Thousands of Aggressive Homeowners Secretly Settle Fraudclosures With Gag Clauses

Livinglies's Weblog

It was only a matter of time before it became common knowledge. My guess is that tens of thousands of homeowners have successfully litigated their foreclosure cases only to come to a fork in the road where they must make a decision: (1) finish the case at trial or (2) accept an incredibly “generous” offer from the pretender lender. My choice is option #1. But Homeowners understandably most often choose option #2.

By way of example, and not to disclose any of the details in the hundreds of cases I know have been settled to the satisfaction of the homeowner, pick a number. Let’s say you have a mortgage and note that you are successfully litigating — i.e., showing that the origination was false, that the payee and mortgagee were falsified, and that the assignment was fabricated based upon a fictitious sale of the loan because no money ever exchanged…

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Hear the Neil Garfield Show on The Greatest Economic Crime in Human History

Livinglies's Weblog

Click in or phone in at The Neil Garfield Show

Or call in at (347) 850-1260, 6pm EDT Thursdays

Much has been written and spoken about the pattern of crises culminating in the catastrophe that has led, so far, to the displacement of 15,000,000 people from their homes, their jobs, and the lives they had built for themselves. We know that another 15,000,000 will most likely be ruined by a basic breach of trust combined with supreme arrogance.

While most people were playing by the rules, the financial institutions burst out of their roles as intermediaries facilitating payments and transfers of money and securities, and beheaded those people, the professionally managed funds that contained their only hope for pensions, and froze the government into gridlock.

Tonight we explore the description of what happened, how it happened, and why more crises of even greater consequences will occur as early as this…

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Livinglies's Weblog

I think you should win this one if you do it right.
The banks fall right through the trap door on this one —- they prove that there was probable cause to believe that they were a valid creditor on the note (UCC3) but not a valid enforcer under the deed of trust (mortgage) (UCC9).
By alleging they are a holder and not a holder in due course they are admitting they didn’t pay for it and/or admitting that they took delivery with knowledge of the defenses of the borrower. That is basic black letter law, in my opinion. And one of the defenses is lack of consideration. either way they either need to show they paid for it — either directly with proof of a wire transfer receipt etc. or by getting a judgment on the note. THEN they can enforce the judgment. Neither way is non-judicial foreclosure permissible…

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Deutsche Bank Says Landlord Ruling May Flood Courts

Deutsche Bank AG (DBK) may learn today whether it will get a chance to overturn a California court ruling that exposes it to wrongful-eviction claims the bank says will depress prices in foreclosure sales and spur lawsuits against innocent homebuyers.

An appeals court in San Jose, in the first such ruling in the U.S., said in January that Deutsche Bank can be sued in state court for violating a federal tenant-protection law. Two renters sued over their eviction from a foreclosed home the Frankfurt-based company acquired in 2009 as trustee for a mortgage-backed security that contained a loan on the property.

Deutsche Bank, along with bankers’ groups in California and Nevada, told the California Supreme Court the ruling may jeopardize the economic recovery as lenders and investors weigh the risks of buying properties that house unwanted tenants, are subject to leases, or are vulnerable to lawsuits brought by renters evicted by paid middlemen.

“The risk of being declared a landlord, when there was no knowledge of a tenancy at the time of sale, could have a chilling effect on bidding at the foreclosure sale,” Charles McKenna, the bank’s attorney, said in a petition asking the state high court to overturn the decision of the three-judge appeals panel. The San Francisco-based court may decide as soon as today whether to review the ruling.

Deutsche Bank National Trust Co., a U.S. unit of Europe’s largest investment bank, was the beneficiary of the deed of trust securing the loan on the property in Sunnyvale, California. Deutsche Bank, as trustee, acquired the home, which had a two-bedroom garage rental unit, after the owner defaulted on the mortgage.

Tenants Barred

The tenants, who paid rent to the owner, sued after their belongings were tossed outside and destroyed and police barred them from the home. Deutsche Bank says the foreclosure ended the tenants’ lease, it played no role in evicting them, and loan servicers are responsible for dealing with renters.

More than one-third of all California residential units in foreclosure during the height of the housing crisis were rentals, and more than 200,000 California tenants lost their homes to foreclosures, according to the California Attorney General’s office. If the ruling stands, thousands of these renters could flood state courts with wrongful-eviction lawsuits, according to Deutsche Bank’s petition.

Nonsense, said Richard Rothschild, attorney for Rosario Nativi and her adult son, who rented the garage unit. They sued after finding their belongings — furniture, electronics, clothing and family photos — in a heap in the backyard in September 2009. Nativi was in her native El Salvador having surgery when she was evicted and had paid the $1,600 monthly rent in advance to the owner, according to court records.

Federal Protection

Rothschild, legal director at the Western Center on Law and Poverty, said the January ruling established that tenants can take owners who acquire properties through foreclosure to state court for violating protections Congress afforded renters under the 2009 Protecting Tenants Against Foreclosure Act. The law doesn’t give renters the right to sue in federal court.

“The bank can’t decide that its only job is to clear people out,” Rothschild said by phone.

Deutsche Bank filed the petition as trustee of the mortgage-backed security “on behalf of the investors,” said Ari Cohen, a bank spokesman.

“Deutsche Bank has no financial stake in this case,” he said in an e-mail. “Loan servicers, and not Deutsche Bank as trustee, are responsible for foreclosure activity, including actions relating to tenants of foreclosed properties, and the maintenance and resale of foreclosed properties.”

Eviction Notice

The federal law, which expires at the end of this year, requires that tenants be given 90 days’ notice of eviction. The San Jose appeals court said Deutsche Bank stepped into the landlord’s shoes when it acquired the home and had to honor the existing lease until it expired 10 months later or a new owner moved in and gave the tenants 90 days’ notice.

It doesn’t matter that the rental wasn’t legal because the owner hadn’t obtained the proper permit, the court said.

A California law granting the same protections to renters in foreclosed properties was passed last year, Rothschild said.

“We are unaware of even a mild dent in the housing market,” he said in a filing urging the California Supreme Court not to review the case. Median home prices in California rose to a six-year high in March to $376,000, according to San Diego-based research firm DataQuick.

More than 480,000 properties nationwide were bank-owned as of last month, compared with more than 1 million in January 2011, according to research firm RealtyTrac. Almost 45,000 California homes were bank-owned, down from about 146,000 in January 2011, according to RealtyTrac.

Local Hire

Deutsche Bank contracted with American Home Mortgage Servicing Inc. to service the property and prepare it for sale, and American Home hired a local real-estate company to assist, the appeals court said in its ruling. According to Deutsche Bank, the service company’s contract was with American Home Mortgage Corp., the sponsor of the security holding the loan.

American Home Servicing is named as a defendant in the case. Katarina Wenk-Bodenmiller, a spokeswoman for West Palm Beach, Florida-based loan servicer Ocwen Financial Corp. (OC), which acquired American Home, said by phone the company doesn’t comment on ongoing litigation.

While there’s no evidence that employees of the bank, American Home or the local company trashed Nativi’s property, no one working on the bank’s behalf ascertained whether the renters had a valid lease even after Nativi said she had one, the court found, calling that “troubling.”

When Nativi, a cleaning woman and caretaker for the elderly, tried to get back into the home, police told her to leave after an employee of the local real estate company said she wasn’t a tenant and had no right to be on the property, according to the court.

‘Triable Issues’

“We believe this evidence raises triable issues of material fact whether the bank,” through the employee’s conduct, helped prevent the Nativis from getting back into the home and should have done something to help them, the judges ruled, reversing a trial-court judge who sided with the bank. Nativi is seeking damages for losing her home and possessions.

The decision broadens banks’ exposure to renters’ claims that they were wrongfully evicted, said Eric Rans, an attorney with Encino, California-based Michelman & Robinson LLP who represents banks and real estate developers.

“If there’s a bona fide tenant in there, it puts the onus on the bank, and if there’s a third party, any wrongdoing that occurs is also put on the bank,” Rans said in a phone interview. “That will cause more work and more levels of review of properties and how they are being handled.”

The case is Nativi v. Deutsche Bank National Trust Co., S216911, California Supreme Court (San Francisco).

To contact the reporter on this story: Karen Gullo in federal court in San Francisco at

To contact the editors responsible for this story: Michael Hytha at Stephen Farr, Andrew Dunn

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Dismissal of claims seeking to set aside HOA’s nonjudicial foreclosure sale for delinquent assessment fees was improper when owners were not notified of right of redemption under CCP §729.050.

July 2013

Dismissal of claims seeking to set aside HOA’s nonjudicial foreclosure sale for delinquent assessment fees was improper when owners were not notified of right of redemption under CCP §729.050.

Multani v Witkin & Neal (2013) 215 CA4th 1428

After an HOA conducted a nonjudicial foreclosure sale of Owners’ unit for delinquent assessment fees, Owners sued the HOA and its agents to set aside the foreclosure, alleging irregularities in the sale notices and procedure. The trial court granted summary judgment for the defendants.

The court of appeal reversed and remanded. Defendants failed to demonstrate that they notified Owners of their right of redemption or the applicable redemption period as required under CCP §729.050. Thus, they did not make a prima facie showing that plaintiffs could not establish any of the three elements generally necessary to set aside a foreclosure, i.e., that:

  • The trustee caused an illegal, fraudulent, or willfully oppressive sale of real property under a power of sale in a mortgage or deed of trust;
  • The trustor was prejudiced or harmed; and
  • The trustor tendered the amount of the secured indebtedness or was excused from tendering.

The trustee’s failure to comply with the statutory procedural requirements for the notice or conduct of the sale satisfied the first element. An HOA’s nonjudicial foreclosure for delinquent assessments is subject to a right of redemption within 90 days after the sale under CCP §729.035. The trustee must serve notice of the right of redemption, indicating the applicable redemption period, under CCP §729.050. Even if a common law presumption of regularity applies to postsale redemption procedures, defendants had to prove that they complied with the statutory procedures to discharge their initial burden of production on a motion for summary judgment; simply referring to the presumption did not suffice.

As to the second element, a debtor who has not received notice under §729.050 has been harmed or prejudiced by not being informed of the postsale right of redemption and the date on which those redemption rights expire. The debtor has no duty to independently calculate the redemption period based on presale notice of the right of redemption. Section 729.050 relieves the debtor of any such burden.

As to the third element, the court concluded that a debtor is excused from complying with the tender requirement when, as here, the nonjudicial foreclosure is subject to a statutory right of redemption and the trustee failed to provide the notice required under §729.050.

THE EDITOR’S TAKE: Homeowner association lien foreclosure sales are made subject to a 90-day period of post-sale statutory redemption, like judicial foreclosure sales, even though these HOA sales are otherwise conducted like nonjudicial trustee sales. That crossover makes it easy for discrepancies to creep in, since the procedure is unique—the trustee must comply with the different rules of both judicial and nonjudicial sales at the same time.

On the pre-sale end, CC §1367.4 requires the notice of sale to contain an extra statement that the sale will be made subject to a right of redemption, while on the post-sale side, CCP §§729.040 and 729.050 require a special certificate of sale (rather than a deed) to go to the foreclosure purchaser and a separate notice of redemption to go to the foreclosure purchaser and former homeowner, respectively, in addition to the notice that was included in the earlier notice of sale. It’s easy to get that mixed up, and clearly makes these HOA sales more complicated than the quick and final (at least in theory) nonjudicial sale under a deed of trust.

This decision holds that an HOA sale that arguably gave the homeowner only one of the two required notices concerning redemption (1) may make the sale “illegal, fraudulent or willfully oppressive”; (2) may be ipso facto harmful or prejudicial; and (3) eliminates the need for the challenger to tender either the amount of the association lien ($13,640) or the amount bid by the purchaser ($20,400), although the obligation itself appeared to not be under attack.

That was a pretty successful (and surprising) outcome for the homeowner—limited, perhaps, by the fact that it came only by way of rejection of the association’s summary judgment motion.—Roger Bernhardt

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