identifiable if they are either (A) segregated or (B) if commingled
with other funds of the assignor or its agent or one acting on its
behalf, can be traced using the lowest intermediate balance
principle, unless the assignor or other party claiming an interest in
proceeds shows that some other method of tracing would better serve
the interests of justice and equity under the circumstances of the
case. The provisions of this paragraph are subject to any generally
applicable law with respect to payments made in the operation of the
assignor’s business.
(g) (1) If the assignee enforces the assignment under subdivision
(c) by means other than the appointment of a receiver and receives
rents, issues, or profits pursuant to this enforcement, the assignor
or another assignee of the affected real property may make written
demand upon the assignee to pay the reasonable costs of protecting
and preserving the property, including payment of taxes and insurance
and compliance with building and housing codes, if any.
(2) On and after the date of receipt of the demand, the assignee
shall pay for the reasonable costs of protecting and preserving the
real property to the extent of any rents, issues, or profits actually
received by the assignee, provided, however, that no such acts by
the assignee shall cause the assignee to become a mortgagee in
possession and the assignee’s duties under this subdivision, upon
receipt of a demand from the assignor or any other assignee of the
leases, rents, issues, and profits pursuant to paragraph (1), shall
not be construed to require the assignee to operate or manage the
property, which obligation shall remain that of the assignor.
(3) The obligation of the assignee hereunder shall continue until
the earlier of (A) the date on which the assignee obtains the
appointment of a receiver for the real property pursuant to
application to a court of competent jurisdiction, or (B) the date on
which the assignee ceases to enforce the assignment.
(4) This subdivision does not supersede or diminish the right of
the assignee to the appointment of a receiver.
(h) The lien priorities, rights, and interests among creditors
concerning rents, issues, or profits collected before the enforcement
by the assignee shall be governed by subdivisions (a) and (b).
Without limiting the generality of the foregoing, if an assignee who
has recorded its interest in leases, rents, issues, and profits prior
to the recordation of that interest by a subsequent assignee seeks
to enforce its interest in those rents, issues, or profits in
accordance with this section after any enforcement action has been
taken by a subsequent assignee, the prior assignee shall be entitled
only to the rents, issues, and profits that are accrued and unpaid as
of the date of its enforcement action and unpaid rents, issues, and
profits accruing thereafter. The prior assignee shall have no right
to rents, issues, or profits paid prior to the date of the
enforcement action, whether in the hands of the assignor or any
subsequent assignee. Upon receipt of notice that the prior assignee
has enforced its interest in the rents, issues, and profits, the
subsequent assignee shall immediately send a notice to any tenant to
whom it has given notice under subdivision (c). The notice shall
inform the tenant that the subsequent assignee cancels its demand
that the tenant pay rent to the subsequent assignee.
(i) (1) This section shall apply to contracts entered into on or
after January 1, 1997.
(2) Sections 2938 and 2938.1, as these sections were in effect
prior to January 1, 1997, shall govern contracts entered into prior
to January 1, 1997, and shall govern actions and proceedings
initiated on the basis of these contracts.
(j) “Real property,” as used in this section, means real property
or any estate or interest therein.
(k) The demand required by paragraph (3) of subdivision (c) shall
be in the following form:
DEMAND TO PAY RENT TO
PARTY OTHER THAN LANDLORD
(SECTION 2938 OF THE CIVIL CODE)
Tenant:  [Name of Tenant]

Property Occupied by Tenant:  [Address]

Landlord:  [Name of Landlord]

Secured Party:  [Name of Secured Party]

Address:  [Address for Payment of Rent to Secured Party and for
Further Information]:

The secured party named above is the assignee of leases, rents,
issues, and profits under [name of document] dated ______, and
recorded at [recording information] in the official records of
___________ County, California. You may request a copy of the
assignment from the secured party at ____ (address).

THIS NOTICE AFFECTS YOUR LEASE OR RENTAL AGREEMENT RIGHTS AND
OBLIGATIONS. YOU ARE THEREFORE ADVISED TO CONSULT AN ATTORNEY
CONCERNING THOSE RIGHTS AND OBLIGATIONS IF YOU HAVE ANY QUESTIONS
REGARDING YOUR RIGHTS AND OBLIGATIONS UNDER THIS NOTICE.

IN ACCORDANCE WITH SUBDIVISION (C) OF SECTION 2938 OF THE CIVIL
CODE, YOU ARE HEREBY DIRECTED TO PAY TO THE SECURED PARTY, ____ (NAME
OF SECURED PARTY) AT ____ (ADDRESS), ALL RENTS UNDER YOUR LEASE OR
OTHER RENTAL AGREEMENT WITH THE LANDLORD OR PREDECESSOR IN INTEREST
OF LANDLORD, FOR THE OCCUPANCY OF THE PROPERTY AT ____ (ADDRESS OF
RENTAL PREMISES) WHICH ARE PAST DUE AND PAYABLE ON THE DATE YOU
RECEIVE THIS DEMAND, AND ALL RENTS COMING DUE UNDER THE LEASE OR
OTHER RENTAL AGREEMENT FOLLOWING THE DATE YOU RECEIVE THIS DEMAND
UNLESS YOU HAVE ALREADY PAID THIS RENT TO THE LANDLORD IN GOOD FAITH
AND IN A MANNER NOT INCONSISTENT WITH THE AGREEMENT BETWEEN YOU AND
THE LANDLORD. IN THIS CASE, THIS DEMAND NOTICE SHALL REQUIRE YOU TO
PAY TO THE SECURED PARTY, ____ (NAME OF THE SECURED PARTY), ALL RENTS
THAT COME DUE FOLLOWING THE DATE OF THE PAYMENT TO THE LANDLORD.

IF YOU PAY THE RENT TO THE UNDERSIGNED SECURED PARTY, ____ (NAME
OF SECURED PARTY), IN ACCORDANCE WITH THIS NOTICE, YOU DO NOT HAVE TO
PAY THE RENT TO THE LANDLORD. YOU WILL NOT BE SUBJECT TO DAMAGES OR
OBLIGATED TO PAY RENT TO THE SECURED PARTY IF YOU HAVE PREVIOUSLY
RECEIVED A DEMAND OF THIS TYPE FROM A DIFFERENT SECURED PARTY.

[For other than residential tenants] IF YOU PAY RENT TO THE
LANDLORD THAT BY THE TERMS OF THIS DEMAND YOU ARE REQUIRED TO PAY TO
THE SECURED PARTY, YOU MAY BE SUBJECT TO DAMAGES INCURRED BY THE
SECURED PARTY BY REASON OF YOUR FAILURE TO COMPLY WITH THIS DEMAND,
AND YOU MAY NOT BE DISCHARGED FROM YOUR OBLIGATION TO PAY THAT RENT
TO THE SECURED PARTY. YOU WILL NOT BE SUBJECT TO THOSE DAMAGES OR
OBLIGATED TO PAY THAT RENT TO THE SECURED PARTY IF YOU HAVE
PREVIOUSLY RECEIVED A DEMAND OF THIS TYPE FROM A DIFFERENT ASSIGNEE.

Your obligation to pay rent under this demand shall continue until
you receive either (1) a written notice from a court directing you
to pay the rent in a manner provided therein, or (2) a written notice
from the secured party named above canceling this demand.

The undersigned hereby certifies, under penalty of perjury, that
the undersigned is an authorized officer or agent of the secured
party and that the secured party is the assignee, or the current
successor to the assignee, under an assignment of leases, rents,
issues, or profits executed by the landlord, or a predecessor in
interest, that is being enforced pursuant to and in accordance with
Section 2938 of the Civil Code.

Executed at _________, California, this ____ day of _________,
_____.

(Secured Party)
Name: __________________________
Title: _________________________

Discharge
2939.  A recorded mortgage must be discharged by a certificate
signed by the mortgagee, his personal representatives or assigns,
acknowledged or proved and certified as prescribed by the chapter on
“recording transfers,” stating that the mortgage has been paid,
satisfied, or discharged. Reference shall be made in said certificate
to the book and page where the mortgage is recorded.

Discharge by Foreign Executor
2939.5.  Foreign executors, administrators and guardians may satisfy
mortgages upon the records of any county in this state, upon
producing and recording in the office of the county recorder of the
county in which such mortgage is recorded, a duly certified and
authenticated copy of their letters testamentary, or of
administration or of guardianship, and which certificate or
authentication shall also recite that said letters have not been
revoked. For the purposes of this section, “guardian” includes a
foreign conservator, committee, or comparable fiduciary.

Discharge Certificate and Record Thereof
2940.  A certificate of the discharge of a mortgage, and the proof
or acknowledgment thereof, must be recorded in the office of the
county recorder in which the mortgage is recorded.

Duty of Mortgagee to Execute Certificate of Discharge
2941.  (a) Within 30 days after any mortgage has been satisfied, the
mortgagee or the assignee of the mortgagee shall execute a
certificate of the discharge thereof, as provided in Section 2939,
and shall record or cause to be recorded in the office of the county
recorder in which the mortgage is recorded. The mortgagee shall then
deliver, upon the written request of the mortgagor or the mortgagor’s
heirs, successors, or assignees, as the case may be, the original
note and mortgage to the person making the request.
(b) (1) Within 30 calendar days after the obligation secured by
any deed of trust has been satisfied, the beneficiary or the assignee
of the beneficiary shall execute and deliver to the trustee the
original note, deed of trust, request for a full reconveyance, and
other documents as may be necessary to reconvey, or cause to be
reconveyed, the deed of trust.
(A) The trustee shall execute the full reconveyance and shall
record or cause it to be recorded in the office of the county
recorder in which the deed of trust is recorded within 21 calendar
days after receipt by the trustee of the original note, deed of
trust, request for a full reconveyance, the fee that may be charged
pursuant to subdivision (e), recorder’s fees, and other documents as
may be necessary to reconvey, or cause to be reconveyed, the deed of
trust.
(B) The trustee shall deliver a copy of the reconveyance to the
beneficiary, its successor in interest, or its servicing agent, if
known. The reconveyance instrument shall specify one of the following
options for delivery of the instrument, the addresses of which the
recorder has no duty to validate:
(i) The trustor or successor in interest, and that person’s last
known address, as the person to whom the recorder will deliver the
recorded instrument pursuant to Section 27321 of the Government Code.
(ii) That the recorder shall deliver the recorded instrument to
the trustee’s address. If the trustee’s address is specified for
delivery, the trustee shall mail the recorded instrument to the
trustor or the successor in interest to the last known address for
that party.
(C) Following execution and recordation of the full reconveyance,
upon receipt of a written request by the trustor or the trustor’s
heirs, successors, or assignees, the trustee shall then deliver, or
caused to be delivered, the original note and deed of trust to the
person making that request.
(D) If the note or deed of trust, or any copy of the note or deed
of trust, is electronic, upon satisfaction of an obligation secured
by a deed of trust, any electronic original, or electronic copy which
has not been previously marked solely for use as a copy, of the note
and deed of trust, shall be altered to indicate that the obligation
is paid in full.
(2) If the trustee has failed to execute and record, or cause to
be recorded, the full reconveyance within 60 calendar days of
satisfaction of the obligation, the beneficiary, upon receipt of a
written request by the trustor or trustor’s heirs, successor in
interest, agent, or assignee, shall execute and acknowledge a
document pursuant to Section 2934a substituting itself or another as
trustee and issue a full reconveyance.
(3) If a full reconveyance has not been executed and recorded
pursuant to either paragraph (1) or paragraph (2) within 75 calendar
days of satisfaction of the obligation, then a title insurance
company may prepare and record a release of the obligation. However,
at least 10 days prior to the issuance and recording of a full
release pursuant to this paragraph, the title insurance company shall
mail by first-class mail with postage prepaid, the intention to
release the obligation to the trustee, trustor, and beneficiary of
record, or their successor in interest of record, at the last known
address.
(A) The release shall set forth:
(i) The name of the beneficiary.
(ii) The name of the trustor.
(iii) The recording reference to the deed of trust.
(iv) A recital that the obligation secured by the deed of trust
has been paid in full.
(v) The date and amount of payment.
(B) The release issued pursuant to this subdivision shall be
entitled to recordation and, when recorded, shall be deemed to be the
equivalent of a reconveyance of a deed of trust.
(4) Where an obligation secured by a deed of trust was paid in
full prior to July 1, 1989, and no reconveyance has been issued and
recorded by October 1, 1989, then a release of obligation as provided
for in paragraph (3) may be issued.
(5) Paragraphs (2) and (3) do not excuse the beneficiary or the
trustee from compliance with paragraph (1). Paragraph (3) does not
excuse the beneficiary from compliance with paragraph (2).
(6) In addition to any other remedy provided by law, a title
insurance company preparing or recording the release of the
obligation shall be liable to any party for damages, including
attorney’s fees, which any person may sustain by reason of the
issuance and recording of the release, pursuant to paragraphs (3) and
(4).
(7) A beneficiary may, at its discretion, in accordance with the
requirements and procedures of Section 2934a, substitute the title
company conducting the escrow through which the obligation is
satisfied for the trustee of record, in which case the title company
assumes the obligation of a trustee under this subdivision, and may
collect the fee authorized by subdivision (e).
(8) In lieu of delivering the original note and deed of trust to
the trustee within 30 days of loan satisfaction, as required by
paragraph (1) of subdivision (b), a beneficiary who executes and
delivers to the trustee a request for a full reconveyance within 30
days of loan satisfaction may, within 120 days of loan satisfaction,
deliver the original note and deed of trust to either the trustee or
trustor. If the note and deed of trust are delivered as provided in
this paragraph, upon satisfaction of the note and deed of trust, the
note and deed of trust shall be altered to indicate that the
obligation is paid in full. Nothing in this paragraph alters the
requirements and obligations set forth in paragraphs (2) and (3).
(c) For the purposes of this section, the phrases “cause to be
recorded” and “cause it to be recorded” include, but are not limited
to, sending by certified mail with the United States Postal Service
or by an independent courier service using its tracking service that
provides documentation of receipt and delivery, including the
signature of the recipient, the full reconveyance or certificate of
discharge in a recordable form, together with payment for all
required fees, in an envelope addressed to the county recorder’s
office of the county in which the deed of trust or mortgage is
recorded. Within two business days from the day of receipt, if
received in recordable form together with all required fees, the
county recorder shall stamp and record the full reconveyance or
certificate of discharge. Compliance with this subdivision shall
entitle the trustee to the benefit of the presumption found in
Section 641 of the Evidence Code.
(d) The violation of this section shall make the violator liable
to the person affected by the violation for all damages which that
person may sustain by reason of the violation, and shall require that
the violator forfeit to that person the sum of five hundred dollars
($500).
(e) (1) The trustee, beneficiary, or mortgagee may charge a
reasonable fee to the trustor or mortgagor, or the owner of the land,
as the case may be, for all services involved in the preparation,
execution, and recordation of the full reconveyance, including, but
not limited to, document preparation and forwarding services rendered
to effect the full reconveyance, and, in addition, may collect
official fees. This fee may be made payable no earlier than the
opening of a bona fide escrow or no more than 60 days prior to the
full satisfaction of the obligation secured by the deed of trust or
mortgage.
(2) If the fee charged pursuant to this subdivision does not
exceed forty-five dollars ($45), the fee is conclusively presumed to
be reasonable.
(3) The fee described in paragraph (1) may not be charged unless
demand for the fee was included in the payoff demand statement
described in Section 2943.
(f) For purposes of this section, “original” may include an
optically imaged reproduction when the following requirements are
met:
(1) The trustee receiving the request for reconveyance and
executing the reconveyance as provided in subdivision (b) is an
affiliate or subsidiary of the beneficiary or an affiliate or
subsidiary of the assignee of the beneficiary, respectively.
(2) The optical image storage media used to store the document
shall be nonerasable write once, read many (WORM) optical image media
that does not allow changes to the stored document.
(3) The optical image reproduction shall be made consistent with
the minimum standards of quality approved by either the National
Institute of Standards and Technology or the Association for
Information and Image Management.
(4) Written authentication identifying the optical image
reproduction as an unaltered copy of the note, deed of trust, or
mortgage shall be stamped or printed on the optical image
reproduction.
(g) No fee or charge may be imposed on the trustor in connection
with, or relating to, any act described in this section except as
expressly authorized by this section.
(h) The amendments to this section enacted at the 1999-2000
Regular Session shall apply only to a mortgage or an obligation
secured by a deed of trust that is satisfied on or after January 1,
2001.
(i) (1) In any action filed before January 1, 2002, that is
dismissed as a result of the amendments to this section enacted at
the 2001-02 Regular Session, the plaintiff shall not be required to
pay the defendant’s costs.
(2) Any claimant, including a claimant in a class action lawsuit,
whose claim is dismissed or barred as a result of the amendments to
this section enacted at the 2001-02 Regular Session, may, within 6
months of the dismissal or barring of the action or claim, file or
refile a claim for actual damages occurring before January 1, 2002,
that were proximately caused by a time lapse between loan
satisfaction and the completion of the beneficiary’s obligations as
required under paragraph (1) of subdivision (b). In any action
brought under this section, the defendant may be found liable for
actual damages, but may not be found liable for any civil penalty
authorized by Section 2941.
(j) Notwithstanding any other penalties, if a beneficiary collects
a fee for reconveyance and thereafter has knowledge, or should have
knowledge, that no reconveyance has been recorded, the beneficiary
shall cause to be recorded the reconveyance, or in the event a
release of obligation is earlier and timely recorded, the beneficiary
shall refund to the trustor the fee charged to perform the
reconveyance. Evidence of knowledge includes, but is not limited to,
notice of a release of obligation pursuant to paragraph (3) of
subdivision (b).

Reconveyance Fee
2941.1.  Notwithstanding any other provision of law, if no payoff
demand statement is issued pursuant to Section 2943, nothing in
Section 2941 shall be construed to prohibit the charging of a
reconveyance fee.

Wilful Violation of Sec. 2941 a Misdemeanor
2941.5.  Every person who willfully violates Section 2941 is guilty
of a misdemeanor punishable by fine of not less than fifty dollars
($50) nor more than four hundred dollars ($400), or by imprisonment
in the county jail for not to exceed six months, or by both such fine
and imprisonment.
For purposes of this section, “willfully” means simply a purpose
or willingness to commit the act, or make the omission referred to.
It does not require an intent to violate the law, to injure another,
or to acquire any advantage.

Corporate Bond Accompanied by Declaration
2941.7.  Whenever the obligation secured by a mortgage or deed of
trust has been fully satisfied and the present mortgagee or
beneficiary of record cannot be located after diligent search, or
refuses to execute and deliver a proper certificate of discharge or
request for reconveyance, or whenever a specified balance, including
principal and interest, remains due and the mortgagor or trustor or
the mortgagor’s or trustor’s successor in interest cannot, after
diligent search, locate the then mortgagee or beneficiary of record,
the lien of any mortgage or deed of trust shall be released when the
mortgagor or trustor or the mortgagor’s or trustor’s successor in
interest records or causes to be recorded, in the office of the
county recorder of the county in which the encumbered property is
located, a corporate bond accompanied by a declaration, as specified
in subdivision (b), and with respect to a deed of trust, a
reconveyance as hereinafter provided.
(a) The bond shall be acceptable to the trustee and shall be
issued by a corporation lawfully authorized to issue surety bonds in
the State of California in a sum equal to the greater of either (1)
two times the amount of the original obligation secured by the
mortgage or deed of trust and any additional principal amounts,
including advances, shown in any recorded amendment thereto, or (2)
one-half of the total amount computed pursuant to (1) and any accrued
interest on such amount, and shall be conditioned for payment of any
sum which the mortgagee or beneficiary may recover in an action on
the obligation secured by the mortgage or deed of trust, with costs
of suit and reasonable attorneys’ fees. The obligees under the bond
shall be the mortgagee or mortgagee’s successor in interest or the
trustee who executes a reconveyance under this section and the
beneficiary or beneficiary’s successor in interest.
The bond recorded by the mortgagor or trustor or mortgagor’s or
trustor’s successor in interest shall contain the following
information describing the mortgage or deed of trust:
(1) Recording date and instrument number or book and page number
of the recorded instrument.
(2) Names of original mortgagor and mortgagee or trustor and
beneficiary.
(3) Amount shown as original principal sum secured thereby.
(4) The recording information and new principal amount shown in
any recorded amendment thereto.
(b) The declaration accompanying the corporate bond recorded by
the mortgagor or trustor or the mortgagor’s or trustor’s successor in
interest shall state:
(1) That it is recorded pursuant to this section.
(2) The name of the original mortgagor or trustor and mortgagee or
beneficiary.
(3) The name and address of the person making the declaration.
(4) That either the obligation secured by the mortgage or deed of
trust has been fully satisfied and the present mortgagee or
beneficiary of record cannot be located after diligent search, or
refuses to execute and deliver a proper certificate of discharge or
request for reconveyance as required under Section 2941; or that a
specified balance, including principal and interest, remains due and
the mortgagor or trustor or mortgagor’s or trustor’s successor in
interest cannot, after diligent search, locate the then mortgagee or
beneficiary.
(5) That the declarant has mailed by certified mail, return
receipt requested, to the last address of the person to whom payments
under the mortgage or deed of trust were made and to the last
mortgagee or beneficiary of record at the address for such mortgagee
or beneficiary shown on the instrument creating, assigning, or
conveying the interest, a notice of recording a declaration and bond
under this section and informing the recipient of the name and
address of the mortgagor or trustee, if any, and of the right to
record a written objection with respect to the release of the lien of
the mortgage or, with respect to a deed of trust, notify the trustee
in writing of any objection to the reconveyance of the deed of
trust. The declaration shall state the date any notices were mailed
pursuant to this section and the names and addresses of all persons
to whom mailed.
The declaration provided for in this section shall be signed by
the mortgagor or trustor under penalty of perjury.
(c) With respect to a deed of trust, after the expiration of 30
days following the recording of the corporate bond and accompanying
declaration provided in subdivisions (a) and (b), and delivery to the
trustee of the usual reconveyance fees plus costs and a demand for
reconveyance under this section, the trustee shall execute and
record, or otherwise deliver as provided in Section 2941, a
reconveyance in the same form as if the beneficiary had delivered to
the trustee a proper request for reconveyance, provided that the
trustee has not received a written objection to the reconveyance from
the beneficiary of record. No trustee shall have any liability to
any person by reason of its execution of a reconveyance in reliance
upon a trustor’s or trustor’s successor’s in interest substantial
compliance with this section. The sole remedy of any person damaged
by reason of the reconveyance shall be against the trustor, the
affiant, or the bond. With respect to a mortgage, a mortgage shall be
satisfied of record when 30 days have expired following recordation
of the corporate bond and accompanying declaration, provided no
objection to satisfaction has been recorded by the mortgagee within
that period. A bona fide purchaser or encumbrancer for value shall
take the interest conveyed free of such mortgage, provided there has
been compliance with subdivisions (a) and (b) and the deed to the
purchaser recites that no objections by the mortgagee have been
recorded.
Upon recording of a reconveyance under this section, or, in the
case of a mortgage the expiration of 30 days following recordation of
the corporate bond and accompanying declaration without objection
thereto having been recorded, interest shall no longer accrue as to
any balance remaining due to the extent the balance due has been
alleged in the declaration recorded under subdivision (b).
The sum of any specified balance, including principal and
interest, which remains due and which is remitted to any issuer of a
corporate bond in conjunction with the issuance of a bond pursuant to
this section shall, if unclaimed, escheat to the state after three
years pursuant to the Unclaimed Property Law. From the date of
escheat the issuer of the bond shall be relieved of any liability to
pay to the beneficiary or his or her heirs or other successors in
interest the escheated funds and the sole remedy shall be a claim for
property paid or delivered to the Controller pursuant to the
Unclaimed Property Law.
(d) The term “diligent search,” as used in this section, shall
mean all of the following:
(1) The mailing of notices as provided in paragraph (5) of
subdivision (b), and to any other address that the declarant has used
to correspond with or contact the mortgagee or beneficiary.
(2) A check of the telephone directory in the city where the
mortgagee or beneficiary maintained the mortgagee’s or beneficiary’s
last known address or place of business.
(3) In the event the mortgagee or beneficiary or the mortgagee’s
or beneficiary’s successor in interest is a corporation, a check of
the records of the California Secretary of State and the secretary of
state in the state of incorporation, if known.
(4) In the event the mortgagee or beneficiary is a state or
national bank or a state or federal savings and loan association, an
inquiry of the regulatory authority of such bank or savings and loan
association.
(e) This section shall not be deemed to create an exclusive
procedure for the issuance of reconveyances and the issuance of bonds
and declarations to release the lien of a mortgage and shall not
affect any other procedures, whether or not such procedures are set
forth in statute, for the issuance of reconveyances and the issuance
of bonds and declarations to release the lien of a mortgage.
(f) For purposes of this section, the trustor or trustor’s
successor in interest may substitute the present trustee of record
without conferring any duties upon the trustee other than those that
are incidental to the execution of a reconveyance pursuant to this
section if all of the following requirements are met:
(1) The present trustee of record and the present mortgagee or
beneficiary of record cannot be located after diligent search.
(2) The declaration filed pursuant to subdivision (b) shall state
in addition that it is filed pursuant to this subdivision, and shall,
in lieu of the provisions of paragraph (4) of subdivision (b), state
that the obligation secured by the mortgage or deed of trust has
been fully satisfied and the present trustee of record and present
mortgagee or beneficiary of record cannot be located after diligent
search.
(3) The substitute trustee is a title insurance company that
agrees to accept the substitution. This subdivision shall not impose
a duty upon a title insurance company to accept the substitution.
(4) The corporate bond required in subdivision (a) is for a period
of five or more years.

Agreement by all Beneficiaries Under Trust Deed to Be Governed by Beneficiaries Holding
More Than 50 Percent of Specified Interests
2941.9.  (a) The purpose of this section is to establish a process
through which all of the beneficiaries under a trust deed may agree
to be governed by beneficiaries holding more than 50 percent of the
record beneficial interest of a series of notes secured by the same
real property or of undivided interests in a note secured by real
property equivalent to a series transaction, exclusive of any notes
or interests of a licensed real estate broker that is the issuer or
servicer of the notes or interests or any affiliate of that licensed
real estate broker.
(b) All holders of notes secured by the same real property or a
series of undivided interests in notes secured by real property
equivalent to a series transaction may agree in writing to be
governed by the desires of the holders of more than 50 percent of the
record beneficial interest of those notes or interests, exclusive of
any notes or interests of a licensed real estate broker that is the
issuer or servicer of the notes or interests of any affiliate of the
licensed real estate broker, with respect to actions to be taken on
behalf of all holders in the event of default or foreclosure for
matters that require direction or approval of the holders, including
designation of the broker, servicing agent, or other person acting on
their behalf, and the sale, encumbrance, or lease of real property
owned by the holders resulting from foreclosure or receipt of a deed
in lieu of foreclosure.
(c) A description of the agreement authorized in subdivision (b)
of this section shall be disclosed pursuant to Section 10232.5 of the
Business and Professions Code and shall be included in a recorded
document such as the deed of trust or the assignment of interests.
(d) Any action taken pursuant to the authority granted in this
section is not effective unless all the parties agreeing to the
action sign, under penalty of perjury, a separate written document
entitled “Majority Action Affidavit” stating the following:
(1) The action has been authorized pursuant to this section.
(2) None of the undersigned is a licensed real estate broker or an
affiliate of the broker that is the issuer or servicer of the
obligation secured by the deed of trust.
(3) The undersigned together hold more than 50 percent of the
record beneficial interest of a series of notes secured by the same
real property or of undivided interests in a note secured by real
property equivalent to a series transaction.
(4) Notice of the action was sent by certified mail, postage
prepaid, with return receipt requested, to each holder of an interest
in the obligation secured by the deed of trust who has not joined in
the execution of the substitution or this document.
This document shall be recorded in the office of the county
recorder of each county in which the real property described in the
deed of trust is located. Once the document in this subdivision is
recorded, it shall constitute conclusive evidence of compliance with
the requirements of this subdivision in favor of trustees acting
pursuant to this section, substituted trustees acting pursuant to
Section 2934a, subsequent assignees of the obligation secured by the
deed of trust, and subsequent bona fide purchasers or encumbrancers
for value of the real property described therein.
(e) For purposes of this section, “affiliate of the licensed real
estate broker” includes any person as defined in Section 25013 of the
Corporations Code who is controlled by, or is under common control
with, or who controls, a licensed real estate broker. “Control” means
the possession, direct or indirect, of the power to direct or cause
the direction of management and policies.

Statute Inapplicable to Bottomry
2942.  Contracts of bottomry or respondentia, although in the nature
of mortgages, are not affected by any of the provisions of this
Chapter.

Statement of Unpaid Balance on Demand
2943.  (a) As used in this section:
(1) “Beneficiary” means a mortgagee or beneficiary of a mortgage
or deed of trust, or his or her assignees.
(2) “Beneficiary statement” means a written statement showing:
(A) The amount of the unpaid balance of the obligation secured by
the mortgage or deed of trust and the interest rate, together with
the total amounts, if any, of all overdue installments of either
principal or interest, or both.
(B) The amounts of periodic payments, if any.
(C) The date on which the obligation is due in whole or in part.
(D) The date to which real estate taxes and special assessments
have been paid to the extent the information is known to the
beneficiary.
(E) The amount of hazard insurance in effect and the term and
premium of that insurance to the extent the information is known to
the beneficiary.
(F) The amount in an account, if any, maintained for the
accumulation of funds with which to pay taxes and insurance premiums.
(G) The nature and, if known, the amount of any additional
charges, costs, or expenses paid or incurred by the beneficiary which
have become a lien on the real property involved.
(H) Whether the obligation secured by the mortgage or deed of
trust can or may be transferred to a new borrower.
(3) “Delivery” means depositing or causing to be deposited in the
United States mail an envelope with postage prepaid, containing a
copy of the document to be delivered, addressed to the person whose
name and address is set forth in the demand therefor. The document
may also be transmitted by facsimile machine to the person whose name
and address is set forth in the demand therefor.
(4) “Entitled person” means the trustor or mortgagor of, or his or
her successor in interest in, the mortgaged or trust property or any
part thereof, any beneficiary under a deed of trust, any person
having a subordinate lien or encumbrance of record thereon, the
escrowholder licensed as an agent pursuant to Division 6 (commencing
with Section 17000) of the Financial Code, or the party exempt by
virtue of Section 17006 of the Financial Code who is acting as the
escrowholder.
(5) “Payoff demand statement” means a written statement, prepared
in response to a written demand made by an entitled person or
authorized agent, setting forth the amounts required as of the date
of preparation by the beneficiary, to fully satisfy all obligations
secured by the loan that is the subject of the payoff demand
statement. The written statement shall include information reasonably
necessary to calculate the payoff amount on a per diem basis for the
period of time, not to exceed 30 days, during which the per diem
amount is not changed by the terms of the note.
(6) “Short-pay agreement” means an agreement in writing in which
the beneficiary agrees to release its lien on a property in return
for payment of an amount less than the secured obligation.
(7) “Short-pay demand statement” means a written statement, issued
subsequent to and conditioned on the existence of a short-pay
agreement that is in possession of the entitled person, that is
prepared in response to a written demand made by an entitled person
or authorized agent, setting forth an amount less than the
outstanding debt, together with any terms and conditions, under which
the beneficiary will execute and deliver a reconveyance of the deed
of trust securing the note that is the subject of the short-pay
demand statement. The period shall not be greater than 30 days from
the date of preparation by the beneficiary.
(8) “Short-pay request” means a written request made by an
entitled person or authorized agent requesting the beneficiary to
provide a short-pay demand statement that includes all of the
following:
(A) A copy of an existing contract to purchase the property for an
amount certain.
(B) A copy of the short-pay agreement in the possession of the
entitled person.
(C) Information related to the release of any other liens on the
property, if any.
(b) (1) A beneficiary, or his or her authorized agent, shall,
within 21 days of the receipt of a written demand by an entitled
person or his or her authorized agent, prepare and deliver to the
person demanding it a true, correct, and complete copy of the note or
other evidence of indebtedness with any modification thereto, and a
beneficiary statement.
(2) A request pursuant to this subdivision may be made by an
entitled person or his or her authorized agent at any time before, or
within two months after, the recording of a notice of default under
a mortgage or deed of trust, or may otherwise be made more than 30
days prior to the entry of the decree of foreclosure.
(c) (1) A beneficiary, or his or her authorized agent, shall, on
the written demand of an entitled person, or his or her authorized
agent, prepare and deliver a payoff demand statement to the person
demanding it within 21 days of the receipt of the demand. However, if
the loan is subject to a recorded notice of default or a filed
complaint commencing a judicial foreclosure, the beneficiary shall
have no obligation to prepare and deliver this statement as
prescribed unless the written demand is received prior to the first
publication of a notice of sale or the notice of the first date of
sale established by a court.
(2) Except as provided in this subdivision, a beneficiary, or his
or her authorized agent, shall, upon receipt of a short-pay request,
prepare and deliver a short-pay demand statement to the person
requesting it within 21 days of the receipt of the short-pay request.
A beneficiary, or his or her authorized agent that elects not to
proceed with the transaction that is the subject of the short-pay
request may refuse to provide a short-pay demand statement for that
transaction, but shall provide a written statement to the person
requesting it, indicating that the beneficiary elects not to proceed
with the proposed transaction, within 21 days of the receipt of the
short-pay request. If the terms and conditions of the short-pay
agreement require approval by the beneficiary of a closing statement
or similar document prepared by an escrowholder, approval or
disapproval shall be provided not more than four days after receipt
by the beneficiary of the closing statement, or the closing statement
shall be deemed approved, provided that the statement is not clearly
contrary to the terms of the short-pay agreement or the short-pay
demand statement provided to the escrowholder.
(d) (1) A beneficiary statement, payoff demand statement, or
short-pay demand statement may be relied upon by the entitled person
or his or her authorized agent in accordance with its terms,
including with respect to the payoff demand statement or short-pay
demand statement reliance for the purpose of establishing the amount
necessary to pay the obligation in full. If the beneficiary notifies
the entitled person or his or her authorized agent of any amendment
to the statement, then the amended statement may be relied upon by
the entitled person or his or her authorized agent as provided in
this subdivision.
(2) If notification of any amendment to the statement is not given
in writing, then a written amendment to the statement shall be
delivered to the entitled person or his or her authorized agent no
later than the next business day after notification.
(3) Upon the dates specified in subparagraphs (A) and (B), any
sums that were due and for any reason not included in the statement
or amended statement shall continue to be recoverable by the
beneficiary as an unsecured obligation of the obligor pursuant to the
terms of the note and existing provisions of law.
(A) If the transaction is voluntary, the entitled party or his or
her authorized agent may rely upon the statement or amended statement
upon the earlier of (i) the close of escrow, (ii) transfer of title,
or (iii) recordation of a lien.
(B) If the loan is subject to a recorded notice of default or a
filed complaint commencing a judicial foreclosure, the entitled party
or his or her authorized agent may rely upon the statement or
amended statement upon the acceptance of the last and highest bid at
a trustee’s sale or a court supervised sale.
(e) The following provisions apply to a demand for either a
beneficiary statement, a payoff demand statement, or a short-pay
demand statement:
(1) If an entitled person or his or her authorized agent requests
a statement pursuant to this section and does not specify a
beneficiary statement, a payoff demand statement, or short-pay demand
statement the beneficiary shall treat the request as a request for a
payoff demand statement.
(2) If the entitled person or the entitled person’s authorized
agent includes in the written demand a specific request for a copy of
the deed of trust or mortgage, it shall be furnished with the
written statement at no additional charge.
(3) The beneficiary may, before delivering a statement, require
reasonable proof that the person making the demand is, in fact, an
entitled person or an authorized agent of an entitled person, in
which event the beneficiary shall not be subject to the penalties of
this section until 21 days after receipt of the proof herein provided
for. A statement in writing signed by the entitled person appointing
an authorized agent when delivered personally to the beneficiary or
delivered by registered return receipt mail shall constitute
reasonable proof as to the identity of an agent. Similar delivery of
a policy of title insurance, preliminary report issued by a title
company, original or photographic copy of a grant deed or certified
copy of letters testamentary, guardianship, or conservatorship shall
constitute reasonable proof as to the identity of a successor in
interest, provided the person demanding a statement is named as
successor in interest in the document.
(4) If a beneficiary for a period of 21 days after receipt of the
written demand willfully fails to prepare and deliver the statement,
he or she is liable to the entitled person for all damages which he
or she may sustain by reason of the refusal and, whether or not
actual damages are sustained, he or she shall forfeit to the entitled
person the sum of three hundred dollars ($300). Each failure to
prepare and deliver the statement, occurring at a time when, pursuant
to this section, the beneficiary is required to prepare and deliver
the statement, creates a separate cause of action, but a judgment
awarding an entitled person a forfeiture, or damages and forfeiture,
for any failure to prepare and deliver a statement bars recovery of
damages and forfeiture for any other failure to prepare and deliver a
statement, with respect to the same obligation, in compliance with a
demand therefor made within six months before or after the demand as
to which the award was made. For the purposes of this subdivision,
“willfully” means an intentional failure to comply with the
requirements of this section without just cause or excuse.
(5) If the beneficiary has more than one branch, office, or other
place of business, then the demand shall be made to the branch or
office address set forth in the payment billing notice or payment
book, and the statement, unless it specifies otherwise, shall be
deemed to apply only to the unpaid balance of the single obligation
named in the request and secured by the mortgage or deed of trust
which is payable at the branch or office whose address appears on the
aforesaid billing notice or payment book.
(6) The beneficiary may make a charge not to exceed thirty dollars
($30) for furnishing each required statement. The provisions of this
paragraph shall not apply to mortgages or deeds of trust insured by
the Federal Housing Administrator or guaranteed by the Administrator
of Veterans Affairs.
(f) The preparation and delivery of a beneficiary statement, a
payoff demand statement, or short-pay demand statement pursuant to
this section shall not change a date of sale established pursuant to
Section 2924g.
(g) This section shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2014, deletes or extends
that date.

Statement of Unpaid Balance on Demand — Definitions
2943.  (a) As used in this section:
(1) “Beneficiary” means a mortgagee or beneficiary of a mortgage
or deed of trust, or his or her assignees.
(2) “Beneficiary statement” means a written statement showing:
(A) The amount of the unpaid balance of the obligation secured by
the mortgage or deed of trust and the interest rate, together with
the total amounts, if any, of all overdue installments of either
principal or interest, or both.
(B) The amounts of periodic payments, if any.
(C) The date on which the obligation is due in whole or in part.
(D) The date to which real estate taxes and special assessments
have been paid to the extent the information is known to the
beneficiary.
(E) The amount of hazard insurance in effect and the term and
premium of that insurance to the extent the information is known to
the beneficiary.
(F) The amount in an account, if any, maintained for the
accumulation of funds with which to pay taxes and insurance premiums.
(G) The nature and, if known, the amount of any additional
charges, costs, or expenses paid or incurred by the beneficiary which
have become a lien on the real property involved.
(H) Whether the obligation secured by the mortgage or deed of
trust can or may be transferred to a new borrower.
(3) “Delivery” means depositing or causing to be deposited in the
United States mail an envelope with postage prepaid, containing a
copy of the document to be delivered, addressed to the person whose
name and address is set forth in the demand therefor. The document
may also be transmitted by facsimile machine to the person whose name
and address is set forth in the demand therefor.
(4) “Entitled person” means the trustor or mortgagor of, or his or
her successor in interest in, the mortgaged or trust property or any
part thereof, any beneficiary under a deed of trust, any person
having a subordinate lien or encumbrance of record thereon, the
escrowholder licensed as an agent pursuant to Division 6 (commencing
with Section 17000) of the Financial Code, or the party exempt by
virtue of Section 17006 of the Financial Code who is acting as the
escrowholder.
(5) “Payoff demand statement” means a written statement, prepared
in response to a written demand made by an entitled person or
authorized agent, setting forth the amounts required as of the date
of preparation by the beneficiary, to fully satisfy all obligations
secured by the loan that is the subject of the payoff demand
statement. The written statement shall include information reasonably
necessary to calculate the payoff amount on a per diem basis for the
period of time, not to exceed 30 days, during which the per diem
amount is not changed by the terms of the note.
(b) (1) A beneficiary, or his or her authorized agent, shall, within 21 days of the receipt of a written
demand by an entitled person or his or her authorized agent, prepare and deliver to the person
demanding it a true, correct, and complete copy of the note or other evidence of indebtedness with any
modification thereto, and a beneficiary statement.
(2) A request pursuant to this subdivision may be made by an entitled person or his or her authorized
agent at any time before, or within two months after, the recording of a notice of default under a
mortgage or deed of trust, or may otherwise be made more than 30 days prior to the entry of the decree
of foreclosure.
(c) A beneficiary, or his or her authorized agent, shall, on the written demand of an entitled person, or
his or her authorized agent, prepare and deliver a payoff demand statement to the person demanding it
within 21 days of the receipt of the demand. However, if the loan is subject to a recorded notice of
default or a filed complaint commencing a judicial foreclosure, the beneficiary shall have no obligation
to prepare and deliver this statement as prescribed unless the written demand is received prior to the
first publication of a notice of sale or the notice of the first date of sale established by a court.
(d) (1) A beneficiary statement or payoff demand statement may be relied upon by the entitled person or
his or her authorized agent in accordance with its terms, including with respect to the payoff demand
statement reliance for the purpose of establishing the amount necessary to pay the obligation in full. If
the beneficiary notifies the entitled person or his or her authorized agent of any amendment to the
statement, then the amended statement may be relied upon by the entitled person or his or her
authorized agent as provided in this subdivision.
(2) If notification of any amendment to the statement is not given in writing, then a written amendment to
the statement shall be delivered to the entitled person or his or her authorized agent no later than the
next business day after notification.
(3) Upon the dates specified in subparagraphs (A) and (B) any sums that were due and for any reason
not included in the statement or amended statement shall continue to be recoverable by the beneficiary
as an unsecured obligation of the obligor pursuant to the terms of the note and existing provisions of
law.
(A) If the transaction is voluntary, the entitled party or his or her authorized agent may rely upon the
statement or amended statement upon the earlier of (i) the close of escrow, (ii) transfer of title, or (iii)
recordation of a lien.
(B) If the loan is subject to a recorded notice of default or a filed complaint commencing a judicial
foreclosure, the entitled party or his or her authorized agent may rely upon the statement or amended
statement upon the acceptance of the last and highest bid at a trustee’s sale or a court supervised sale.
(e) The following provisions apply to a demand for either a beneficiary statement or a payoff demand
statement:
(1) If an entitled person or his or her authorized agent requests a statement pursuant to this section and
does not specify a beneficiary statement or a payoff demand statement the beneficiary shall treat the
request as a request for a payoff demand statement.
(2) If the entitled person or the entitled person’s authorized agent includes in the written demand a
specific request for a copy of the deed of trust or mortgage, it shall be furnished with the written
statement at no additional charge.
(3) The beneficiary may, before delivering a statement, require reasonable proof that the person making
the demand is, in fact, an entitled person or an authorized agent of an entitled person, in which event
the beneficiary shall not be subject to the penalties of this section until 21 days after receipt of the proof
herein provided for. A statement in writing signed by the entitled person appointing an authorized agent
when delivered personally to the beneficiary or delivered by registered return receipt mail shall
constitute reasonable proof as to the identity of an agent. Similar delivery of a policy of title insurance,
preliminary report issued by a title company, original or photographic copy of a grant deed or certified
copy of letters testamentary, guardianship, or conservatorship shall constitute reasonable proof as to
the identity of a successor in interest, provided the person demanding a statement is named as
successor in interest in the document.
(4) If a beneficiary for a period of 21 days after receipt of the written demand willfully fails to prepare
and deliver the statement, he or she is liable to the entitled person for all damages which he or she
may sustain by reason of the refusal and, whether or not actual damages are sustained, he or she shall
forfeit to the entitled person the sum of three hundred dollars ($300). Each failure to prepare and deliver
the statement, occurring at a time when, pursuant to this section, the beneficiary is required to prepare
and deliver the statement, creates a separate cause of action, but a judgment awarding an entitled
person a forfeiture, or damages and forfeiture, for any failure to prepare and deliver a statement bars
recovery of damages and forfeiture for any other failure to prepare and deliver a statement, with
respect to the same obligation, in compliance with a demand therefor made within six months before or
after the demand as to which the award was made. For the purposes of this subdivision, “willfully”
means an intentional failure to comply with the requirements of this section without just cause or
excuse.
(5) If the beneficiary has more than one branch, office, or other place of business, then the demand
shall be made to the branch or office address set forth in the payment billing notice or payment book,
and the statement, unless it specifies otherwise, shall be deemed to apply only to the unpaid balance of
the single obligation named in the request and secured by the mortgage or deed of trust which is
payable at the branch or office whose address appears on the aforesaid billing notice or payment book.
(6) The beneficiary may make a charge not to exceed thirty dollars ($30) for furnishing each required
statement. The provisions of this paragraph shall not apply to mortgages or deeds of trust insured by
the Federal Housing Administrator or guaranteed by the Administrator of Veterans Affairs.
(f) The preparation and delivery of a beneficiary statement or a payoff demand statement pursuant to this
section shall not change a date of sale established pursuant to Section 2924g.
(g) This section shall become operative on January 1, 2014.

Commercial code Transactions or Interests
2944.  None of the provisions of this chapter applies to any transaction or security interest governed by
the Commercial Code, except to the extent made applicable by reason of an election made by the
secured party pursuant to subparagraph (B) of paragraph (1) of subdivision (a) of Section 9604 of the
Commercial Code.

Refusal to Accept Policy Issued for Continuous Period Without Fixed Expiration Date
Prohibited
2944.5.  No lender, mortgagee, or any third party having an interest in real or personal property shall
refuse to accept a policy issued by an admitted insurer solely because the policy is issued for a
continuous period without a fixed expiration date even though the policy premium is due and payable
every six months, provided the lender, mortgagee, or third party is entitled to receive (a) notice
of renewal from the insurer within 15 days of receipt of payment on the policy by the insured or (b)
notice of cancellation or nonrenewal under the terms and conditions set forth in Sections 678 and
2074.8 of the Insurance Code, whichever is applicable.

Loan Modification by Third Party
2944.6.  (a) Notwithstanding any other provision of law, any person who negotiates, attempts to
negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or
other form of mortgage loan forbearance for a fee or other compensation paid by the borrower, shall
provide the following to the borrower, as a separate statement, in not less than 14-point bold type, prior
to entering into any fee agreement with the borrower:
It is not necessary to pay a third party to arrange for a loan modification or other form of forbearance
from your mortgage lender or servicer. You may call your lender directly to ask for a change in
your loan terms. Nonprofit housing counseling agencies also offer these and other forms of borrower
assistance free of charge. A list of nonprofit housing counseling agencies approved by the United
States Department of Housing and Urban Development (HUD) is available from your local HUD office or
by visiting http://www.hud.gov.
(b) If loan modification or other mortgage loan forbearance services are offered or negotiated in one of
the languages set forth in Section 1632, a translated copy of the statement in subdivision (a) shall be
provided to the borrower in that foreign language.
(c) A violation of this section by a natural person is a public offense punishable by a fine not exceeding
ten thousand dollars ($10,000), by imprisonment in the county jail for a term not to exceed one year, or
by both that fine and imprisonment, or if by a business entity, the violation is punishable by a fine not
exceeding fifty thousand dollars ($50,000). These penalties are cumulative to
any other remedies or penalties provided by law. (d) This section does not apply to a person, or an
agent acting on that person’s behalf, offering loan modification or other loan forbearance services for a
loan owned or serviced by that person.
(e) This section shall apply only to mortgages and deeds of trust secured by residential real property
containing four or fewer dwelling units.

2944.7.  (a) Notwithstanding any other provision of law, it shall be unlawful for any person who
negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a
mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation
paid by the borrower, to do any of the following:
(1) Claim, demand, charge, collect, or receive any compensation until after the person has fully
performed each and every service the person contracted to perform or represented that he or she
would perform.
(2) Take any wage assignment, any lien of any type on real or personal property, or other security to
secure the payment of compensation.
(3) Take any power of attorney from the borrower for any purpose.
(b) A violation of this section by a natural person is a public offense punishable by a fine not exceeding
ten thousand dollars ($10,000), by imprisonment in the county jail for a term not to
exceed one year, or by both that fine and imprisonment, or if by a business entity, the violation is
punishable by a fine not exceeding fifty thousand dollars ($50,000). These penalties are cumulative to
any other remedies or penalties provided by law.
(c) Nothing in this section precludes a person, or an agent acting on that person’s behalf, who offers
loan modification or other loan forbearance services for a loan owned or serviced by that person,
from doing any of the following:
(1) Collecting principal, interest, or other charges under the terms of a loan, before the loan is modified,
including charges to establish a new payment schedule for a nondelinquent loan, after the
borrower reduces the unpaid principal balance of that loan for the express purpose of lowering the
monthly payment due under the terms of the loan.
(2) Collecting principal, interest, or other charges under the terms of a loan, after the loan is modified.
(3) Accepting payment from a federal agency in connection with the federal Making Home Affordable
Plan or other federal plan intended to help borrowers refinance or modify their loans or otherwise avoid
foreclosures.
(d) This section shall apply only to mortgages and deeds of trust secured by residential real property
containing four or fewer dwelling units.
(e) This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless
a later enacted statute, that is enacted before January 1, 2013, deletes or extends
that date.

2932.5 ruling

Deutsche Bank National Trust Company (Deutsche Bank),

as Trustee for WaMu Series 2007-HEl Trust, its assignees

and/or successors (HEl Trust), moved for relief from the

automatic stay to proceed with foreclosure proceedings on

Debtors’ residence (Property). It is undisputed that the

claim asserted by Deutsche Bank on behalf of HEl Trust

exceeds the fair market value of the Property. The Debtors

filed no opposition and have indicated an intention to

surrender the Property. The Trustee opposed the motion on

the grounds that Deutsche Bank lacks standing in that

Deutsche Bank had failed to establish that it or HEl Trust,

the party represented thereby, held a perfected security

interest in the Property.

Because the Court finds that Deutsche Bank has failed

to provide evidence that it, let alone HEl Trust, has a

security interest in the Property, the Court denies the

motion for relief from stay without prejudice.

This Court has subject matter jurisdiction over the

proceeding pursuant to 28 U.S.C. § 1334 and General Order

No. 312-D of the United States District Court for the Southern

District of California. This is a core proceeding under

28 U.S.C. § 157(b) (2) (A) & (G).

BACKGROUND

On or about November 8, 2006, Debtors borrowed money from

WAMU and executed a promissory note in favor of WAMU of the same

date (Note). Debtors also executed a deed of trust granting

WAMU a security interest in the Property (Deed of Trust). On

December 17, 2007 Debtors filed a petition commencing this

bankruptcy case. According to Debtors’ schedules, the value of

the Property ($863,931.00) was less than the amount owed on the

Note and secured by the Deed of Trust ($998,016.00). Debtors’

schedules list WAMU as the secured creditor on the Property.

Debtors indicated their intention to surrender the Property.

On January 25, 2008, Deutsche Bank, “as Trustee for” HE1

Trust, moved for relief from stay to proceed with foreclosure on

the Property. In support of the motion Deutsche Bank submitted a

declaration of Lori Brecheen – an officer of WAMU “as Servicing

Agent for Movant.” The declaration included a copy of the Deed

of Trust and the Note. The Deed of Trust lists WAMU as the

beneficiary and “California Reconveyance Company” as the

“Trustee.” The Promissory Note lists WAMU as the Lender and

payee.

As noted, the Debtors did not oppose the motion, but the

Trustee did on the ground that Deutsche Bank failed to establish

that it had standing to bring the motion because it had failed to

prove that it had a perfected lien against the Property.

In the Reply to the Trustee’s opposition, Deutsche Bank

asserts that it is the “current beneficiary of a promissory note

and deed of trust by way of assignment … ” In a subsequent

declaration, Ms. Brecheen declared that WAMU “transferred the

NOTE and DEED OF TRUST to DEUTSCHE BANK.” She went on to explain

that since transferring the Note and Deed of Trust, WAMU has

acted as servicing agent for Deutsche Bank on the loan. As agent

for Deutsche Bank, WAMU was in possession of the Note, as

endorsed to Deutsche Bank. Attached to the supplemental

declaration was a copy of the Note with an added page with what

Ms. Brecheen contends is the endorsement. As discussed below, it

is simply a stamp signed by a vice president of WAMU reading “Pay

to the order of ” – the space for payees is left blank.

The Court held a hearing on the matter and took it under

submission.

DISCUSSION

It is undisputed that the subject Property is, as the saying

goes, underwater. All parties seem to agree that the claim

secured by the Property exceeds the value of the Property. The

Debtors are prepared to abandon the Property. The only issue

before the Court is whether Deutsche Bank is in a position to

seek relief from the stay.

Bankruptcy Code section 362(d) provides for relief from stay

on request of a “party in interest.” Party in interest for the

purposes of a motion for relief from stay is not defined.

However, the Court agrees with the court in In re Maisel, that

“[a] party seeking relief from the automatic stay to exercise

rights as to property must demonstrate at least a colorable claim

to the property.” 378 B.R. 19, 21 (Bankr.D.Mass. 2007) (citing In

re Huggins, 357 B.R. 180, 185 (Bankr.D.Mass. 2006). That is,

since Deutsche Bank seeks relief from stay to proceed against the

Property, it must establish that it, or more accurately the party

it represents, HE1 Trust, has a security interest in such

property. As movant, Deutsche Bank has the responsibility to

convince the Court that the party seeking relief from the stay

with respect to the Property has an interest in the Property.

Deutsche Bank has failed to do so.

In support of the motion, Deutsche Bank has provided the

copies of the original Note and Deed of Trust. However, both the

undisputed that WAMU held a security interest in the Property by

virtue of the Deed of Trust, Deutsche Bank has provided no

evidence at all that any interest in the Deed of Trust was ever

assigned from WAMU to Deutsche Bank, or to anyone else for that

matter. In her supplemental declaration Ms. Brecheen declares

that the Deed of Trust was “transferred” to Deutsche Bank.

However, Deutsche Bank has provided no authority (and the Court

is aware of none) for the apparent proposition that transfer of

the Deed of Trust without assignment, let alone recordation, is

sufficient to give Deutsche Bank or HEl Trust a security interest

in the Property. As it stands on the record before the Court,

the Deed of Trust remains in the name (and possession) of WAMU. 1

Nothing in the Deed of Trust as written or in the way in which it

has been handled gives any indication that Deutsche Bank or HEl

Trust has a security interest in the Property. Not surprisingly

therefor, Deutsche Bank focuses the Court’s attention on the

Note.

The Note too runs solely in favor of WAMU. The copy of the

Note produced in connection with the Motion gave no indication

that anyone but WAMU had an interest therein. In response to the

Trustee’s opposition, Deutsche Bank eventually produced a copy of

the Note with an additional, unnumbered, undated page attached,

which appears to been endorsement by WAMU. However, the “Pay to

the order of” line of the endorsement is blank. There is no

indication from the face of the Note as endorsed that it was

endorsed to Deutsche Bank and/or HEl Trust.

The sole evidence that Deutsche Bank provides which would

indicate to the Court that Deutsche Bank might have any interest

at all in the Property, is the supplemental declaration of

Ms. Brecheen that the Note had been transferred to Deutsche Bank.

Assuming for the sake of argument that this “transfer” amounts to

an “assignment,” such an assignment of the Note appears to be

sufficient under California to give Deutsche Bank a security

interest in the Property.

California Civil Code § 2932.5 provides:

Where a power to sell real property is given to a

mortgagee, or other encumbrancer, in an instrument

intended to secure the payment of money, the power is

part of the security and vests in any person who by

assignment becomes entitled to payment of the money

secured by the instrument. The power of sale may be

exercised by the assignee if the assignment is duly

acknowledged and recorded.

The Court is aware of no California case law interpreting this

section. However, it appears to indicate that a security

interest runs with the obligation – in terms of the case at hand,

that is, an assignment of the Note amounts to an assignment of

the Deed of Trust. 2 However, as indicated, Deutsche Bank has

provided no convincing evidence that the Note was ever assigned

to Deutsche Bank. Furthermore, even if the Note was assigned to

Deutsche Bank, Deutsche Bank is not the party asserting a

security interest in the Property. Rather, the motion is brought

by Deutsche Bank as Trustee for HEI Trust. The record is devoid

of any further assignment to HEI Trust.

In summary, the only question before this Court is whether

Deutsche Bank and/or HEI Trust has an interest in the Property.

The Court holds that Deutsche Bank has failed to provide evidence

that it, let alone HEI Trust, has a security interest in the

Property. 3 Accordingly, the motion is denied.

The Trustee argues that based upon the last line of § 2932.5 Deutsche Bank may not

foreclose on the Property because the assignment was not recorded. That may well be.

However, that is an issue the Trustee can raise with the state court if relief from stay is ultimately

granted.

Both parties allotted much ink and paper to the issue of whether Deutsche Bank has a

perfected security interest in the Note. The Court finds this discussion beyond the scope of the

motion before it. Deutsche Bank has moved for relief from stay to proceed against the Property.

Whether or not it holds a security interest in the Note is irrelevant. Since we are not concerned

with a security interest in the Note, all talk of a “perfected lien” on the Note is beside the point.

CONCLUSION

For the reasons set forth above Deutsche Bank’s motion for

relief from stay is denied without prejudice.

IT IS SO ORDERED.

DATE: JUN – 9 2008

PE ER W. BOWIE, Chief Judge

United States Bankruptcy Court

Understanding California Civil Code Section 2932.5.

Can a lender or their agent (ex, the loan servicer) pursue a non-judicial foreclose on real property via exercising the power of sale contained in the deed of trust, if the alleged creditor has only the note and no assignment and recording of the deed of trust (the security for payment of the note)?
Posted by Foreclosure Defense Attorney Steve Vondran on July 18, 2010 · Leave a Comment

Can a lender or their agent (ex, the loan servicer) pursue a non-judicial foreclose on real property via exercising the power of sale contained in the deed of trust, if the alleged creditor has only the note and no assignment and recording of the deed of trust (the security for payment of the note)? Understanding California Civil Code Section 2932.5.

This article is general legal information only and not intended to serve as legal advice or a substitute for legal advice. As law is constantly changing and evolving, the information may not be 100% complete, accurate or up-to-date. For specific questions about your legal liability in regard to junior loans, please contact a skilled and experienced real estate or foreclosure defense lawyer.

Steve Vondran is a California Real Estate Lawyer who is licensed to practice law in California and Arizona. He also holds a real estate broker’s license in California and Arizona and has a background in mortgage brokering and commercial real estate. HE can be reached at steve@vondranlaw.com or (877) 276-5084 begin_of_the_skype_highlighting (877) 276-5084 end_of_the_skype_highlighting.

________________________________________________________________

First, let’s get some general rules on the table that lenders and their attorneys will rely on when seeking to foreclose on your property:

(1) There is no obligation to produce the original note if a lender seeks to conduct a private trustee sale (i.e. a non-judicial foreclosure that relies on the power of sale contained in the deed of trust). In other words, do not try to file for an injunction in a court of law to fight the lender and challenge whether or not they own the loan, because you have no right to ask who is foreclosing on you in a private sale. Sad yes, but such is the law. Therefore, in a non-judicial foreclosure setting, there is no way to force them to prove they are in fact your creditor with the right to foreclose. Their mere allegation that they have the note is all they need if you challenge them at this stage, and do not expect the judge to rule otherwise.

See our Blog posting on this page for more details: http://www.foreclosuredefenseresourcecenter.com/2010/03/can-a-california-homeowner-demand-that-the-lender-or-loan-servicer-produce-the-note-as-a-foreclosure-defense-strategy/.

(2) In support of their right to foreclose non-judicially, lenders like to use the “security follows the note” argument and line of cases to support their position that if they merely allege that they have the note, then that must also mean they have the security interest (i.e. the deed of trust or mortgage) whether or not the security interest is/was specifically assigned to them – normally by MERS who originally records the security interest in as many as 60 million mortgages across the United States. For this proposition they usually cite two cases: (a) Carpenter v. Longan, 83 U.S. 271, 275 (1873); and (b) Restatement Third of Property (Mortgages) Section 5.4 (1997). Note that these pre-date most loan securitization.

LONGAN: In Longan the United States Supreme Court held: “The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.” Note, this case says only that assigning the note also assigns the security (i.e. the right to foreclose). The case does NOT say that the POWER OF SALE is also assigned when a note is assigned. This is important, because without the power of sale, a lender should be relegated to conducting a JUDICIAL FORECLOSURE SALE AND NOT A PRIVATE TRUSTEE SALE USING THE POWER OF SALE.

RESTATMENT: It appears to be the general rule in California that the transfer of a mortgage note transfers with it the related mortgage – “the mortgage follows the note” as they say. The RESTATEMENT (THIRD) OF
PROPERTY (MORTGAGES) § 5.4 (1997), relied on by many lenders in their briefs, states: “a transfer of an obligation secured by a mortgage also transfers the mortgage unless the parties to the transfer agree otherwise.” The rationale is to avoid economic waste to the lender and avoid a windfall to the borrower if the note and mortgage are split – rendering the mortgage note unsecured. The Restatement also cites the case of Carpenter v. Longan, 83 U.S. 271 (1827) “all the authorities agree that the debt is the principal thing and the mortgage an accessory.”

These cases seem to give the lenders wide latitude to just merely claim they own the note (they never want to show it) and have the Court agree that the security naturally follows (whether or not the deed of trust was assigned, acknowledged, and recorded) and that the lender therefore has standing to lift a stay in bankruptcy court. If the lender can show proof of the original promissory note in the BK lift-stay motion, I would say I might agree. But again, they will not want to show the note, and it is up to the BK judge to demand they show this critical piece of evidence before they allow a creditor to lift the automatic stay. If you want legal authority take a look at In re Hwang, 396 B.R. 757 (C.D. California 2008. I have attached a link to my case brief on this important case: http://www.producethenoteattorney.com/2010/05/in-re-hwang-an-overview-of-motion-for-relief-from-automatic-stay-real-party-in-interest-and-constitutional-standing-requirements-in-a-california-bankruptcy-court/

But is the same true if a homeowner files for an injunction trying to prevent a lender from conducting a non-judicial foreclosure sale where there is simply no proof the lender has physical possession of the note and the chain of title does not indicate any assignment or recording of the deed of trust (i.e. the power of private sale never conveyed per 2932.5)?

Applying Constitutional law standards, States are always free to grant more rights and freedoms that the United States Supreme Court may grant, but states cannot provide less. I would argue that is what California did when it enacted Civil Code Section 2932.5 by requiring an actual assignment and recording of the deed of trust if the lender/mortgagee wants to exercise the power of sale and conduct a private trustee sale – Notice of Default / Notice of Sale – outside the watchful eye of the Court (as would be required in a judicial sale). In other words, if a lender wants to foreclose in a non-judicial private trustee sale fashion, it would seem they need both the endorsed note and physical possession of such – or, physical possession of the note endorsed in blank – AND the assignment of the deed of trust duly acknowledged and recorded as required under California Civil Code Section 2932.5. Without both, I would argue a lender is relegated to a judicial foreclosure sale only, and the Court should enjoin the attempted and threatened private trustee sale. At least that is my honest opinion and it would be great if it worked out that way. There is not a lot of case law on this curious code section.

Let’s take a look at 2932.5 and tell me if you agree. First off, here is a link to the law I am talking about so we can all take a look at it. It is short and sweet so do not be intimidated. http://law.onecle.com/california/civil/2932.5.html I have pasted the law below if you are the type of person who hates opening up links:

“Where a power to sell real property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the payment of money, the power is part of the security and vests in any person who by assignment becomes entitled to payment of the money secured by the instrument. The power of sale may be exercised by the assignee if the assignment is duly acknowledged and recorded.”

Looks to me like the power of sale (i.e. the right to pursue a private judicial foreclosure sale) requires an assignment of the deed of trust and recording of such in the County recorder’s office. If that is not what this law means, then what does it mean? In other words, if a lender conducts a private trustee sale and the chain of title reflects that there has been no assignment or recording of the deed by that lender or its agent, wouldn’t that make the private sale voidable and subject to set aside? See our blog piece on the “lender please don’t make me tender” rule before you get excited. Here is a link to that post.

http://www.foreclosuredefenseresourcecenter.com/2010/03/phoenix-foreclosure-lawyer/

Bolstering this position that the deed of trust must be assigned, acknowledged, and recorded before exercising the private power of sale in California is the case of Strike v. Transwest Discount Corp, 92 CA3d, 735 (1979). In this case the court held:

“A recorded assignment of note and deed of trust vests in the assignee all of the rights, interests of the beneficiary (Musgrave v. Renkin, 180 Cal. 785 [183 P. 145]) including authority to exercise any power of sale given the beneficiary (Civ. Code, § 858)…… The power of sale here derived from the instrument itself. (Civ. Code, § 2932; McDonald v. Smoke Creek Live Stock, 209 Cal. 231).”

Therefore, I would think you have at least a fair argument that a lender seeking to foreclose non-judicially, outside the Courts presence (as in a judicial foreclosure), that they would need to be able to establish that the deed of trust was properly assigned and recorded in addition to owning the note, although as discussed above they don’t have to show the note. If there is no proof of recorded assignment of the security in the County Recorder’s office, I would argue the lender has only the right to foreclose judicially (subject to a four year statute of limitations**), and by filing the Notice of Sale and Notice of Default, the lender has indicated that they are not willing to go that route. The problem is, if you filed for an injunction, they would probably just quickly assign and record the deed of trust killing the argument altogether. If any one else has any other opinions or interpretations, or even case law, I would love to see/hear it.

** There are time limits to file a judicial foreclosure as stated in the case of Aviel v. Ng, 161 Cal.App.4th 809, (2008) where the Court held: “The running of the statute of limitations on an obligation underlying a mortgage or deed of trust bars judicial foreclosure of the mortgage as well as an action to enforce the obligation. Cal.Civ.Code § 2911(1).”

For now, suffice it to say, this might be something to look into or argue if you are going all out and trying to save your home from foreclosure. Before filing any civil lawsuit, you should consult with a real estate or foreclosure lawyer to determine whether you have proper legal grounds to file a lawsuit.

One way this popped up in a bankruptcy case was the lender sought to record the assignment of the deed of trust while the borrower was in bankruptcy court and protected by the automatic stay. We are arguing that this is an attempt to perfect its right to non-judicially foreclose (i.e. they are trying to comply with 2932.5 to get the right to foreclose non-judicially) and that such action to perfect its interest violates Bankruptcy Code Section 362 which prohibits the following:

(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;

(4) any act to create, perfect, or enforce any lien against property of the estate;

(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title;

(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;

Again, just trying to give you some things to think about as you fight to save your home from foreclosure. Although the security may follow the note and that may be fine to judicially foreclose, perhaps that security interest must be assigned, acknowledged and recorded in order to preserve the right to conduct the private non-judicial trustee sale under the power of sale contained in the security. The deed of trust itself may also have some language you need to look at that that may dictate other rights.

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NOTICE: The foregoing information is general legal information only and shall not be relied upon as legal advice, or a substitution for legal advice. If you have specific legal questions about your foreclosure case you should seek out the advice of a real estate attorney. In addition, the information posted above may not be 100% complete, accurate or up-to-date. Law is always changing. The Law Offices of Steve Vondran is licensed to practice law in the state of Arizona and California and only seeks to solicit and serve Clients in these two states. Steve Vondran, Esq. is a licensed attorney and real estate broker in California and Arizona. He can be reached by email at steve@vondranlaw.com or toll free (877) 276-5084 begin_of_the_skype_highlighting (877) 276-5084 end_of_the_skype_highlighting. This is an advertisement and communication pursuant to State Bar Rules. Please do not send us private or confidential information through any of our above-listed websites. Sending us an email does not create an attorney-client relationship (only signing a legal retainer will do this). Copyright 2010 – Law Offices of Steven C. Vondran – All Rights Reserved.

BASIC OVERVIEW OF TAKING A DEFAULT JUDGMENT IN CALIFORNIA WHERE A LENDER, LOAN SERVICER, HOMEOWNER, REAL ESTATE BROKER, OR INVESTOR FAILS TO ANSWER A REAL ESTATE COMPLAINT

Posted by Foreclosure Defense Attorney Steve Vondran on September 11, 2010 · Leave a Comment

The following is general legal information only and not intended as legal advice or a substitute for obtaining legal advice. For specific answers to your questions please consult a real estate attorney. Steve Vondran, Esq., is a real estate attorney licensed to practice law in California and Arizona. He can be reached at steve@vondranlaw.com or by phone at (877) 276-5084 begin_of_the_skype_highlighting (877) 276-5084 end_of_the_skype_highlighting. There is no representation that this article is 100% accurate or up-to-date as the law is constantly evolving.

INTRODUCTION

When we file lawsuits alleging predatory lending, truth in lending violations, RESPA violations, unfair competition, fraud, misrepresentation and the like and seeking money damages, loan rescission, quiet title and other remedies, sometimes the Defendants fail to respond. When the lenders, investors, loan servicers, MERS, or others fail to answer (which does happen from time to time) the next step is to “take a default” against them. The following is the process we normally follow in handling our cases. This usually involves two steps: (1) Filing the entry of default and (2) the “prove-up” stage. This article discusses an overview of the general process. It may vary depending on the type of case, causes of action alleged, the court’s rules, etc.

OVERVIEW OF STEPS REQUIRED TO TAKE A DEFAULT JUDGMENT IN CALIFORNIA

1. First, after the Defendant fails to respond to a complaint within the time permitted a document must be filed with the Court to get them to enter the default of that Defendant. Here is a look at the judicial counsel form we use for that purpose: http://www.courtinfo.ca.gov/forms/fillable/civ100.pdf

NOTE: If your case involves a simple contract issue, the Clerk may be able to enter that judgement. In most other cases, you will need to proceed to the steps listed below.

1. Next, after the Court enters the Default of the Defendant, within 45 days a similar application to the court is made to actually get the Default Judgement against the non-answering defendants. This application will use the same form above, except we check the “court judgment” box and “I request a court judgment.” At this point, it is also wise to check with the Court clerk to see how the judge hears default judgments. Some Courts want oral evidence for example, and some would prefer to hear the case on affidavits, declarations, exhibits, etc. and not to hear live testimony. So we check with the Court to figure this out. In Quiet Title, or Fraud Real Estate actions, it is likely the Court will at some point require an oral prove up hearing with live testimony.
2. At any rate, it is time to fill out the form and basically time to bring the evidence forward to prove the case against the non-answering defendant and to obtain a monetary judgment in according to proof and “for sums which appear just”.

NOTE: When seeking a default it is important to note that we cannot obtain a default judgment in an amount in excess of sought in the complaint and cannot add new causes of action that were not raised in the complaint. This highlights the importance of having a well-plead complaint which must also be sufficient to raise facts constituting a prima facie case as to each cause of action for the Court will not award a defaul if the facts don’t meet the elements required for a particular cause of action. HERE IS LINK TO RULE 3.1800 CALIFORNIA RULES OF COURT IN REGARD TO DEFAULT JUDGEMENTS AND WHAT IS NEEDED. http://www.courtinfo.ca.gov/rules/index.cfm?title=three&linkid=rule3_1800.

AS YOU CAN SEE THERE IS A VERY SPECIFIC SET OF REQUIREMENTS TO OBTAIN THE DEFAULT JUDGMENT INCLUDING:

● Declarations under penalty of perjury

● Any Documentary Evidence or Exhibits which which are admissible as evidence

● Case Summary

● Declaration of Counsel in support of Application for Default Judgement by Court

● Legal Basis for any Attorney Fees requested (check with the Court to see if they have a Attorney fee schedule which may set forth maximum amounts that may be requested)

● Any interest calculations such as “per diem to date of entry of judgment.”

● Memorandum of Costs

● Declaration that Defendant is non-military

● Proposed form of Judgment

● Dismissal of parties to which a judgment is not sought

● Proof of publication if the defendant(s) were served (Summons and Complaint) by publication. (ex. State in a declaration that Publication Rules were complied with).

ALSO NOTE: California Code of Civil Procedure Sectoin 587 which states:
An application by a plaintiff for entry of default under

subdivision (a), (b), or (c) of Section 585 or Section 586 shall

include an affidavit stating that a copy of the application has been

mailed to the defendant’s attorney of record or, if none, to the

defendant at his or her last known address and the date on which the

copy was mailed. If no such address of the defendant is known to the

plaintiff or plaintiff’s attorney, the affidavit shall state that

fact.

NOTE: As you can see there are very strict requirements to getting a default judgement. If certain steps in the entire process are not followed, Default Judgments, even if obtained (note there is no guarantee a default judgment will ultimately be obtained, or be obtained in the amounts requested just because the Defendant fails to appear – the case and amounts have to be proven) can be subject to appeal or collateral attack.

Local rules always come into play when seeking default judgement. Ex. Here are the local rules for Los Angeles: http://www.lasuperiorcourt.org/courtrules/ui/popup.aspx?ch=Chap9&tab=2

SOME COMMON GROUNDS FOR ATTACKING OR APPEALING A DEFAULT JUDGEMENT ARE:

(a) Court lacked jurisdiction to hear case or render a judgment.

(b) Improper service of summons and complaint (no reasonable attempt to give actual notice of the lawsuit to defendant).

(c) Complaint did not state a valid cause of action.

(d) New causes of action (not set forth in the complaint) were raised at the prove up stage.

(e) Relief requested and granted at prove-up exceeded relief asked for in the complaint.

(f) Insufficnency of Evidence that lead to Default Judgment

(g) Default was taken against Defendant (but another Defendant who answered the complaint was found not liable which would also make Defandant not liable – ex. Defendants were two partners who were sued in regards to partnership activities and the answering defendant proved there was no legal violations).

SO, THE BOTTOM LINE IS THERE NEEDS TO BE A WELL PLEAD COMPLAINT BEFORE SEEKING A DEFAULT JUDGMENT, INCLUDING SETTING FORTH THE AMOUNTS SOUGHT AND THE FACTUAL SUPPORT FOR THE CAUSES OF ACTION PLED. WHEN THE DEFENDANTS DON’T ANSWER ON TIME THERE IS A SPECIFIC PROCEDURE THAT MUST BE FOLLOWED TO TAKE THE DEFAULT AND PROVE IT UP. FAILURE TO TAKE THE PROPER STEPS AT ALL STAGES COULD RESULT IN AN ATTACK ON THE JUDGEMENT.

Foreclosure proof homes ? !!!

forclosure proof homes

never stipulate to the Commissioner HERE’S WHY Listen

never stipulate to the Commissioner HERE’S WHY ListenFannie Mae v Cabesas – Jul 9 10

The Ultimate Question of the “Who”? (And this is Not About the Band)

This is a guest post by G. Alex Morfesis and edited by Max.
The current trend in the mortgage business in dealing with the foreclosure mess and the plague of bogus affidavits and other legal documents is to shout out as loudly as humanly possible that “we should not give the borrowers a free home” because they signed the mortgage notes and received the funds to buy their homes so they must owe the money! How can they deny they owe the money? And yes, it is certainly true that the funds are owed to someone; that the mortgage notes are somewhere; and that someone in some place actually and lawfully owns the notes. The real question is WHO are these parties? WHO lawfully owns and holds the mortgage notes? WHO will actually lose money if the $400,000 home is sold at foreclosure for $150,000? WHO has some real skin in this game that will be scrapped to the bone in a forced foreclosure sale?
It is ironic that the people advancing these “free home” arguments are the same folks on Maiden Lane in downtown New York City who did not scream or shout when Wall Street stopped making a market in auction rate securities and the Treasury came to rescue with billions and billions of dollars to save their collective asses. After all, it was all just a “big oops” by the smartest guys in the room. These were the guys who failed to take into account that a lot of these multi-option payment adjustable rate mortgages (the so-called MOARMS or MORONS) might not perform once they “adjusted.” These were also the same people who assumed that the value of residential real estate would continue to appreciate from now on at the annual rate of at least 15% per year. Talk about falling asleep at the wheel; these guys were not even in the car!
The average American home borrower pays much more in interest rates than most OECD nation borrowers. This is by design and not by chance. And, that additional thrown off capital from the American homeowner was originally designed to allow a cushion so that the flattening out of risks would be possible and the disruptive nature of recessions would not create problems in the housing markets. In sum, these loan pools were designed to be self-correcting and modifying, that was why the distribution of risk formulas were put in place.
So, what happened? In short, a little instrument called derivatives got in the way, something not disclosed (by the way) in the original prospectuses of the depositors and sponsors upon the registration of these securitized loan pools with the SEC. Not that registration would have made any difference—Exhibit One being the Bernie Madoff case. And then we had the collateral debt obligations, the collateral debt obligations squared and cubed, the credit default swaps and the rest the ponzi-inspired investment schemes. We all know the rest of the story (which, by the way, is on-going and never ending at this point).
So what about the HOPE NOW and HAMP programs? What about all of the participation agreements the mortgage servicers signed with the Treasury? The agreements the servicers never intended to honor and who drafted them with as many outs as a great piece of Swiss cheese. Well, the truth of the matter is that at least seventy plus billions of taxpayer dollars sit fallow since the servicers are much happier gaming the system than allowing the average borrower a modicum of financial and emotional stability. The economy is being held back by the disruptive nature of the servicers trying to pick the pockets of MBIA and AMBAC and MGIC and RADIAN in the same way they clipped AIG.
Are there borrowers who want to play “Wall Street Banksters” and live off the hard work of the American taxpayer? Yes, but in truth probably less than ten percent. The fact is that most borrowers do not abandon their responsibilities just because their homes cannot be sold for a profit. The so-called structured defaults and “bail and buy” are the products of a propaganda campaign by the mortgage industry. If there was any logic to these lies, then most new car buyers would abandon their cars thirty seconds after driving off the dealer’s lot. Or, they would buy a new Chrysler under the 60 day free trial plan and then turn that baby back in and test drive another new vehicle for another 60 days and so on. And, by the way, don’t get me started on the federally funded Chapter 11 bankruptcy cases of Chrysler and GM! The Government spent billions to save several thousand jobs for these two corporations but will not spend any real money to save millions of homeowners.
The fact that an extremely small percentage of borrowers might be able to enjoy the life of a Wall Street baron by getting a loan they do not have to pay for currently does not justify wholesale short-cutting, and in most states there is a difference between the “timing out” of a case and getting a “free” home. Most of those who hire counsel who know how the mill attorneys use the short cuts taken by the foreclosure industry and then use this information against that same industry will at most end up with a borrower that will get a major loan modification that will be paid off/refinanced by them long before they get to the many years needed to quiet title in many states.
I understand that Max Gardner, who leads a consumer army of “trained soldiers” and is called the “go to guy for consumer bankruptcy cases” by Business Week, stresses that his Boot Camp trained-lawyers should use the “maximum amount of legal leverage” in order to secure the “maximum modification of the mortgage loan.” There is certainly power in fully understanding how the other side really does business. I think Gardner knows more than anybody on the consumer side of isle about how the mortgage business really operates and he has made a lot of money with that knowledge. He knows where all the bodies are buried and where the plan to plant the fresh ones.
And as for the free-home advocates, who exactly suggested that Florida or any other state for that matter is a pro borrower jurisdiction? The facts are that about 95% of the Florida foreclosure cases get slam dunked without so much as a whimper from anyone. The foreclosure mills don’t even come into court to get their summary judgments, they just call them in. Actually, they get the judges to call them. You see these mill lawyers are very busy beavers and court and due process and proper evidence are just nuisances that should be avoided at all cost. So the most time a “mill” lawyer has to spend on a foreclosure case is about 90 seconds on a call in to the judge’s chambers…yup, not even in open court. Today, in America, a consumer can lose a home over the phone. This reminds me of the old TV show called “Dialing for Dollars” but this time in reverse. Now the mills are still dialing in for dollars but also securing an order of foreclosure at the same time. And, by the way, I could possibly agree to own a foreclosure or bankruptcy mill if the firm made $2,500.00 for 90 seconds of “real lawyer” work. It is not bad money if you can get away with and still sleep at night. I have trouble sleeping anyway so this would never work for me.
Either way, this author would really much rather be working on using his human capital on helping small companies grow. You see we really and truly need jobs. And a lot of jobs. How can consumers make their mortgage payments without jobs? You see one must stop the bleeding before one can treat the patient.
But for those who act as if the borrower is their spoiled kid asking for some more money to spend at their university, what good would come from pushing through foreclosures faster? Is there some mystery money out there floating around available for the average investor to buy these properties? I am sure the readers of Scotsman’s Guide would love to hear about it, this rush to “punish” people for having had the audacity to get laid off from their jobs. How does that help create stability in this economy? Does anybody think millions of Americans just walked off the job like the Jet Blue flight attendant did by jumping down the emergency exit ramp with two Miller High Life beers? Let’s get real for once!
So that brings us back to the WHO. The parties in the securitized loan pools who are the ones being told to take the losses would NEVER say no to a mortgage modification as it would preserve their capital position. So it is not the so-called “owner of the note” who is saying “foreclose.” The parties who own the impacted bonds in a CUSIP based tranches in the REMIC Trusts who would take the losses are being precluded from making that choice. The truth of the matter is that the mortgage servicers and their legion of “out-source vendors” are the “real parties in interest” in terms of making these decisions because they are the only ones making money in the “foreclosure business.” And they are making a ton of money in this depression. Just check out the current 10-K filed by Lender Processing Services LLC as the proof is in the filing as they say.
The proposition that the borrower should be negotiating with the mortgage servicers is akin to the old adage about the man making a deal with the devil—the devil always gets the best end of the deal and the other party ends up with a hell of an eternity. As a result, the borrower must know who the “real party in interest” is in all of these securitized deals because the homeowner and this party are the two players who have major bucks to lose if we let the servicers and their vendors continue on with their rape and plunder tactics. The Trustee and the Master Servicer in all of these RMBS trusts have fiduciary duties to the bond holders (the so-called “investors”) to do everything possible to protect the value of the bonds—which means they need to engage in mass mortgage modifications in order to preserve as much bond value as possible for all tranches in the structure.
Conversely, the borrower has the absolute right to know who these “real parties” are so that the negotiations can be with those who have “skin in the game” as opposed to those who are simply taking as much skin out of the game as they can scam. This is especially important since the American taxpayer is footing the bill for all the scamsters.
It is way past time to bring some sanity to this madness. The future of America is at risk along with the integrity of our system of just. The fierce urgency of now to quote a once famous leader.

LOAN MODIFICATIONS: IS THIS WHAT I’M SUPPOSED TO BELIEVE??

IS THIS WHAT I’M TO UNDERSTAND?

You don’t need to hire anyone to help you negotiate with your bank for a loan modification.

You don’t need an attorney, you don’t need a mortgage expert, and you don’t need a fraud examiner.

All of those people, the lawyers, the mortgage experts, the fraud examiners… they’re all scammers because they CHARGE for their services.

And everyone knows that loan modifications are FREE… like water in a stream, or the air that we breathe.

Banks, on the other hand, have plenty of lawyers, mortgage experts, credit specialists, underwriters, and professional negotiators.

You, however, should come alone.

Who says you should come alone? The banks say so, that’s who.

The banks are looking out for you. The banks are going to help you. The banks are on your side. You can trust the banks.

The same banks that put you into mortgages where the payments double as soon as the prepayment penalty period ends.

The same banks that blame you, the borrowers, for the meltdown, and have already foreclosed on millions of homes.

The same banks that just lobbied congress to kill the bankruptcy reform bill that would have allowed judges to modify mortgages in bankruptcy so that people going bankrupt could have a chance to keep their homes.

The same banks that just lobbied congress asking for a top allowable interest rate of 500%, and got 390%, while they charge you 29% on your credit card.

The same banks that fraudulently packaged mortgage backed securities as AAA rated bonds and in doing so destroyed the bond market, and left the world’s financial systems in ruin.

The same banks that paid their executives untold billions in compensation and bonuses as the entire country was sliding into the deepest recession since the 1930s.

The same banks that have received TRILLIONS OF DOLLARS in taxpayer money. TRILLIONS.

Those same banks are now going to help you … as long as you come alone to the negotiation. Don’t hire anyone to help you… and they’ll help you.

And our President and our government agrees.

But the FACT is that banks are REQUIRED BY LAW to negotiate in the banks best interest, not yours. The law says that the bank MUST do what’s in the bank’s best interest, not yours.

It’s called a “fiduciary duty,” and it means that the banks MUST do what’s in the best interests of their shareholders, or their shareholders can SUE them for lots of money.

Those are the facts. And while you are entitled to your own opinion, you are not entitled to your own set of facts.

Here’s another fact: The banks don’t want you to have representation. They’d prefer you come alone… without help… without an attorney… without a mortgage expert. They’d much rather negotiate with people who are scared, emotional, and unknowledgeable. It makes it easier and better for them.

But the 5th and 14th Amendments to the United States Constitution state that:

No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

This can be viewed as a person’s rights to fair governing.

In the United States of America there are two types of due process of law, “procedural” and “substantive”.

Procedural due process of law means that the procedures used by government in making, applying, interpreting, and enforcing laws be reasonable and consistent. Substantive due process of law means that the government cannot make laws that apply to situations in which the government has no business interfering. It means that the “substance” or purpose of laws be constitutional.

The Fourteenth Amendment continues and later talks about the “equal protection clause”. It states that no state may “deny to any person within its jurisdiction the equal protection of the laws.” The Fourteenth Amendment’s original purpose was to create a society in which all people were treated equally.

There have been three Taxpayer Bill of Rights passed by the United States Congress in the last 20 years. Here’s what the first right in the first Taxpayer Bill of Rights states:

Taxpayers have the right to legal representation similar to that of a criminal defendant. Taxpayers have the right to have the IRS processes explained to them. Taxpayers have the right to sue the government for damages caused by IRS officials.

Shouldn’t taxpayers have the same rights as homeowners when negotiating with their banks to avoid foreclosure and keep their homes?

How many scammers are there? No one knows. How many mortgages have been successfully modified with the help of a private sector law firm or mortgage firm? No one knows.

The government says we must protect homeowners from “scammers,” because homeowners can’t tell whether a given firm is a “scammer” or not. So, the banks and the government say they are all “scammers,” and you can tell because they charge a fee or retainer in advance of the work being completed… which is exactly the way all attorneys charge for every single case they take on.

Is it the scammers who cause the scam, or is it the homeowner who is in a panic? It’s the panic.

And who is causing the homeowner to be in a panic? Who defrauded the financial system and caused the housing meltdown and worst recession since The Great Depression? Who broke the bond market by selling bonds that were fraudulently packaged and sold to investors? Who put homeowners into loans they did not understand and could not afford?

The banks did all of that. The banks caused the panic. The panic leads to the scams.

SO, WHO ARE THE REAL SCAMMERS HERE?

Yes… that’s right.

SO, MAYBE IT’S TIME WE STOPPED LISTENING TO THEM. GET YOUR OWN REPRESENTATION BEFORE NEGOTIATING WITH YOUR BANK OVER A LOAN MODIFICATION. NO MATTER WHAT ANYONE TELLS YOU.

USE YOUR HEAD. THIS MESS WASN’T YOUR FAULT. POOR PEOPLE WHO WANTED HOMES DIDN’T CAUSE THE WORLD’S BANKING SYSTEM AND WALL ST. TO FAIL.

DON’T BE A SUCKER FOR THE BANKS… AGAIN.

In a related story…

Wells Fargo Bank killed a man recently. The man was in jeopardy of losing his home to foreclosure. He had raised his family there. He lived there with his wife. They lived in Agora, CA. He was trying to handle the negotiations himself. Because that’s what he was told to do…

The bank was refusing to work with him. They wouldn’t modify his loan. They told him he had to come up with tens of thousands of dollars or he’d have to get out. They were nasty with him. It was taking a toll on him. The stress must have been unbearable. He couldn’t stand the thought of losing what he had worked his entire life to protect.

Nothing worked. Now there was only ONE WEEK before his home would be sold in a foreclosure sale. He couldn’t stand it.

He had a massive heart attack.

He was 62 years old.

His widow buried him. She was scared that she would have to move from their home.

She hired the law firm of Serge, Rodnunsky & Jones in Woodland Hills. They called Wells Fargo and today they got the bank to agree to delay the sale until September. They’re confident they will be successful in obtaining a loan modification for the widow.

That’s all they needed… a loan modification.

But he is gone. Someone’s husband of decades. Someone’s father. Someone’s grandfather. A life ended.

Because the bank couldn’t modify the loan. A few dollars.

He worked his entire life in this country. His tax dollars made it possible for Wells Fargo to get bailed out by the government. And they killed him. And they didn’t and don’t care one bit.

And I will never forgive Wells Fargo or any of the banks for this. Never.