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Watchdog Report: Foreclosure Review Scrapped On Eve Of Critical, Congressman Says

6 Jan

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Posted: 12/31/2012 3:53 pm EST  |  Updated: 12/31/2012 4:08 pm EST

Foreclosure Review
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The surprising decision by regulators to scrap a massive and expensive foreclosure review program in favor of a $10 billion settlement with 14 banks — reported by The New York Times Sunday night — came after a year of mounting concerns about the independence and effectiveness of the controversial program.

The program, known as the Independent Foreclosure Review, was supposed to give homeowners who believe that their bank made a mistake in handling their foreclosure an opportunity for a neutral third party to review the claim. It’s not clear what factors led banking regulators to abandon the program in favor of a settlement, but the final straw may have been a pending report by the Government Accountability Office, a nonpartisan investigative arm of Congress, which was investigating the review program.

Rep. Brad Miller, a North Carolina Democrat, told The Huffington Post that the report, which has not been released, was “critical” and that the Office of the Comptroller of the Currency, which administers the review, was aware of its findings. Miller said that that one problem the GAO was likely to highlight was an “unacceptably high” error rate of 11 percent in a sampling of bank loan files.

The sample files were chosen at random by the banks from their broader pool of foreclosed homeowners, who had not necessarily applied for relief. The data suggests that of the 4 million families who lost their homes to foreclosure since the housing crash, more than 400,000 had some bank-caused problem in their loan file. It also suggests that many thousands of those who could have applied for relief didn’t — because they weren’t aware of the review, or weren’t aware that their bank had made a mistake. Some of these mistakes pushed homeowners into foreclosure who otherwise could have afforded to keep their homes.

Miller said the news that a settlement to replace the review was in the works caught him by surprise, and stressed that he had no way of knowing whether the impending GAO report had triggered the decision.

It’s not clear what will happen to the 250,000 homeowners who have already applied to the Independent Foreclosure Review for relief. The Times, citing people familiar with the negotiations, said that a deal between the banks and banking regulators, led by the Office of the Comptroller of the Currency, could be reached by the end of the week. It wasn’t clear how that money would be distributed or how many current and former homeowners who lost their homes to foreclosure — or who were hit with an unnecessary fee — might qualify.

Bryan Hubbard, a spokesman for the OCC, which administers the program, declined to comment on the Times’ story. Hubbard told HuffPost, “The Office of the Comptroller of the Currency is committed to ensuring the Independent Foreclosure Review proceeds efficiently and to ensuring harmed borrowers are compensated as quickly as possible.”

Since the housing market crashed in 2007, thousands of foreclosed homeowners have complained that their mortgage company made a mistake in the management of their home loan, such as foreclosing on someone making payments on a loan modification plan. The Independent Foreclosure Review emerged from a legal agreement in April 2011 between 14 mortgage companies and bank regulators over these abusive “servicing” practices. It was supposed to give homeowners an opportunity to have an unbiased third party review their foreclosure and determine whether they might qualify for a cash payout of up to $125,000.

The initial response was tepid, at best. Homeowners and advocates complained that the application forms were confusing and that information about what type of compensation they might get was missing. Some told HuffPost that they were so disillusioned by the federal government’s anemic response to widely reported bank errors that they weren’t going to bother to apply.

In one instance, Daniel Casper, an Illinois wedding videographer, applied to the program in January after years of combat with Bank of America over his home loan. As The Huffington Post reported in October, he was initially rejected, because, according to the bank, his mortgage was not in the foreclosure process during the eligible review period. Promontory Financial Group, which Bank of America hired to review his loan, apparently did not double check Bank of America’s analysis against the extensive documentation that Chase submitted. That documentation clearly showed that his loan was eligible for review.

In recent months ProPublica, an investigative nonprofit, has issued a series of damning articles about the Independent Foreclosure Review. The most recent found that supposedly independent third-party reviewers looking over Bank of America loan files were given the “correct” answers in advance by the bank. These reviewers could override the answers, but they weren’t starting from a blank slate.

Banks, if they did not find a “compensable error,” did not have to pay anything, giving them a strong incentive to find no flaws with their own work.

“It was flawed from the start,” Miller said of the review program. “There was an inherent conflict of interest by just about everyone involved.”

Also on HuffPost:

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Predatory Lending and Predatory Servicing together at last Jan 1, 2013 Civil Code §2924.12(b)

10 Dec

Predatory Lending are abusive practices used in the mortgage industry that strip borrowers of home equity and threaten families with bankruptcy and foreclosure.

Predatory Lending can be broken down into three categories: Mortgage Origination, Mortgage Servicing; and Mortgage Collection and Foreclosure.

Mortgage Origination is the process by which you obtain your home loan from a mortgage broker or a bank.

Predatory lending practices in Mortgage Origination include:
# Excessive points;
# Charging fees not allowed or for services not delivered;
# Charging more than once for the same fee
# Providing a low teaser rate that adjusts to a rate you cannot afford;
# Successively refinancing your loan of “flipping;”
# “Steering” you into a loan that is more profitable to the Mortgage Originator;
# Changing the loan terms at closing or “bait & switch;”
# Closing in a location where you cannot adequately review the documents;
# Serving alcohol prior to closing;
# Coaching you to put minimum income or assets on you loan so that you will qualify for a certain amount;
# Securing an inflated appraisal;
# Receiving a kickback in money or favors from a particular escrow, title, appraiser or other service provider;
# Promising they will refinance your mortgage before your payment resets to a higher amount;
# Having you sign blank documents;
# Forging documents and signatures;
# Changing documents after you have signed them; and
# Loans with prepayment penalties or balloon payments.

Mortgage Servicing is the process of collecting loan payments and credit your loan.

Predatory lending practices in Mortgage Servicing include:
# Not applying payments on time;
# Applying payments to “Suspense;”
# “Jamming” illegal or improper fees;
# Creating an escrow or impounds account not allowed by the documents;
# Force placing insurance when you have adequate coverage;
# Improperly reporting negative credit history;
# Failing to provide you a detailed loan history; and
# Refusing to return your calls or letters.
#

Mortgage Collection & Foreclosure is the process Lenders use when you pay off your loan or when you house is repossessed for non-payment

Predatory lending practices in Mortgage Collection & Foreclosure include:
# Producing a payoff statement that includes improper charges & fees;
# Foreclosing in the name of an entity that is not the true owner of the mortgage;
# Failing to provide Default Loan Servicing required by all Fannie Mae mortgages;
# Failing to follow due process in foreclosure;
# Fraud on the court;
# Failing to provide copies of all documents and assignments; and
# Refusing to adequately communicate with you.

Abuses by Mortgage Service Companies

Although predatory lending has received far more attention than abusive servicing, a significant percentage of consumer complaints over loans involve servicing, not origination. For example, the director of the Nevada Fair Housing Center testified that of the hundreds of complaints of predatory lending issues her office received in 2002, about 42 percent involved servicing once the loan was transferred

Abusive Mortgage Servicing Defined:

Abusive servicing occurs when a servicer, either through action or inaction, obtains or attempts to obtain unwarranted fees or other costs from borrowers, engages in unfair collection practices, or through its own improper behavior or inaction causes borrowers to be more likely to go into default or have their homes foreclosed. Abusive practices should be distinguished from appropriate actions that may harm borrowers, such as a servicer merely collecting appropriate late fees or foreclosing on borrowers who do not make their payments despite proper loss mitigation efforts. Servicing can be abusive either intentionally, when there is intent to obtain unwarranted fees, or negligently, when, for example, a servicer’s records are so disorganized that borrowers are regularly charged late fees even when mortgage payments were made on time.

Abusive servicing often happens to debtors who have filed a Chapter 13 Bankruptcy Plan and are in the process of making payments under the Plan. If you suspect that your mortgage servicer is abusing your relationship by charging unnecessary fees while you are paying off your Chapter 13 Plan, call us. We can help.

There is significant evidence that some Mortgage servicers have engaged in abusive behavior and that borrowers have frequently been the victims. Some servicers have engaged in practices that are not only detrimental to borrowers but also illegal Such abuse has been documented in court opinions and decisions, in the decisions and findings of ratings agencies, in litigation and settlements obtained by government agencies against prominent servicers, in congressional testimony, and in newspaper accounts of borrowers who claim to have been mistreated by servicers. The abusive servicing practices documented in these sources include improper foreclosure or attempted foreclosure, improper fees, improper forced-placed insurance, and improper use or oversight of escrow funds .

Civil Code §2924.12(b) Right to Sue Mortgage Servicers for Injunctive Relief, Damages, Treble Damages, and Right to Attorney’s Fees. : )

5 Dec

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H. Right to Sue Mortgage Servicers for Injunctive Relief, Damages, Treble Damages, and Right to Attorney’s Fees

2013 is going to be a good year

One of the most important provisions of the Act from a lender’s perspective is that it provides borrowers with the right to sue mortgage servicers for injunctive relief before the trustee’s deed upon sale has recorded, or if it has already recorded, to sue for actual economic damages, if the mortgage servicer has not corrected any “material” violation of certain enumerated portions of the Act before the trustee’s deed upon sale recorded. (Civil Code §2924.12(a).) In an area that will certainly open up a Pandora’s Box of litigation, the Act does not define what constitutes a “material” violation of the Act. If a court finds that the violation was intentional, reckless or willful, the court can award the borrower the greater of treble (triple) damages or $50,000. (Civil Code §2924.12(b).) Furthermore, a violation of the enumerated provisions of the Act is also deemed to be a violation of the licensing laws if committed by a person licensed as a consumer or commercial finance lender or broker, a residential mortgage lender or servicer, or a licensed real estate broker or salesman. (Civil Code §2924.12(d).) Lastly, in a one-sided attorney’s fee provision that only benefits borrowers, the court may award a borrower who obtains an injunction or receives an award of economic damages as a result of the violation of the Act their reasonable attorney’s fees and costs as the prevailing party. (Civil Code §2924.12(i).) This provides all the more reason for lenders and mortgage servicers to comply with the terms of the Act. This provision for the recovery by only the borrower of their reasonable attorney’s fees makes it more likely that borrowers will file litigation against mortgage lenders or servicers than they otherwise would. Compliance is the lender’s or mortgage servicer’s best defense to litigation under the Act.

Significantly for lenders, as long as the mortgage servicer remedies the material violation of the Act before the trustee’s deed upon sale has recorded, the Act specifically provides that the mortgage servicer shall not be liable under the Act for any violation or damages. (Civil Code §2924.12(b) & (c).) The Act also clarifies that signatories to the National Mortgage Settlement who are in compliance with the terms of that settlement, as they relate to the terms of the Act, will not face liability under the Act. (Civil Code §2924.12(g).

Improper foreclosure or attempted foreclosure

Because servicers can exact fees associated with foreclosures, such as attorneys’ fees, some servicers have attempted to foreclose on property even when borrowers are current on their payments or without giving borrowers enough time to repay or otherwise working with them on a repayment plan Furthermore, a speedy foreclosure may save servicers the cost of attempting other techniques that might have prevented the foreclosure.

Some servicers have been so brazen that they have regularly claimed to the courts that borrowers were in default so as to justify foreclosure, even though the borrowers were current on their payments. Other courts have also decried the frequent use of false statements to obtain relief from stay in order to foreclose on borrowers’ homes. For example, in Hart v. GMAC Mortgage Corporation, et al., 246 B.R. 709 (2000), even though the borrower had made the payments required of him by a forbearance agreement he had entered into with the servicer (GMAC Mortgage Corporation), it created a “negative suspense account” for moneys it had paid out, improperly charged the borrower an additional monthly sum to repay the negative suspense account, charged him late fees for failing to make the entire payment demanded, and began foreclosure proceedings.

Improper fees

Claiming that borrowers are in default when they are actually current allows servicers to charge unwarranted fees, either late fees or fees related to default and foreclosure. Servicers receive as a conventional fee a percentage of the total value of the loans they service, typically 25 basis points for prime loans and 50 basis points for subprime loans In addition, contracts typically provide that the servicer, not the trustee or investors, has the right to keep any and all late fees or fees associated with defaults. Servicers charge late fees not only because they act as a prod to coax borrowers into making payments on time, but also because borrowers who fail to make payments impose additional costs on servicers, which must then engage in loss mitigation to induce payment.

Such fees are a crucial part of servicers’ income. For example, one servicer’s CEO reportedly stated that extra fees, such as late fees, appeared to be paying for all of the operating costs of the company’s entire servicing department, leaving the conventional servicing fee almost completely profit The pressure to collect such fees appears to be higher on subprime servicers than on prime servicers:

Because borrowers typically cannot prove the exact date a payment was received, servicers can charge late fees even when they receive the payment on time Improper late fees may also be based on the loss of borrowers’ payments by servicers, their inability to track those payments accurately, or their failure to post payments in a timely fashion. In Ronemus v. FTB Mortgage Services, 201 B.R. 458 (1996), under a Chapter 13 bankruptcy plan, the borrowers had made all of their payments on time except for two; they received permission to pay these two late and paid late fees for the privilege. However, the servicer, FTB Mortgage Services, misapplied their payments, then began placing their payments into a suspense account and collecting unauthorized late fees. The servicer ignored several letters from the borrowers’ attorney attempting to clear up the matter, sent regular demands for late fees, and began harassing the borrowers with collection efforts. When the borrowers sued, the servicer submitted to the court an artificially inflated accounting of how much the borrowers owed.

Some servicers have sent out late notices even when they have received timely payments and even before the end of a borrower’s grace period Worse yet, a servicer might pocket the payment, such as an extra payment of principal, and never credit it to the borrower Late fees on timely payments are a common problem when borrowers are making mortgage payments through a bankruptcy plan

Moreover, some servicers have also added false fees and charges not authorized by law or contract to their monthly payment demands, relying on borrowers’ ignorance of the exact amount owed. They can collect such fees or other unwarranted claims by submitting inaccurate payoff demands when a borrower refinances or sells the house). Or they can place the borrowers’ monthly payments in a suspense account and then charge late fees even though they received the payment Worse yet, some servicers pyramid their late fees, applying a portion of the current payment to a previous late fee and then charging an additional late fee even though the borrower has made a timely and full payment for the new month Pyramiding late fees allows servicers to charge late fees month after month even though the borrower made only one late payment

Servicers can turn their fees into a profit center by sending inaccurate monthly payment demands, demanding unearned fees or charges not owed, or imposing fees higher than the expenses for a panoply of actions For example, some servicers take advantage of borrowers’ ignorance by charging fees, such as prepayment penalties, where the note does not provide for them Servicers have sometimes imposed a uniform set of fees over an entire pool of loans, disregarding the fact that some of the loan documents did not provide for those particular fees. Or they charge more for attorneys’, property inspection, or appraisal fees than were actually incurred. Some servicers may add a fee by conducting unnecessary property inspections, having an agent drive by even when the borrower is not in default, or conducting multiple inspections during a single period of default to charge the resulting multiple fees

The complexity of the terms of many loans makes it difficult for borrowers to discover whether they are being overcharged Moreover, servicers can frustrate any attempts to sort out which fees are genuine.

Improperly forced-placed insurance

Mortgage holders are entitled under the terms of the loan to require borrowers to carry homeowners’ insurance naming the holder as the payee in case of loss and to force-place insurance by buying policies for borrowers who fail to do so and charging them for the premiums However, some servicers have force-placed insurance even in cases where the borrower already had it and even provided evidence of it to the servicer Worse yet, servicers have charged for force-placed insurance without even purchasing it. Premiums for force-placed insurance are often inflated in that they provide protection in excess of what the loan.

Escrow Account Mismanagement

One of the benefits of servicing mortgages is controlling escrow accounts to pay for insurance, taxes, and the like and, in most states, keeping any interest earned on these accounts Borrowers have complained that servicers have failed to make tax or insurance payments when they were due or at all. The treasurer of the country’s second largest county estimated that this failure to make timely payments cost borrowers late fees of at least $2 million in that county over a two-year span, causing some to lose their homes. If servicers fail to make insurance payments and a policy lapses, borrowers may face much higher insurance costs even if they purchase their own, non-force-placed policy. Worse yet, borrowers may find themselves unable to buy insurance at all if they cannot find a new insurer willing to write them a policy

You can make a claim for mortgage service abuse, and often the court will award actual and punitive damages. If you think you have been a victim of mortgage service abuse, contact us. We can help you make a claim.

Many a client call me when its toooooo late however sometimes something can be done it would envolve an appeal and this application for a stay. Most likely you will have to pay the reasonable rental value till the case is decided. And … Yes we have had this motion granted. ex-parte-application-for-stay-of-judgment-or-unlawful-detainer3
When title to the property is still in dispute ie. the foreclosure was bad. They (the lender)did not comply with California civil code 2923.5 or 2923.6 or 2924. Or the didn’t possess the documents to foreclose ie. the original note. Or they did not possess a proper assignment 2932.5. at trial you will be ignored by the learned judge but if you file a Motion for Summary Judgmentevans sum ud
template notice of Motion for SJ
TEMPLATE Points and A for SJ Motion
templateDeclaration for SJ
TEMPLATEProposed Order on Motion for SJ
TEMPLATEStatement of Undisputed Facts
you can force the issue and if there is a case filed in the Unlimited jurisdiction Court the judge may be forced to consider title and or consolidate the case with the Unlimited Jurisdiction Case

BILL NUMBER: AB 278	CHAPTERED
	BILL TEXT

	CHAPTER  86
	FILED WITH SECRETARY OF STATE  JULY 11, 2012
	APPROVED BY GOVERNOR  JULY 11, 2012
	PASSED THE SENATE  JULY 2, 2012
	PASSED THE ASSEMBLY  JULY 2, 2012
	AMENDED IN SENATE  SEPTEMBER 1, 2011
	AMENDED IN SENATE  JUNE 23, 2011

INTRODUCED BY   Assembly Members Eng, Feuer, Mitchell, and John A.
Pérez
   (Principal coauthors: Assembly Members Davis, Carter, and Skinner)

   (Principal coauthors: Senators Leno, Evans, Calderon, Corbett,
DeSaulnier, Hancock, Pavley, and Steinberg)

                        FEBRUARY 8, 2011

   An act to amend and add Sections 2923.5 and 2923.6 of, to amend
and repeal Section 2924 of, to add Sections 2920.5, 2923.4, 2923.7,
2924.17, and 2924.20 to, to add and repeal Sections 2923.55, 2924.9,
2924.10, 2924.18, and 2924.19 of, and to add, repeal, and add
Sections 2924.11, 2924.12, and 2924.15 of, the Civil Code, relating
to mortgages.

	LEGISLATIVE COUNSEL'S DIGEST

   AB 278, Eng. Mortgages and deeds of trust: foreclosure.
   (1) Existing law, until January 1, 2013, requires a mortgagee,
trustee, beneficiary, or authorized agent to contact the borrower
prior to filing a notice of default to explore options for the
borrower to avoid foreclosure, as specified. Existing law requires a
notice of default or, in certain circumstances, a notice of sale, to
include a declaration stating that the mortgagee, trustee,
beneficiary, or authorized agent has contacted the borrower, or has
tried with due diligence to contact the borrower, or that no contact
was required for a specified reason.
   This bill would add mortgage servicers, as defined, to these
provisions and would extend the operation of these provisions
indefinitely, except that it would delete the requirement with
respect to a notice of sale. The bill would, until January 1, 2018,
additionally require the borrower, as defined, to be provided with
specified information in writing prior to recordation of a notice of
default and, in certain circumstances, within 5 business days after
recordation. The bill would prohibit a mortgage servicer, mortgagee,
trustee, beneficiary, or authorized agent from recording a notice of
default or, until January 1, 2018, recording a notice of sale or
conducting a trustee's sale while a complete first lien loan
modification application is pending, under specified conditions. The
bill would, until January 1, 2018, establish additional procedures to
be followed regarding a first lien loan modification application,
the denial of an application, and a borrower's right to appeal a
denial.
   (2) Existing law imposes various requirements that must be
satisfied prior to exercising a power of sale under a mortgage or
deed of trust, including, among other things, recording a notice of
default and a notice of sale.
   The bill would, until January 1, 2018, require a written notice to
the borrower after the postponement of a foreclosure sale in order
to advise the borrower of any new sale date and time, as specified.
The bill would provide that an entity shall not record a notice of
default or otherwise initiate the foreclosure process unless it is
the holder of the beneficial interest under the deed of trust, the
original or substituted trustee, or the designated agent of the
holder of the beneficial interest, as specified.
   The bill would prohibit recordation of a notice of default or a
notice of sale or the conduct of a trustee's sale if a foreclosure
prevention alternative has been approved and certain conditions exist
and would, until January 1, 2018, require recordation of a
rescission of those notices upon execution of a permanent foreclosure
prevention alternative. The bill would, until January 1, 2018,
prohibit the collection of application fees and the collection of
late fees while a foreclosure prevention alternative is being
considered, if certain criteria are met, and would require a
subsequent mortgage servicer to honor any previously approved
foreclosure prevention alternative.
   The bill would authorize a borrower to seek an injunction and
damages for violations of certain of the provisions described above,
except as specified. The bill would authorize the greater of treble
actual damages or $50,000 in statutory damages if a violation of
certain provisions is found to be intentional or reckless or resulted
from willful misconduct, as specified. The bill would authorize the
awarding of attorneys' fees for prevailing borrowers, as specified.
Violations of these provisions by licensees of the Department of
Corporations, the Department of Financial Institutions, and the
Department of Real Estate would also be violations of those
respective licensing laws. Because a violation of certain of those
licensing laws is a crime, the bill would impose a state-mandated
local program.
   The bill would provide that the requirements imposed on mortgage
servicers, and mortgagees, trustees, beneficiaries, and authorized
agents, described above are applicable only to mortgages or deeds of
trust secured by residential real property not exceeding 4 dwelling
units that is owner-occupied, as defined, and, until January 1, 2018,
only to those entities who conduct more than 175 foreclosure sales
per year or annual reporting period, except as specified.
   The bill would require, upon request from a borrower who requests
a foreclosure prevention alternative, a mortgage servicer who
conducts more than 175 foreclosure sales per year or annual reporting
period to establish a single point of contact and provide the
borrower with one or more direct means of communication with the
single point of contact. The bill would specify various
responsibilities of the single point of contact. The bill would
define single point of contact for these purposes.
   (3) Existing law prescribes documents that may be recorded or
filed in court.
   This bill would require that a specified declaration, notice of
default, notice of sale, deed of trust, assignment of a deed of
trust, substitution of trustee, or declaration or affidavit filed in
any court relative to a foreclosure proceeding or recorded by or on
behalf of a mortgage servicer shall be accurate and complete and
supported by competent and reliable evidence. The bill would require
that before recording or filing any of those documents, a mortgage
servicer shall ensure that it has reviewed competent and reliable
evidence to substantiate the borrower's default and the right to
foreclose, including the borrower's loan status and loan information.
The bill would, until January 1, 2018, provide that any mortgage
servicer that engages in multiple and repeated violations of these
requirements shall be liable for a civil penalty of up to $7,500 per
mortgage or deed of trust, in an action brought by specified state
and local government entities, and would also authorize
administrative enforcement against licensees of the Department of
Corporations, the Department of Financial Institutions, and the
Department of Real Estate.
   The bill would authorize the Department of Corporations, the
Department of Financial Institutions, and the Department of Real
Estate to adopt regulations applicable to persons and entities under
their respective jurisdictions for purposes of the provisions
described above. The bill would provide that a violation of those
regulations would be enforceable only by the regulating agency.
   (4) The bill would state findings and declarations of the
Legislature in relation to foreclosures in the state generally, and
would state the purposes of the bill.
   (5) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) California is still reeling from the economic impacts of a
wave of residential property foreclosures that began in 2007. From
2007 to 2011 alone, there were over 900,000 completed foreclosure
sales. In 2011, 38 of the top 100 hardest hit ZIP Codes in the nation
were in California, and the current wave of foreclosures continues
apace. All of this foreclosure activity has adversely affected
property values and resulted in less money for schools, public
safety, and other public services. In addition, according to the
Urban Institute, every foreclosure imposes significant costs on local
governments, including an estimated nineteen thousand two hundred
twenty-nine dollars ($19,229) in local government costs. And the
foreclosure crisis is not over; there remain more than two million
"underwater" mortgages in California.
   (b) It is essential to the economic health of this state to
mitigate the negative effects on the state and local economies and
the housing market that are the result of continued foreclosures by
modifying the foreclosure process to ensure that borrowers who may
qualify for a foreclosure alternative are considered for, and have a
meaningful opportunity to obtain, available loss mitigation options.
These changes to the state's foreclosure process are essential to
ensure that the current crisis is not worsened by unnecessarily
adding foreclosed properties to the market when an alternative to
foreclosure may be available. Avoiding foreclosure, where possible,
will help stabilize the state's housing market and avoid the
substantial, corresponding negative effects of foreclosures on
families, communities, and the state and local economy.
   (c) This act is necessary to provide stability to California's
statewide and regional economies and housing market by facilitating
opportunities for borrowers to pursue loss mitigation options.
  SEC. 2.  Section 2920.5 is added to the Civil Code, to read:
   2920.5.  For purposes of this article, the following definitions
apply:
   (a) "Mortgage servicer" means a person or entity who directly
services a loan, or who is responsible for interacting with the
borrower, managing the loan account on a daily basis including
collecting and crediting periodic loan payments, managing any escrow
account, or enforcing the note and security instrument, either as the
current owner of the promissory note or as the current owner's
authorized agent. "Mortgage servicer" also means a subservicing agent
to a master servicer by contract. "Mortgage servicer" shall not
include a trustee, or a trustee's authorized agent, acting under a
power of sale pursuant to a deed of trust.
   (b) "Foreclosure prevention alternative" means a first lien loan
modification or another available loss mitigation option.
   (c) (1) Unless otherwise provided and for purposes of Sections
2923.4, 2923.5, 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11,
2924.18, and 2924.19, "borrower" means any natural person who is a
mortgagor or trustor and who is potentially eligible for any federal,
state, or proprietary foreclosure prevention alternative program
offered by, or through, his or her mortgage servicer.
   (2) For purposes of the sections listed in paragraph (1),
"borrower" shall not include any of the following:
   (A) An individual who has surrendered the secured 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) An individual who 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.
   (C) An individual who has filed a case 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) "First lien" means the most senior mortgage or deed of trust
on the property that is the subject of the notice of default or
notice of sale.
  SEC. 3.  Section 2923.4 is added to the Civil Code, to read:
   2923.4.  (a) The purpose of the act that added this section is to
ensure that, as part of the nonjudicial foreclosure process,
borrowers are considered for, and have a meaningful opportunity to
obtain, available loss mitigation options, if any, offered by or
through the borrower's mortgage servicer, such as loan modifications
or other alternatives to foreclosure. Nothing in the act that added
this section, however, shall be interpreted to require a particular
result of that process.
   (b) Nothing in this article obviates or supersedes the obligations
of the signatories to the consent judgment entered in the case
entitled United States of America et al. v. Bank of America
Corporation et al., filed in the United States District Court for the
District of Columbia, case number 1:12-cv-00361 RMC.
  SEC. 4.  Section 2923.5 of the Civil Code is amended to read:
   2923.5.  (a) (1) A mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent may not record a notice of default
pursuant to Section 2924 until both of the following:
   (A) Either 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 (e).
   (B) The mortgage servicer complies with paragraph (1) of
subdivision (a) of Section 2924.18, if the borrower has provided a
complete application as defined in subdivision (d) of Section
2924.18.
   (2) A mortgage servicer 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 mortgage servicer shall advise the borrower that
he or she has the right to request a subsequent meeting and, if
requested, the mortgage servicer 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 recorded pursuant to Section 2924 shall
include a declaration that the mortgage servicer has contacted the
borrower, has tried with due diligence to contact the borrower as
required by this section, or that no contact was required because the
individual did not meet the definition of "borrower" pursuant to
subdivision (c) of Section 2920.5.
   (c) A mortgage servicer's loss mitigation personnel may
participate by telephone during any contact required by this section.

    (d) A borrower may designate, with consent given in writing, a
HUD-certified housing counseling agency, attorney, or other adviser
to discuss with the mortgage servicer, on the borrower's behalf, the
borrower's 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 mortgage servicer is subject to approval by the borrower.
    (e) A notice of default may be recorded pursuant to Section 2924
when a mortgage servicer 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 mortgage
servicer. For purposes of this section, "due diligence" shall require
and mean all of the following:
   (1) A mortgage servicer 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 mortgage servicer
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 mortgage servicer 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 mortgage servicer.
   (C) A mortgage servicer 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
mortgage servicer shall then send a certified letter, with return
receipt requested.
   (4) The mortgage servicer 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 mortgage servicer 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 mortgage servicer when discussing options
for avoiding foreclosure.
   (C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with their mortgage servicer.
   (D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
    (f) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (g) This section shall apply only to entities described in
subdivision (b) of Section 2924.18.
    (h) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 5.  Section 2923.5 is added to the Civil Code, to read:
   2923.5.  (a) (1) A mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent may not record a notice of default
pursuant to Section 2924 until both of the following:
   (A) Either 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 (e).
   (B) The mortgage servicer complies with subdivision (a) of Section
2924.11, if the borrower has provided a complete application as
defined in subdivision (f) of Section 2924.11.
   (2) A mortgage servicer 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 mortgage servicer shall advise the borrower that
he or she has the right to request a subsequent meeting and, if
requested, the mortgage servicer 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 recorded pursuant to Section 2924 shall
include a declaration that the mortgage servicer has contacted the
borrower, has tried with due diligence to contact the borrower as
required by this section, or that no contact was required because the
individual did not meet the definition of "borrower" pursuant to
subdivision (c) of Section 2920.5.
   (c) A mortgage servicer's loss mitigation personnel may
participate by telephone during any contact required by this section.

   (d) A borrower may designate, with consent given in writing, a
HUD-certified housing counseling agency, attorney, or other adviser
to discuss with the mortgage servicer, on the borrower's behalf, the
borrower's 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 mortgage servicer is subject to approval by the borrower.
   (e) A notice of default may be recorded pursuant to Section 2924
when a mortgage servicer 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 mortgage
servicer. For purposes of this section, "due diligence" shall require
and mean all of the following:
   (1) A mortgage servicer 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 mortgage servicer
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 mortgage servicer 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 mortgage servicer.
   (C) A mortgage servicer 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
mortgage servicer shall then send a certified letter, with return
receipt requested.
   (4) The mortgage servicer 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 mortgage servicer 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 mortgage servicer when discussing options
for avoiding foreclosure.
   (C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with their mortgage servicer.
   (D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
   (f) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (g) This section shall become operative on January 1, 2018.
  SEC. 6.  Section 2923.55 is added to the Civil Code, to read:
   2923.55.  (a) A mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent may not record a notice of default
pursuant to Section 2924 until all of the following:
    (1) The mortgage servicer has satisfied the requirements of
paragraph (1) of subdivision (b).
   (2) Either 30 days after initial contact is made as required by
paragraph (2) of subdivision (b) or 30 days after satisfying the due
diligence requirements as described in subdivision (f).
   (3) The mortgage servicer complies with subdivision (c) of Section
2923.6, if the borrower has provided a complete application as
defined in subdivision (h) of Section 2923.6.
   (b) (1) As specified in subdivision (a), a mortgage servicer shall
send the following information in writing to the borrower:
   (A) A statement that if the borrower is a servicemember or a
dependent of a servicemember, he or she may be entitled to certain
protections under the federal Servicemembers Civil Relief Act (50
U.S.C. Sec. 501 et seq.) regarding the servicemember's interest rate
and the risk of foreclosure, and counseling for covered
servicemembers that is available at agencies such as Military
OneSource and Armed Forces Legal Assistance.
   (B) A statement that the borrower may request the following:
   (i) A copy of the borrower's promissory note or other evidence of
indebtedness.
   (ii) A copy of the borrower's deed of trust or mortgage.
   (iii) A copy of any assignment, if applicable, of the borrower's
mortgage or deed of trust required to demonstrate the right of the
mortgage servicer to foreclose.
   (iv) A copy of the borrower's payment history since the borrower
was last less than 60 days past due.
   (2) A mortgage servicer 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 mortgage servicer shall advise the borrower that
he or she has the right to request a subsequent meeting and, if
requested, the mortgage servicer 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.
   (c) A notice of default recorded pursuant to Section 2924 shall
include a declaration that the mortgage servicer has contacted the
borrower, has tried with due diligence to contact the borrower as
required by this section, or that no contact was required because the
individual did not meet the definition of "borrower" pursuant to
subdivision (c) of Section 2920.5.
   (d) A mortgage servicer's loss mitigation personnel may
participate by telephone during any contact required by this section.

   (e) A borrower may designate, with consent given in writing, a
HUD-certified housing counseling agency, attorney, or other adviser
to discuss with the mortgage servicer, on the borrower's behalf, the
borrower's 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
(b). Any foreclosure prevention alternative offered at the meeting by
the mortgage servicer is subject to approval by the borrower.
   (f) A notice of default may be recorded pursuant to Section 2924
when a mortgage servicer has not contacted a borrower as required by
paragraph (2) of subdivision (b), provided that the failure to
contact the borrower occurred despite the due diligence of the
mortgage servicer. For purposes of this section, "due diligence"
shall require and mean all of the following:
   (1) A mortgage servicer 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 mortgage servicer
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 mortgage servicer 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 mortgage servicer.
   (C) A mortgage servicer 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
mortgage servicer shall then send a certified letter, with return
receipt requested, that includes the toll-free telephone number made
available by HUD to find a HUD-certified housing counseling agency.
   (4) The mortgage servicer 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 mortgage servicer 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 mortgage servicer when discussing options
for avoiding foreclosure.
   (C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with their mortgage servicer.
   (D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
   (g) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (h) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (i)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 7.  Section 2923.6 of the Civil Code is amended to read:
   2923.6.  (a) The Legislature finds and declares that any duty that
mortgage 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 pooling and servicing agreement, and that a mortgage 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 mortgage servicer
offer the borrower a loan modification or workout plan if such a
modification or plan is consistent with its contractual or other
authority.
   (c) If a borrower submits a complete application for a first lien
loan modification offered by, or through, the borrower's mortgage
servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or
authorized agent shall not record a notice of default or notice of
sale, or conduct a trustee's sale, while the complete first lien loan
modification application is pending. A mortgage servicer, mortgagee,
trustee, beneficiary, or authorized agent shall not record a notice
of default or notice of sale or conduct a trustee's sale until any of
the following occurs:
   (1) The mortgage servicer makes a written determination that the
borrower is not eligible for a first lien loan modification, and any
appeal period pursuant to subdivision (d) has expired.
   (2) The borrower does not accept an offered first lien loan
modification within 14 days of the offer.
   (3) The borrower accepts a written first lien loan modification,
but defaults on, or otherwise breaches the borrower's obligations
under, the first lien loan modification.
   (d) If the borrower's application for a first lien loan
modification is denied, the borrower shall have at least 30 days from
the date of the written denial to appeal the denial and to provide
evidence that the mortgage servicer's determination was in error.
   (e) If the borrower's application for a first lien loan
modification is denied, the mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent shall not record a notice of default
or, if a notice of default has already been recorded, record a
notice of sale or conduct a trustee's sale until the later of:
   (1) Thirty-one days after the borrower is notified in writing of
the denial.
   (2) If the borrower appeals the denial pursuant to subdivision
(d), the later of 15 days after the denial of the appeal or 14 days
after a first lien loan modification is offered after appeal but
declined by the borrower, or, if a first lien loan modification is
offered and accepted after appeal, the date on which the borrower
fails to timely submit the first payment or otherwise breaches the
terms of the offer.
   (f) Following the denial of a first lien loan modification
application, the mortgage servicer shall send a written notice to the
borrower identifying the reasons for denial, including the
following:
   (1) The amount of time from the date of the denial letter in which
the borrower may request an appeal of the denial of the first lien
loan modification and instructions regarding how to appeal the
denial.
   (2) If the denial was based on investor disallowance, the specific
reasons for the investor disallowance.
   (3) If the denial is the result of a net present value
calculation, the monthly gross income and property value used to
calculate the net present value and a statement that the borrower may
obtain all of the inputs used in the net present value calculation
upon written request to the mortgage servicer.
   (4) If applicable, a finding that the borrower was previously
offered a first lien loan modification and failed to successfully
make payments under the terms of the modified loan.

         (5) If applicable, a description of other foreclosure
prevention alternatives for which the borrower may be eligible, and a
list of the steps the borrower must take in order to be considered
for those options. If the mortgage servicer has already approved the
borrower for another foreclosure prevention alternative, information
necessary to complete the foreclosure prevention alternative.
   (g) In order to minimize the risk of borrowers submitting multiple
applications for first lien loan modifications for the purpose of
delay, the mortgage servicer shall not be obligated to evaluate
applications from borrowers who have already been evaluated or
afforded a fair opportunity to be evaluated for a first lien loan
modification prior to January 1, 2013, or who have been evaluated or
afforded a fair opportunity to be evaluated consistent with the
requirements of this section, unless there has been a material change
in the borrower's financial circumstances since the date of the
borrower's previous application and that change is documented by the
borrower and submitted to the mortgage servicer.
   (h) For purposes of this section, an application shall be deemed
"complete" when a borrower has supplied the mortgage servicer with
all documents required by the mortgage servicer within the reasonable
timeframes specified by the mortgage servicer.
   (i) Subdivisions (c) to (h), inclusive, shall not apply to
entities described in subdivision (b) of Section 2924.18.
   (j) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
    (k)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 8.  Section 2923.6 is added to the Civil Code, to read:
   2923.6.  (a) The Legislature finds and declares that any duty
mortgage 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
pooling and servicing agreement, and that a mortgage 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 mortgage servicer
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 become operative on January 1, 2018.
  SEC. 9.  Section 2923.7 is added to the Civil Code, to read:
   2923.7.  (a) Upon request from a borrower who requests a
foreclosure prevention alternative, the mortgage servicer shall
promptly establish a single point of contact and provide to the
borrower one or more direct means of communication with the single
point of contact.
   (b) The single point of contact shall be responsible for doing all
of the following:
   (1) Communicating the process by which a borrower may apply for an
available foreclosure prevention alternative and the deadline for
any required submissions to be considered for these options.
   (2) Coordinating receipt of all documents associated with
available foreclosure prevention alternatives and notifying the
borrower of any missing documents necessary to complete the
application.
   (3) Having access to current information and personnel sufficient
to timely, accurately, and adequately inform the borrower of the
current status of the foreclosure prevention alternative.
   (4) Ensuring that a borrower is considered for all foreclosure
prevention alternatives offered by, or through, the mortgage
servicer, if any.
   (5) Having access to individuals with the ability and authority to
stop foreclosure proceedings when necessary.
   (c) The single point of contact shall remain assigned to the
borrower's account until the mortgage servicer determines that all
loss mitigation options offered by, or through, the mortgage servicer
have been exhausted or the borrower's account becomes current.
   (d) The mortgage servicer shall ensure that a single point of
contact refers and transfers a borrower to an appropriate supervisor
upon request of the borrower, if the single point of contact has a
supervisor.
   (e) For purposes of this section, "single point of contact" means
an individual or team of personnel each of whom has the ability and
authority to perform the responsibilities described in subdivisions
(b) to (d), inclusive. The mortgage servicer shall ensure that each
member of the team is knowledgeable about the borrower's situation
and current status in the alternatives to foreclosure process.
   (f) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (g) (1) This section shall not apply to a depository institution
chartered under state or federal law, a person licensed pursuant to
Division 9 (commencing with Section 22000) or Division 20 (commencing
with Section 50000) of the Financial Code, or a person licensed
pursuant to Part 1 (commencing with Section 10000) of Division 4 of
the Business and Professions Code, that, during its immediately
preceding annual reporting period, as established with its primary
regulator, foreclosed on 175 or fewer residential real properties,
containing no more than four dwelling units, that are located in
California.
   (2) Within three months after the close of any calendar year or
annual reporting period as established with its primary regulator
during which an entity or person described in paragraph (1) exceeds
the threshold of 175 specified in paragraph (1), that entity shall
notify its primary regulator, in a manner acceptable to its primary
regulator, and any mortgagor or trustor who is delinquent on a
residential mortgage loan serviced by that entity of the date on
which that entity will be subject to this section, which date shall
be the first day of the first month that is six months after the
close of the calendar year or annual reporting period during which
that entity exceeded the threshold.
  SEC. 10.  Section 2924 of the Civil Code, as amended by Section 1
of Chapter 180 of the Statutes of 2010, is amended to read:
   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 paragraph (4), 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.
   (4) Notwithstanding paragraph (3), the mortgagee, trustee, or
other person authorized to take sale may record a notice of sale
pursuant to Section 2924f up to five days before the lapse of the
three-month period described in paragraph (2), provided that the date
of sale is no earlier than three months and 20 days after the
recording of the notice of default.
   (5) Until January 1, 2018, whenever a sale is postponed for a
period of at least 10 business days pursuant to Section 2924g, a
mortgagee, beneficiary, or authorized agent shall provide written
notice to a borrower regarding the new sale date and time, within
five business days following the postponement. Information provided
pursuant to this paragraph shall not constitute the public
declaration required by subdivision (d) of Section 2924g. Failure to
comply with this paragraph shall not invalidate any sale that would
otherwise be valid under Section 2924f. This paragraph shall be
inoperative on January 1, 2018.
   (6) No entity shall record or cause a notice of default to be
recorded or otherwise initiate the foreclosure process unless it is
the holder of the beneficial interest under the mortgage or deed of
trust, the original trustee or the substituted trustee under the deed
of trust, or the designated agent of the holder of the beneficial
interest. No agent of the holder of the beneficial interest under the
mortgage or deed of trust, original trustee or substituted trustee
under the deed of trust may record a notice of default or otherwise
commence the foreclosure process except when acting within the scope
of authority designated by the holder of the beneficial interest.
   (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.
  SEC. 11.  Section 2924 of the Civil Code, as amended by Section 2
of Chapter 180 of the Statutes of 2010, is repealed.
  SEC. 12.  Section 2924.9 is added to the Civil Code, to read:
   2924.9.  (a) Unless a borrower has previously exhausted the first
lien loan modification process offered by, or through, his or her
mortgage servicer described in Section 2923.6, within five business
days after recording a notice of default pursuant to Section 2924, a
mortgage servicer that offers one or more foreclosure prevention
alternatives shall send a written communication to the borrower that
includes all of the following information:
   (1) That the borrower may be evaluated for a foreclosure
prevention alternative or, if applicable, foreclosure prevention
alternatives.
   (2) Whether an application is required to be submitted by the
borrower in order to be considered for a foreclosure prevention
alternative.
   (3) The means and process by which a borrower may obtain an
application for a foreclosure prevention alternative.
   (b) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (c) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (d)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 13.  Section 2924.10 is added to the Civil Code, to read:
   2924.10.  (a) When a borrower submits a complete first lien
modification application or any document in connection with a first
lien modification application, the mortgage servicer shall provide
written acknowledgment of the receipt of the documentation within
five business days of receipt. In its initial acknowledgment of
receipt of the loan modification application, the mortgage servicer
shall include the following information:
   (1) A description of the loan modification process, including an
estimate of when a decision on the loan modification will be made
after a complete application has been submitted by the borrower and
the length of time the borrower will have to consider an offer of a
loan modification or other foreclosure prevention alternative.
   (2) Any deadlines, including deadlines to submit missing
documentation, that would affect the processing of a first lien loan
modification application.
   (3) Any expiration dates for submitted documents.
   (4) Any deficiency in the borrower's first lien loan modification
application.
   (b) For purposes of this section, a borrower's first lien loan
modification application shall be deemed to be "complete" when a
borrower has supplied the mortgage servicer with all documents
required by the mortgage servicer within the reasonable timeframes
specified by the mortgage servicer.
   (c) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (d) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (e)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 14.  Section 2924.11 is added to the Civil Code, to read:
   2924.11.  (a) If a foreclosure prevention alternative is approved
in writing prior to the recordation of a notice of default, a
mortgage servicer, mortgagee, trustee, beneficiary, or authorized
agent shall not record a notice of default under either of the
following circumstances:
   (1) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (2) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (b) If a foreclosure prevention alternative is approved in writing
after the recordation of a notice of default, a mortgage servicer,
mortgagee, trustee, beneficiary, or authorized agent shall not record
a notice of sale or conduct a trustee's sale under either of the
following circumstances:
   (1) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (2) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (c) When a borrower accepts an offered first lien loan
modification or other foreclosure prevention alternative, the
mortgage servicer shall provide the borrower with a copy of the fully
executed loan modification agreement or agreement evidencing the
foreclosure prevention alternative following receipt of the executed
copy from the borrower.
   (d) A mortgagee, beneficiary, or authorized agent shall record a
rescission of a notice of default or cancel a pending trustee's sale,
if applicable, upon the borrower executing a permanent foreclosure
prevention alternative. In the case of a short sale, the rescission
or cancellation of the pending trustee's sale shall occur when the
short sale has been approved by all parties and proof of funds or
financing has been provided to the mortgagee, beneficiary, or
authorized agent.
   (e) The mortgage servicer shall not charge any application,
processing, or other fee for a first lien loan modification or other
foreclosure prevention alternative.
   (f) The mortgage servicer shall not collect any late fees for
periods during which a complete first lien loan modification
application is under consideration or a denial is being appealed, the
borrower is making timely modification payments, or a foreclosure
prevention alternative is being evaluated or exercised.
   (g) If a borrower has been approved in writing for a first lien
loan modification or other foreclosure prevention alternative, and
the servicing of that borrower's loan is transferred or sold to
another mortgage servicer, the subsequent mortgage servicer shall
continue to honor any previously approved first lien loan
modification or other foreclosure prevention alternative, in
accordance with the provisions of the act that added this section.
   (h) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (i) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (j)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 15.  Section 2924.11 is added to the Civil Code, to read:
   2924.11.  (a) If a borrower submits a complete application for a
foreclosure prevention alternative offered by, or through, the
borrower's mortgage servicer, a mortgage servicer, trustee,
mortgagee, beneficiary, or authorized agent shall not record a notice
of sale or conduct a trustee's sale while the complete foreclosure
prevention alternative application is pending, and until the borrower
has been provided with a written determination by the mortgage
servicer regarding that borrower's eligibility for the requested
foreclosure prevention alternative.
   (b) Following the denial of a first lien loan modification
application, the mortgage servicer shall send a written notice to the
borrower identifying with specificity the reasons for the denial and
shall include a statement that the borrower may obtain additional
documentation supporting the denial decision upon written request to
the mortgage servicer.
   (c) If a foreclosure prevention alternative is approved in writing
prior to the recordation of a notice of default, a mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall
not record a notice of default under either of the following
circumstances:
   (1) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (2) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (d) If a foreclosure prevention alternative is approved in writing
after the recordation of a notice of default, a mortgage servicer,
mortgagee, trustee, beneficiary, or authorized agent shall not record
a notice of sale or conduct a trustee's sale under either of the
following circumstances:
   (1) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (2) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (e) This section applies only to mortgages or deeds of trust as
described in Section 2924.15.
   (f) For purposes of this section, an application shall be deemed
"complete" when a borrower has supplied the mortgage servicer with
all documents required by the mortgage servicer within the reasonable
timeframes specified by the mortgage servicer.
   (g) This section shall become operative on January 1, 2018.
  SEC. 16.  Section 2924.12 is added to the Civil Code, to read:
   2924.12.  (a) (1) If a trustee's deed upon sale has not been
recorded, a borrower may bring an action for injunctive relief to
enjoin a material violation of Section 2923.55, 2923.6, 2923.7,
2924.9, 2924.10, 2924.11, or 2924.17.
   (2) Any injunction shall remain in place and any trustee's sale
shall be enjoined until the court determines that the mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent has
corrected and remedied the violation or violations giving rise to the
action for injunctive relief. An enjoined entity may move to
dissolve an injunction based on a showing that the material violation
has been corrected and remedied.
   (b) After a trustee's deed upon sale has been recorded, a mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall
be liable to a borrower for actual economic damages pursuant to
Section 3281, resulting from a material violation of Section 2923.55,
2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17 by that
mortgage servicer, mortgagee, trustee, beneficiary, or authorized
agent where the violation was not corrected and remedied prior to the
recordation of the trustee's deed upon sale. If the court finds that
the material violation was intentional or reckless, or resulted from
willful misconduct by a mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent, the court may award the borrower
the greater of treble actual damages or statutory damages of fifty
thousand dollars ($50,000).
   (c) A mortgage servicer, mortgagee, trustee, beneficiary, or
authorized agent shall not be liable for any violation that it has
corrected and remedied prior to the recordation of a trustee's deed
upon sale, or that has been corrected and remedied by third parties
working on its behalf prior to the recordation of a trustee's deed
upon sale.
   (d) A violation of Section 2923.55, 2923.6, 2923.7, 2924.9,
2924.10, 2924.11, or 2924.17 by a person licensed by the Department
of Corporations, Department of Financial Institutions, or Department
of Real Estate shall be deemed to be a violation of that person's
licensing law.
   (e) No violation of this article shall affect the validity of a
sale in favor of a bona fide purchaser and any of its encumbrancers
for value without notice.
   (f) A third-party encumbrancer shall not be relieved of liability
resulting from violations of Section 2923.55, 2923.6, 2923.7, 2924.9,
2924.10, 2924.11, or 2924.17 committed by that third-party
encumbrancer, that occurred prior to the sale of the subject property
to the bona fide purchaser.
   (g) A signatory to a consent judgment entered in the case entitled
United States of America et al. v. Bank of America Corporation et
al., filed in the United States District Court for the District of
Columbia, case number 1:12-cv-00361 RMC, that is in compliance with
the relevant terms of the Settlement Term Sheet of that consent
judgment with respect to the borrower who brought an action pursuant
to this section while the consent judgment is in effect shall have no
liability for a violation of Section 2923.55, 2923.6, 2923.7,
2924.9, 2924.10, 2924.11, or 2924.17.
   (h) The rights, remedies, and procedures provided by this section
are in addition to and independent of any other rights, remedies, or
procedures under any other law. Nothing in this section shall be
construed to alter, limit, or negate any other rights, remedies, or
procedures provided by law.
   (i) A court may award a prevailing borrower reasonable attorney's
fees and costs in an action brought pursuant to this section. A
borrower shall be deemed to have prevailed for purposes of this
subdivision if the borrower obtained injunctive relief or was awarded
damages pursuant to this section.
   (j) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (k)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 17.  Section 2924.12 is added to the Civil Code, to read:
   2924.12.  (a) (1) If a trustee's deed upon sale has not been
recorded, a borrower may bring an action for injunctive relief to
enjoin a                                                 material
violation of Section 2923.5, 2923.7, 2924.11, or 2924.17.
   (2) Any injunction shall remain in place and any trustee's sale
shall be enjoined until the court determines that the mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent has
corrected and remedied the violation or violations giving rise to the
action for injunctive relief. An enjoined entity may move to
dissolve an injunction based on a showing that the material violation
has been corrected and remedied.
   (b) After a trustee's deed upon sale has been recorded, a mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall
be liable to a borrower for actual economic damages pursuant to
Section 3281, resulting from a material violation of Section 2923.5,
2923.7, 2924.11, or 2924.17 by that mortgage servicer, mortgagee,
trustee, beneficiary, or authorized agent where the violation was not
corrected and remedied prior to the recordation of the trustee's
deed upon sale. If the court finds that the material violation was
intentional or reckless, or resulted from willful misconduct by a
mortgage servicer, mortgagee, trustee, beneficiary, or authorized
agent, the court may award the borrower the greater of treble actual
damages or statutory damages of fifty thousand dollars ($50,000).
   (c) A mortgage servicer, mortgagee, trustee, beneficiary, or
authorized agent shall not be liable for any violation that it has
corrected and remedied prior to the recordation of the trustee's deed
upon sale, or that has been corrected and remedied by third parties
working on its behalf prior to the recordation of the trustee's deed
upon sale.
   (d) A violation of Section 2923.5, 2923.7, 2924.11, or 2924.17 by
a person licensed by the Department of Corporations, Department of
Financial Institutions, or Department of Real Estate shall be deemed
to be a violation of that person's licensing law.
   (e) No violation of this article shall affect the validity of a
sale in favor of a bona fide purchaser and any of its encumbrancers
for value without notice.
   (f) A third-party encumbrancer shall not be relieved of liability
resulting from violations of Section 2923.5, 2923.7, 2924.11, or
2924.17 committed by that third-party encumbrancer, that occurred
prior to the sale of the subject property to the bona fide purchaser.

   (g) The rights, remedies, and procedures provided by this section
are in addition to and independent of any other rights, remedies, or
procedures under any other law. Nothing in this section shall be
construed to alter, limit, or negate any other rights, remedies, or
procedures provided by law.
   (h) A court may award a prevailing borrower reasonable attorney's
fees and costs in an action brought pursuant to this section. A
borrower shall be deemed to have prevailed for purposes of this
subdivision if the borrower obtained injunctive relief or was awarded
damages pursuant to this section.
   (i) This section shall become operative on January 1, 2018.
  SEC. 18.  Section 2924.15 is added to the Civil Code, to read:
   2924.15.  (a) Unless otherwise provided, paragraph (5) of
subdivision (a) of Section 2924, and Sections 2923.5, 2923.55,
2923.6, 2923.7, 2924.9, 2924.10, 2924.11, and 2924.18 shall apply
only to first lien mortgages or deeds of trust that are secured by
owner-occupied residential real property containing no more than four
dwelling units. For these purposes, "owner-occupied" means that the
property is the principal residence of the borrower and is security
for a loan made for personal, family, or household purposes.
   (b)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 19.  Section 2924.15 is added to the Civil Code, to read:
   2924.15.  (a) Unless otherwise provided, Sections 2923.5, 2923.7,
and 2924.11 shall apply only to first lien mortgages or deeds of
trust that are secured by owner-occupied residential real property
containing no more than four dwelling units. For these purposes,
"owner-occupied" means that the property is the principal residence
of the borrower and is security for a loan made for personal, family,
or household purposes.
   (b) This section shall become operative on January 1, 2018.
  SEC. 20.  Section 2924.17 is added to the Civil Code, to read:
   2924.17.  (a) A declaration recorded pursuant to Section 2923.5
or, until January 1, 2018, pursuant to Section 2923.55, a notice of
default, notice of sale, assignment of a deed of trust, or
substitution of trustee recorded by or on behalf of a mortgage
servicer in connection with a foreclosure subject to the requirements
of Section 2924, or a declaration or affidavit filed in any court
relative to a foreclosure proceeding shall be accurate and complete
and supported by competent and reliable evidence.
   (b) Before recording or filing any of the documents described in
subdivision (a), a mortgage servicer shall ensure that it has
reviewed competent and reliable evidence to substantiate the borrower'
s default and the right to foreclose, including the borrower's loan
status and loan information.
   (c) Until January 1, 2018, any mortgage servicer that engages in
multiple and repeated uncorrected violations of subdivision (b) in
recording documents or filing documents in any court relative to a
foreclosure proceeding shall be liable for a civil penalty of up to
seven thousand five hundred dollars ($7,500) per mortgage or deed of
trust in an action brought by a government entity identified in
Section 17204 of the Business and Professions Code, or in an
administrative proceeding brought by the Department of Corporations,
the Department of Real Estate, or the Department of Financial
Institutions against a respective licensee, in addition to any other
remedies available to these entities. This subdivision shall be
inoperative on January 1, 2018.
  SEC. 21.  Section 2924.18 is added to the Civil Code, to read:
   2924.18.  (a) (1) If a borrower submits a complete application for
a first lien loan modification offered by, or through, the borrower'
s mortgage servicer, a mortgage servicer, trustee, mortgagee,
beneficiary, or authorized agent shall not record a notice of
default, notice of sale, or conduct a trustee's sale while the
complete first lien loan modification application is pending, and
until the borrower has been provided with a written determination by
the mortgage servicer regarding that borrower's eligibility for the
requested loan modification.
   (2) If a foreclosure prevention alternative has been approved in
writing prior to the recordation of a notice of default, a mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall
not record a notice of default under either of the following
circumstances:
   (A) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (B) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (3) If a foreclosure prevention alternative is approved in writing
after the recordation of a notice of default, a mortgage servicer,
mortgagee, trustee, beneficiary, or authorized agent shall not record
a notice of sale or conduct a trustee's sale under either of the
following circumstances:
   (A) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (B) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (b) This section shall apply only to a depository institution
chartered under state or federal law, a person licensed pursuant to
Division 9 (commencing with Section 22000) or Division 20 (commencing
with Section 50000) of the Financial Code, or a person licensed
pursuant to Part 1 (commencing with Section 10000) of Division 4 of
the Business and Professions Code, that, during its immediately
preceding annual reporting period, as established with its primary
regulator, foreclosed on 175 or fewer residential real properties,
containing no more than four dwelling units, that are located in
California.
   (c) Within three months after the close of any calendar year or
annual reporting period as established with its primary regulator
during which an entity or person described in subdivision (b) exceeds
the threshold of 175 specified in subdivision (b), that entity shall
notify its primary regulator, in a manner acceptable to its primary
regulator, and any mortgagor or trustor who is delinquent on a
residential mortgage loan serviced by that entity of the date on
which that entity will be subject to Sections 2923.55, 2923.6,
2923.7, 2924.9, 2924.10, 2924.11, and 2924.12, which date shall be
the first day of the first month that is six months after the close
of the calendar year or annual reporting period during which that
entity exceeded the threshold.
   (d) For purposes of this section, an application shall be deemed
"complete" when a borrower has supplied the mortgage servicer with
all documents required by the mortgage servicer within the reasonable
timeframes specified by the mortgage servicer.
   (e) If a borrower has been approved in writing for a first lien
loan modification or other foreclosure prevention alternative, and
the servicing of the borrower's loan is transferred or sold to
another mortgage servicer, the subsequent mortgage servicer shall
continue to honor any previously approved first lien loan
modification or other foreclosure prevention alternative, in
accordance with the provisions of the act that added this section.
   (f) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (g)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 22.  Section 2924.19 is added to the Civil Code, to read:
   2924.19.  (a) (1) If a trustee's deed upon sale has not been
recorded, a borrower may bring an action for injunctive relief to
enjoin a material violation of Section 2923.5, 2924.17, or 2924.18.
   (2) Any injunction shall remain in place and any trustee's sale
shall be enjoined until the court determines that the mortgage
servicer, mortgagee, beneficiary, or authorized agent has corrected
and remedied the violation or violations giving rise to the action
for injunctive relief. An enjoined entity may move to dissolve an
injunction based on a showing that the material violation has been
corrected and remedied.
   (b) After a trustee's deed upon sale has been recorded, a mortgage
servicer, mortgagee, beneficiary, or authorized agent shall be
liable to a borrower for actual economic damages pursuant to Section
3281, resulting from a material violation of Section 2923.5, 2924.17,
or 2924.18 by that mortgage servicer, mortgagee, beneficiary, or
authorized agent where the violation was not corrected and remedied
prior to the recordation of the trustee's deed upon sale. If the
court finds that the material violation was intentional or reckless,
or resulted from willful misconduct by a mortgage servicer,
mortgagee, beneficiary, or authorized agent, the court may award the
borrower the greater of treble actual damages or statutory damages of
fifty thousand dollars ($50,000).
   (c) A mortgage servicer, mortgagee, beneficiary, or authorized
agent shall not be liable for any violation that it has corrected and
remedied prior to the recordation of the trustee's deed upon sale,
or that has been corrected and remedied by third parties working on
its behalf prior to the recordation of the trustee's deed upon sale.
   (d) A violation of Section 2923.5, 2924.17, or 2917.18 by a person
licensed by the Department of Corporations, the Department of
Financial Institutions, or the Department of Real Estate shall be
deemed to be a violation of that person's licensing law.
   (e) No violation of this article shall affect the validity of a
sale in favor of a bona fide purchaser and any of its encumbrancers
for value without notice.
   (f) A third-party encumbrancer shall not be relieved of liability
resulting from violations of Section 2923.5, 2924.17 or 2924.18,
committed by that third-party encumbrancer, that occurred prior to
the sale of the subject property to the bona fide purchaser.
   (g) The rights, remedies, and procedures provided by this section
are in addition to and independent of any other rights, remedies, or
procedures under any other law. Nothing in this section shall be
construed to alter, limit, or negate any other rights, remedies, or
procedures provided by law.
   (h) A court may award a prevailing borrower reasonable attorney's
fees and costs in an action brought pursuant to this section. A
borrower shall be deemed to have prevailed for purposes of this
subdivision if the borrower obtained injunctive relief or damages
pursuant to this section.
   (i) This section shall apply only to entities described in
subdivision (b) of Section 2924.18.
   (j)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 23.  Section 2924.20 is added to the Civil Code, to read:
   2924.20.  Consistent with their general regulatory authority, and
notwithstanding subdivisions (b) and (c) of Section 2924.18, the
Department of Corporations, the Department of Financial Institutions,
and the Department of Real Estate may adopt regulations applicable
to any entity or person under their respective jurisdictions that are
necessary to carry out the purposes of the act that added this
section. A violation of the regulations adopted pursuant to this
section shall only be enforceable by the regulatory agency.
  SEC. 24.  The provisions of this act are severable. If any
provision of this act or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
  SEC. 25.   No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.

California Can Finally Say “Show Me The…..Note!”

26 Oct

Attorneys representing homeowners in all 50 states must undoubtedly feel that their states do not do enough to protect homeowners from preventable foreclosures. In non-judicial states like California, the lack of oversight in the foreclosure process at all levels has led to rampant abuse, fraud and at the very least, negligence. Our courts have done little to diffuse this trend with cases like Chilton v. Federal Nat. Mortg. Ass’n holding: “(n)on-judicial foreclosure under a deed of trust is governed by California Civil Code Section 2924 which relevant section provides that a “trustee, mortgagee or beneficiary or any of their authorized agents” may conduct the foreclosure process.” California courts have held that the Civil Code provisions “cover every aspect” of the foreclosure process, and are “intended to be exhaustive.” There is no requirement that the party initiating foreclosure be in possession of the original note.

Chilton and many other rulings refuse to acknowledge that homeowners have any rights to challenge wrongful foreclosures including Gomes v Countrywide, Fontenot v Wells Fargo, and a long line of tender cases holding that a plaintiff seeking to set aside a foreclosure sale must first allege tender of the amount of the secured indebtedness. Complicating matters further is the conflict between state, federal and bankruptcy cases regarding Civil Code 2932.5 and the requirement of recording an assignment prior to proceeding to foreclosure.
While the specific terms are still evolving, the http://www.nationalmortgagesettlement.com/ information website has released the Servicing Standards Highlights that set forth the basic changes that the banks and servicers have agreed to as part of the settlement. When the AG Settlement is finalized, it will be reduced to a judgment that can be enforced by federal judges, the special independent monitor Joseph Smith, federal agencies and Attorneys General. This judgment can be used by attorneys to define a standard and therefore allow us to fashion a remedy that will improve our chances of obtaining relief for our clients.

Lean Forward

Many have opined about the deficiencies in the AG Settlement, from the lack of investigation to inadequacy of the dollars committed to compensate for wrongful foreclosures, principal reduction or refinancing. The reality is, as tainted as it may be, the AG Settlement leaves us better off than were were for future cases. It does not however, address past wrongs in any meaningful way. The terms make it abundantly clear that this is not the settlement for compensation; if there is any remote possibility of compensation it must be sought in the OCC Independent Foreclosure Review and the homeowner must meet the extreme burden of proving financial harm caused by the wrongful foreclosure. For California, the AG Settlement at best, improves our ability to request crucial documents to challenge wrongful foreclosures which previously were difficult if not impossible to obtain. This will allow us to negotiate better loss mitigation options for clients.

Loan Modification 2008-2011

The homeowner submits an application 10 times, pays on 3 different trial plans, speaks to 24 different representatives who give him various inconsistent versions of status. After two years, and thousands of default fees later, he is advised that the investor won’t approve a modification and foreclosure is imminent. Actually, the truth was that the homeowner was in fact qualified for the modification, the data used for the NPV analysis was incorrect and the investor had in fact approved hundreds of modifications according to guidelines that were known to the servicer from the beginning. How could the AG Settlement not improve on this common scenario?

Foreclosure Rules
14 days prior to initiating foreclosure, the servicer must provide the homeowner with notice which must include:

facts supporting the bank’s right to foreclose
payment history
a copy of the note with endorsements
the identity of the investor
amount of delinquency and terms to bring loan current
summary of loss mitigation efforts
A prompt review of the 14 Day Pre Foreclosure Notice and investigation regarding the securitization aspects of the case can result in the filing of a lawsuit and request for TRO if all terms have not been complied with or the documents provided do not establish the right to foreclose. There will be no issue of tender, prejudice or show me the note that can be raised in opposition by defendants and this is an opportunity that we have not been afforded under current case law. Additionally, a loan level review will reveal improper fees and charges that can be challenged. Deviation from the AG Settlement Servicing Standards should be aggressively pursued through the proper complaint channels.

Loan Modification Guidelines

Notify the homeowner of all loss mitigation options
Servicer shall offer a loan modification if NPV positive
HAMP trial plans shall promptly be converted to permanent modifications
Servicer must review and make determination within 30 days of receipt of complete package
Homeowner must submit package within 120 days of delinquency to receive answer prior to referral to foreclosure (could be problematic since most homeowners are more than 120 days late)
After the loan has been referred to foreclosure, the homeowner must apply for a loan modification within 15 days before sale. Servicer must expedite review.
Servicer must cease all collection efforts while a complete loan modification package is under review or homeowner is making timely trial modification payments
Other significant terms include the requirement that the servicer maintain loan portals where the homeowner can check status which must be updated every ten days, assign a single point of contact to every loan, restriction on default fees and forced placed insurance, modification denials must state reasons and provide document support and the homeowner has 30 days to appeal a negative decision.

Short Sales Will Now Really Be Short

The rules regarding short sales will greatly increase the chances that short sales will be processed in a timely manner and accordingly, will result in more short sales being closed.

Banks/servicers must make short sale requirements public
Banks/servicers must provide a short sale price evaluation upon request by the homeowner prior to listing the property
Receipt of short sale packages must be confirmed and notification of missing documents must be provided within 30 days
Knowledge of all of the new requirements for processing foreclosures, loan modifications and short sales can greatly increase our chances of obtaining successful outcomes for clients. Resolution is the goal, and now, we may have leverage that did not exist before.

17200 recent ruling unfair business practice foreclosure

26 Oct

17200

 

Elements

*9 Plaintiff also fails to plead sufficient facts to support a UCL claim for “unlawful, unfair, or fraudulent business act or practice.” Cal. Bus. & Prof.Code § 17200. Because the framers of the UCL expressed the three categories of unfair competition in the disjunctive, “each prong of the UCL is a separate and distinct theory of liability,” each offering “an independent basis for relief.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir.2009). Furthermore, a claim under Section 17200 is “derivative of some other illegal conduct or fraud committed by a defendant, and [a] plaintiff must state with reasonable particularity the facts supporting the statutory elements of the violation.” See Benham v. Aurora Loan Servs., No. 09–2059, 2009 WL 2880232, at *4 (N.D.Cal. Sept.1, 2009). “A complaint based on an unfair business practice may be predicated on a single act; the statute does not require a pattern of unlawful conduct.” Brewer v. Indymac Bank, 609 F.Supp.2d 1104, 1122 (E.D.Cal.2009).

There is little question that the execution of documents in connection with a Deed of Trust constitutes a “business act or practice.” As for the nature of the conduct alleged, while the Complaint alludes to all three prongs of this statute generally, Plaintiff does not specify the theory on which she bases her claim, nor does she address the elements of any one of these theories. Compl. ¶ 41 (“[T]he instances mentioned in paragraphs 32–26[sic] above are unfair, deceptive, untrue acts, which are prohibited by California Business And Professions Code § 17200.”). Other courts have dismissed UCL claims on these grounds. See, e.g., Jensen, 702 F.Supp.2d at 1200 (dismissing plaintiff’s UCL claim because his UCL allegations “do not specify the basis for his claim, i.e., whether it is based on unlawful, unfair, or fraudulent practice”). However, in an effort to construe the factual allegations in a light most favorable to Plaintiff, this Court will consider the adequacy of the Complaint under each prong separately.

a. “Unlawful” Prong

The “unlawful” prong of the UCL requires a plaintiff to demonstrate that the defendant’s conduct violated some other law. Chabner v. United of Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir.2000). In effect, Section 17200 “borrows” violations of federal, state, or local law and makes them independently actionable. Id. To state a claim for relief under this theory, a plaintiff must “state, with reasonable particularity, the facts supporting the statutory elements of the violation.” Jensen, 702 F.Supp.2d at 1189.

Aside from the cause of action for breach of contract, Plaintiff alleges no violation of federal, state, or local law in her Complaint that could be actionable under Section 17200. Courts consistently conclude that a breach of contract is not itself an unlawful act for the purposes of the UCL. Puentes v. Wells Fargo Home Mortgage, Inc., 160 Cal.App.4th 638, 645, 72 Cal.Rptr.3d 903 (2008); Gibson v. World Sav. & Loan Ass’n, 103 Cal.App.4th 1291, 1302, 128 Cal.Rptr.2d 19 (2002) (“Contractual duties are voluntarily undertaken by the parties to the contract, not imposed by state or federal law.”). Only when the act constituting breach is unfair, unlawful, or fraudulent for some additional reason may that act also violate the UCL. Smith v. Wells Fargo Home Mortgage, Inc., 135 Cal.App.4th 1463, 1483, 38 Cal.Rptr.3d 653 (2005). Here, Plaintiff fails to demonstrate how the facts alleged to support breach are, apart from the breach, wrongful.

*10 Contractual considerations aside, to the extent that Plaintiff bases a theory of “unlawful” conduct on defendant Aurora’s lack of authority to substitute a trustee or CalWestern’s lack of authority to initiate foreclosure proceedings, her cause of action fails. California Civil Code Sections 2924 through 2924k, “[t]he comprehensive statutory framework established to govern nonjudicial foreclosure sales” are intended to be “exhaustive.” Moeller v. Lien, 25 Cal.App.4th 822, 834, 30 Cal.Rptr.2d 777 (1994). Section 2924(a)(1) provides that a “trustee, mortgagee, or beneficiary, or any of their authorized agents may initiate the foreclosure process.” Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149, 1155, 121 Cal.Rptr.3d 819 (2011). Thus, even a breach of contract theory invalidating Cal–Western’s appointment as trustee does not also bar Cal–Western from initiating foreclosure as an agent of the trustee. Only the alleged breach, and not a violation of California law, could potentially render the Defendants’ conduct illegal.

Furthermore, California Civil Code Section 2934a(a)(1)(A) provides that “a trustee under a trust deed … may be substituted by … all of the beneficiaries under the trust deed, or their successors in interest.” Again, while Aurora’s attempt to appoint Cal–Western as the new trustee may have breached the terms of the Deed of Trust, it did comply with California law.7

Thus, to the extent Plaintiff predicates her UCL claim on a violation of another law, this cause of action fails.

b. “Unfair” Prong

The California Supreme Court has yet to establish a definitive test that may be used in consumer cases to determine whether a particular business act or practice is “unfair” for the purposes of the UCL. Drum v. San Fernando Valley Bar Ass’n, 182 Cal.App.4th 247, 253–54, 106 Cal.Rptr.3d 46 (2010) (citing Cel–Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 187 n. 12, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999)). As a result, three tests have developed among state and federal courts. See Vogan v. Wells Fargo Bank, N.A., No. 11–02098, 2011 WL 5826016, at *6 (E.D.Cal. Nov. 17, 2011); Davis v. Ford Motor Credit Co., 179 Cal.App.4th 581, 593–97, 101 Cal.Rptr.3d 697 (2009) (detailing the split in authority in handling consumer UCL cases).

One test, which has garnered the most attention from the Ninth Circuit, limits unfair conduct to that which “offends an established public policy” and is “tethered to specific constitutional, statutory, or regulatory provisions.” Davis, 179 Cal.App.4th at 595, 101 Cal.Rptr.3d 697; Lozano v. AT & T Wireless Servs., 504 F.3d 718, 736 (9th Cir.2007) (holding that unfairness must be tied to a “legislatively declared” policy). The second test contemplates whether the alleged business practice is “immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers,” and requires the court to “weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged victim.” Davis, 179 Cal.App.4th at 594–95, 101 Cal.Rptr.3d 697; McDonald, 543 F.3d at 506; Progressive West Ins. Co. v. Yolo County Sup.Ct., 135 Cal.App.4th 263, 285–87, 37 Cal.Rptr.3d 434 (2005). The third test, which borrows the definition of “unfair” from the Federal Trade Commission Act, requires that “(1) the consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided.” Davis, 179 Cal.App.4th at 597, 101 Cal.Rptr.3d 697.

*11 Plaintiff’s complaint does not, in any meaningful way, address the considerations presented by these tests. She fails to link her claim to a “legislatively declared” policy as required under the first test. Under the second and third tests, the Complaint fails because Plaintiff does not allege that Defendants’ conduct caused any injury, to the Plaintiff or others. Even under the second test, which a California Court of Appeal admits is “fact intensive and not conducive to resolution at the demurrer stage,” Plaintiff’s claim under this theory cannot proceed without allegations of its fundamental requirements. Progressive West, 135 Cal.App.4th at 287, 37 Cal.Rptr.3d 434.

Thus, to the extent that Plaintiff attempts to state a claim under the “unfair” prong of the UCL, this cause of action fails.

c. “Fraudulent” Prong

“Fraudulent acts are ones where members of the public are likely to be deceived.” Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1151–52 (9th Cir.2008). In response to the new eligibility requirements for private actions under Section 17200 enacted through Proposition 64, a UCL claim under the “fraudulent prong” requires a plaintiff to have “actually relied” on the alleged misrepresentation to his detriment. In re Tobacco II Cases, 46 Cal.4th at 326, 93 Cal.Rptr.3d 559, 207 P.3d 20 (2009).

Under the Federal Rules of Civil Procedure 9(b), the “circumstances constituting fraud” or any other claim that “sounds in fraud” must be stated “with particularity.” Fed.R.Civ.P. 9(b); Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1103–04 (9th Cir.2003). The Ninth Circuit has explained that this standard requires, at a minimum, that the claimant pleads evidentiary facts, such as time, place, persons, statements, and explanations of why the statements are misleading. See In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547–48 (9th Cir.1994) (en banc).

The Complaint does, with particularity, allege several instances that could plausibly constitute acts of fraud. Specifically, Plaintiff argues that MERS committed fraud under the UCL by causing Stacy Sandoz, who is neither Vice President as stated nor authorized to act on behalf of MERS in this capacity, to execute the Corporate Assignment. Compl. ¶¶ 19, 38, 43; Compl. Ex. 2. The Complaint makes identical allegations against Aurora regarding Vice President Michele Rice, as stated on the Substitution of Trustee. Compl. ¶¶ 26, 45; Compl. Ex. 6. The Plaintiff similarly maintains that First American’s use of the name “Derrick Sue” on the Notice of Default and Election to Sell was fraudulent conduct, owing to the fact that “no such person by that name exists or is employed by First American.” Compl. ¶¶ 22, 40; Compl. Ex. 5. The Complaint also claims that Cal–Western fraudulently represented Megan Cooper as having the authority to execute the Affidavit of Mailing Substitute Trustee, since no such person exists, is employed by Cal–Western, or signed said document. Compl. ¶¶ 27, 46; Compl. Ex. 6. Such detailed accounts may very well satisfy the particularity requirement under 9(b) because they appear to allege the who, what, when, and how of the alleged “deceptive business acts.” Compl. ¶ 36. But see Jensen, 702 F.Supp.2d at 1189 (granting defendant JP Morgan’s motion to dismiss plaintiff borrower’s UCL claim for failure “to specify what particular role JP Morgan played in the fraudulent scheme, when and where the scheme occurred, or details of the specific misrepresentations involved”).8

*12 Defendant argues that Plaintiff fails to state that the alleged fraudulent statements “were disseminated to the public [such that] reasonable consumers are likely to be deceived.” Mot. at 10 (quoting Sybersound, 517 F.3d at 1151–52). This argument, while accurate in pointing out Plaintiff’s failure to address the distinct features of a fraud-based UCL claim, is questionable considering the fact that all challenged documents were publicly recorded and notarized. While Plaintiff does not attempt to demonstrate that Defendants have likely deceived the public under the Sybersound test, recording documents with the county may be sufficient “dissemination to the public.”

More problematic, however, Plaintiff does not and likely cannot plead actual reliance on the Defendants’ alleged fraud. The Complaint does not indicate that Plaintiff ever believed in the alleged misrepresentations or that they caused her to take any action to her detriment. As discussed above with regard to UCL standing, Plaintiff fails to plead loss of money or property, let alone a causal correlation of a loss with the Defendants’ alleged fraud.

To the extent that Plaintiff attempts to state a claim under the “fraudulent” prong of the UCL, the cause of action fails.

For the foregoing reasons, the Court GRANTS Defendants’ Motion to Dismiss Plaintiff’s UCL claim without prejudice to provide an opportunity to establish standing and more clearly articulate the basis for this cause of action.

 

Ford v. Lehman Bros. Bank, FSB, C 12-00842 CRB, 2012 WL 2343898 (N.D. Cal. June 20, 2012)

 

However, Plaintiff’s third UCL theory, Recontrust’s continual advertising of Plaintiff’s foreclosure after this Court’s preliminary injunction went into effect, is flawed because it is unclear what damage such conduct caused Plaintiff. While she alleges emotional damages, she does not allege any loss of money or property—either threatened or realized—as a result of Recontrust’s advertising. See Cal. Bus. & Prof.Code § 17204 (requiring a private litigant to have “suffered injury in fact and [ ] lost money or property as a result of the unfair competition” in order to bring a UCL claim); Cf. Sullivan v. Washington Mut. Bank, FA, C–09–2161 EMC, 2009 WL 3458300, at *4 (N.D.Cal. Oct.23, 2009) (finding standing where “foreclosure proceedings have been initiated which puts her interest in the property in jeopardy”). Accordingly, the Court will dismiss this UCL claim.

Tamburri v. Suntrust Mortg., Inc., C-11-2899 EMC, 2012 WL 2367881 (N.D. Cal. June 21, 2012)

 

 

DEBRUNNER REDUX

 

January 2008, Debrunner and his co-investors filed a notice of default, presumably for Chiu’s inability to remain current on the second-position loan. Debrunner, supra, 204 Cal.App.4th at 436, 138 Cal.Rptr.3d 830. A trustee’s sale of the Los Altos property was scheduled for May 2008, but was delayed after Chiu’s business entity petitioned for Chapter 11 bankruptcy protection in June 2008. The bankruptcy court granted Debrunner’s and his co-investors’ motion for relief from the bankruptcy stay, allowing them to foreclose upon the property and obtain a trustee’s deed upon sale in March 2009. Id. But back in August 2008, before the sale was completed, Saxon—the servicer on the first-position loan—had also filed a notice of default, which was rescinded because of the bankruptcy proceedings. Deutsche Bank—the assignee of the first deed of trust—moved for relief from the bankruptcy stay in July 2009 in order to file a new notice of default, although its motion was taken off calendar after the bankruptcy case was closed in August 2009. Old Republic Default Management Services (Old Republic), the foreclosure trustee, then recorded a new notice of default on the Los Altos property in September 2009. In the accompanying Fair Debt Collection Practices Act Notice, Old Republic named Deutsche Bank as the creditor and Saxon as its ‘ “attorney-in-fact’ “ and informed the debtor that payment to stop the foreclosure could be made to Saxon. Id. On January 5, 2010, the same day the assignment from FV–1 to Deutsche Bank was recorded, a ‘ “Substitution of Trustee’ “ from Chicago Title Company to Old Republic was recorded. This document had been signed and notarized by Saxon on behalf of Deutsche Bank on September 2, 2008. Id. at 436–37, 138 Cal.Rptr.3d 830.

In November 2009, Debrunner brought an action against Deutsche Bank, Saxon and Old Republic to stop the foreclosure proceedings on the first deed of trust, contending the defendants had no right to foreclose because Deutsche Bank did not have physical possession of or ownership rights to the original promissory note executed by Chiu. Debrunner, supra, 204 Cal.App.4th at 437, 138 Cal.Rptr.3d 830. Deutsche Bank and Saxon demurred to the complaint, contending possession of the original note was not required under California’s non-judicial foreclosure statutes, Cal. Civ.Code §§ 2924 et seq. In opposition, Debrunner contended that “any assignment of the deed of trust was immaterial because a deed of trust ‘cannot be transferred independently’ of the promissory note, which must be ‘properly assigned’ and attached,” and that “ ‘[a] deed of trust standing alone is a nullity,’ and thus cannot provide authority for a lender to foreclose.” Id. The trial court sustained Deutsche Bank’s and Saxon’s demurrer without leave to amend, id. at 438, 138 Cal.Rptr.3d 830, and the Court of Appeal affirmed.

On appeal, Debrunner reiterated his argument that an assignment of the deed of trust was ineffective and a legal nullity unless the assignee also physically received the promissory note and endorsed it, and that the beneficiary of the deed of trust must physically possess the note to initiate foreclosure proceedings. Debrunner, supra, 204 Cal.App.4th at 439, 138 Cal.Rptr.3d 830. The court rejected this contention: “As the parties recognized, many federal courts have rejected this position, applying California law. All have noted that the procedures to be followed in a nonjudicial foreclosure are governed by sections 2924 through 2924k, which do not require that the note be in the possession of the party initiating the foreclosure. [Citations.] We likewise see nothing in the applicable statutes that precludes foreclosure when the foreclosing party does not possess the original promissory note. They set forth a ‘comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust. The purposes of this comprehensive scheme are threefold: (1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.’ [Citation.] Notably, section 2924, subdivision (a)(1), permits a notice of default to be filed by the ‘trustee, mortgagee, or beneficiary, or any of their authorized agents.’ The provision does not mandate physical possession of the underlying promissory note in order for this initiation of foreclosure to be valid.” Debrunner, supra, 204 Cal.App.4th at 440, 138 Cal.Rptr.3d 830.

*5 Plaintiffs further contend the April 29, 2009 notice of default and September 18, 2009 notice of sale recorded by NDEx were invalid because no substitution of trustee was ever recorded naming NDEx as the trustee under the deed of trust. Not so. Pursuant to Plaintiffs’ motion, the Court has consulted the official Fresno County Recorder website (http://www.co.fresno.ca.us) and notes that on June 29, 2009 (two months after the notice of default but three months before the notice of sale), a substitution of trustee naming Deutsche Bank National Trust Company as grantor and NDEx as grantee appeared to have been recorded as document # 2009–00879966–00. To the extent Plaintiffs intend to suggest a preliminary injunction should issue because the notice of default recorded by NDEx was defective in that it listed NDEx as the trustee even though there was no recorded substitution of NDEx as a trustee at the time, the claim likewise fails. An identical argument was raised and rejected in Debrunner. Debrunner had alternatively contended the notice of default in that case was defective because it listed Old Republic as the trustee even though there was no recorded substitution of Old Republic as a trustee at the time the notice of default was recorded. Debrunner, supra, 204 Cal.App.4th at 443, 138 Cal.Rptr.3d 830. The court disagreed, observing that “[California Civil Code] section 2934a provides for the situation in which a substitution of trustee is executed but is not recorded until after the notice of default is recorded.” Id. at 443–44, 138 Cal.Rptr.3d 830 (citing Cal. Civ.Code, § 2934a, subd. (b)).3 Plaintiffs have provided no argument or evidence to suggest a substitution of NDEx as trustee had not been executed at the time NDEx recorded the April 29, 2009 notice of default.

Even if there were a defect in NDEx’s commencement of the foreclosure proceedings, Plaintiffs have failed to allege prejudice. In Debrunner, the court concluded that a failure to show or assert prejudice resulting from an alleged defect in the foreclosure process was fatal to the plaintiff’s claims. Debrunner, supra, 204 Cal.App.4th at 443, 138 Cal.Rptr.3d 830. “ ‘[A] plaintiff in a suit for wrongful foreclosure has generally been required to demonstrate [that] the alleged imperfection in the foreclosure process was prejudicial to the plaintiff’s interests.’ [¶] … [¶] … [T]here was no allegation in the first amended complaint that plaintiff’s ability to contest or avert foreclosure was impaired. Even in his opposition to the demurrer and on appeal he has not identified the harm he suffered from any asserted violation of section 2934a, subdivision (b), again preferring to assume that he is entitled to judgment without any showing of prejudice.” Id. at 444, 138 Cal.Rptr.3d 830 (quoting Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256, 271, 129 Cal.Rptr.3d 467 (2011)). In this case, as in Debrunner, Plaintiffs have provided no argument or evidence of harm resulting from the failure to record a substitution of NDEx as trustee before NDEx filed its notice of default. Accordingly, the Court finds no basis for injunctive relief on this ground. A substitution would simply have replaced one trustee with another without modifying Plaintiffs’ obligations under the note or deed of trust. Under these circumstances, Plaintiffs would be hard pressed to show any conceivable prejudice, given Plaintiffs have offered no facts to suggest the substitution of NDEx (or the allegedly improper recording thereof) adversely affected their ability to pay their debt or cure their default.

 

Ghuman v. Wells Fargo Bank, N.A., 1:12-CV-00902-AWI, 2012 WL 2263276 (E.D. Cal. June 15, 2012)

 

 

ADD AGENT TO DESTROY DIVERSITY

 

Like Golden West, Defendant LSI is a citizen of California. The Wells Fargo Bank Defendants contend that LSI’s “citizenship should be ignored for purposes of diversity jurisdiction” on the grounds that LSI did nothing more than facilitate the recording of the Notice of Default on behalf of NDeX. Defs.’s Resp. to OSC at 4. The pleadings are not a model of clarity, and LSI’s precise role in connection with the claims alleged is not entirely clear. However, it appears that Plaintiffs are alleging, inter alia, that LSI, among others, failed to comply with California law in proceeding with the foreclosure in accordance with California Civil Code section 2923.5. See SAC at 2.

*5 Section 2923.5 provides a private right of action to postpone a foreclosure sale. Mabry v. Superior Court, 185 Cal.App.4th 208, 2141, 110 Cal.Rptr.3d 201 (2010). Under section 2923.5, “a mortgagee, trustee, beneficiary, or authorized agent” must follow certain procedures in the context of a foreclosure. Cal. Civ.Code § 2923.5. Plaintiffs allege that LSI acted as an agent for Wells Fargo and was involved in the preparation of forged and fraudulent foreclosure notices, including the Notice of Default, Substitution of Trustee and Notice of Trustee’s Sale. See Notice of Joinder for Inclusion of LSI Title Company, Dkt. 25. These allegations support the conclusion that Plaintiffs may have a potential claim against LSI under section 2923.5, and that LSI is not merely a nominal party as Wells Fargo Defendants now contend. See Cheng v. Wells Fargo Bank, N.A., No. SACV10–1764–JST (FFMx), 2010 WL 4923045, at *1 (C.D.Cal., Dec.2, 2010) (finding that LSI was not fraudulently joined in a mortgage fraud action removed from state court where plaintiffs alleged that LSI was acting as an agent for Wells Fargo in connection with the allegedly fraudulent foreclosure of their home). Thus, even if there was complete diversity at the time of removal, Plaintiffs’ subsequent joinder of LSI destroyed diversity jurisdiction and requires remand. See 28 U.S.C § 1447(e).

 

Boggs v. Wells Fargo Bank NA, C 11-2346 SBA, 2012 WL 2357428 (N.D. Cal. June 14, 2012)

 

NBA IS WEAKER THAN HOLA

 

Defendants cite to only one case holding that the NBA has preemptive effect over certain California laws relating to foreclosure. See Acosta v. Wells Fargo Bank, N.A., C 10–9910JF (PVT), 2010 WL 2077209 (N.D.Cal. May 21, 2010). In Acosta, Judge Fogel analogized the NBA to the Home Owners’ Loan Act (“HOLA”), which some courts have found to preempt state laws relating to federal savings banks. Id. at *8 (finding that the NBA preempted § 2923.5 because “several district courts within the Ninth Circuit have determined that the Home Owners’ Loan Act (“HOLA”), 12 U.S.C. § 1464–which contains the nearly identical language at 12 U.S.C. § 1464(b)(10)-preempts Section 2923.5”).

However, the analogy between the NBA and HOLA is flawed. Unlike the NBA, which contains only a conflict preemption clause, HOLA contains a broad field preemption clause. Specifically, 12 C.F.R. § 560.2(a) provides, in relevant part,

To enhance safety and soundness and to enable federal savings associations to conduct their operations in accordance with best practices (by efficiently delivering low-cost credit to the public free from undue regulatory duplication and burden), [the Office of Thrift Supervision (“OTS”) ] hereby occupies the entire field of lending regulation for federal savings associations. OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, federal savings associations may extend credit as authorized under federal law, including this part, without regard to state laws purporting to regulate or otherwise affect their credit activities, except to the extent provided in paragraph (c) or § 560.102 of this part.

 

paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption.

Parcray v. Shea Mortg. Inc., CV–F09–1942OWW/GSA, 2010 WL 1659369, at *7–8 (E.D.Cal. Apr.23, 2010) (quoting OTS, Final Rule, 61 Fed.Reg. 50951, 50966–50967 (Sept. 30, 1996) (emphasis added)). Thus, the savings clause comes into play only if the law at issue is not listed in the preemption section.

Such broad preemption language is absent from the NBA. In contrast to 12 C.F.R. § 502.2(b) of the OTS/HOLA regulations which broadly declares categories of state law that are preempted per se, 12 C.F.R. § 34.4(b) declares categories that are not preempted if they have an incidental effect on bank’s lending powers. Indeed, the Ninth Circuit has concluded that, while the OTS/HOLA regulations described above permit a court to consider the savings clause of § 560.2(c) only if the law at issue does not fall within the express preemption provisions of § 560.2(b), the OCC/NBA regulations “require[ ] the court to consider both the express preemption and savings clauses together” in the first instance. Aguayo v. U.S. Bank, 653 F.3d 912, 922 (9th Cir.2011) (emphasis added) (internal citations omitted).

As the Ninth Circuit held in Aguayo v. U.S. Bank, “while the OTS [HOLA] and the OCC [NBA] regulations are similar in many ways, the OCC has explicitly avoided full field preemption in its rulemaking and has not been granted full field preemption by Congress.” 653 F.3d at 921–22 (internal citations omitted). “Because of this difference in field preemption, courts have been cautious in applying OTS analysis to OCC regulations.” Id. at 922 (internal citations omitted). HOLA’s strict field preemption analysis therefore bears little relation to the NBA’s more flexible conflict preemption analysis. See also Gerber v. Wells Fargo Bank, N.A., CV 11–01083–PHX–NVW, 2012 WL 413997 (D.Ariz. Feb.9, 2012) (“[T]he [NBA] rule only preempts the types and features of state laws pertaining to making loans and taking deposits that are specifically listed in the regulation.”) (quoting OCC Interpretive Letter No. 1005, 2004 WL 3465750 (June 10, 2004) (emphasis added); citing Martinez v. Wells Fargo Home Mortg., Inc., 598 F.3d 549, 555 (9th Cir.2010) (“The [NBA] (and OCC regulations thereunder) does not ‘preempt the field’ of banking.”)).

The distinction between HOLA’s field preemption, on the one hand, and NBA’s mere conflict preemption, on the other, renders cases construing HOLA preemption inapposite to the question of whether NBA preemption applies. It is likely for this reason that almost no courts have addressed NBA preemption in the context of foreclosure litigation, despite the growing body of foreclosure cases circulating through the state and federal court systems.

*8 Aside from the one case Defendants cite which, in this Court’s view, erroneously applies the HOLA preemption analysis in the context of the NBA, Defendants provide no other authority for the proposition that Plaintiff’s state law claims, including § 2923.5, are preempted by the NBA. The few courts that have examined the NBA’s application to state foreclosure laws have concluded that “state laws regulating foreclosure are [ ] not preempted by NBA.” Gerber v. Wells Fargo Bank, N.A., CV 11–01083–PHX–NVW, 2012 WL 413997, at *8 (D.Ariz. Feb.9, 2012). Gerber reached this conclusion after an extensive analysis of the NBA’s preemption provisions, and concluded that “there has never been a federal presence [ ] sufficient to displace the various types of state statutes governing foreclosure procedures. Indeed, foreclosure practices govern ‘acquisition and transfer of property,’ an area which the Supreme Court has already confirmed lies within states’ presumed powers to regulate.” See id. at *5 (quoting Watters, 550 U.S. at 11) (addressing NBA preemption and concluding that banks remain subject to state laws regarding, e.g., “acquisition and transfer of property”). Gerber also concluded that “foreclosure” was not among the NBA’s expressly preempted state laws in 12 C.F.R. § 34.4(a). Although the regulation listed “servicing,” the court found that “foreclosure” was not sufficiently related to “servicing” because “[t]he OCC went to the trouble of specificity concerning other phases of the loan’s existence (e.g., ‘processing,’ ‘origination’) but did not list ‘foreclosure,’ and it is therefore difficult to assume that it meant to include it within a ‘servicing’ catch-all.” Id. at *8. The court noted that such a reading would create the implausible result of “bring[ing] down … probably every state’s laws regarding foreclosure.” Id. See also Loder v. World Savings Bank, N.A., No. C11–00053 TEH, 2011 WL 1884733, at *7 (N.D.Cal. May 18, 2011) (expressing concern, in the context of a HOLA preemption argument, that “a broad interpretation of what it means to ‘service’ or ‘participate in’ a mortgage could operate to preempt most all California foreclosure statutes where the foreclosing entity is a national lender”).

The Court finds Gerber persuasive and adopts its reasoning with respect to Plaintiff’s state law claims asserted here, including under § 2923.5. As the Supreme Court has explained, the NBA leaves national banks “subject to the laws of the State,” and banks “are governed in their daily course of business far more by the laws of the State than of the nation.” Atherton v. FDIC, 519 U.S. 213, 222, 117 S.Ct. 666, 136 L.Ed.2d 656 (1997) (quoting Nat’l Bank v. Commonwealth, 75 U.S. 353, 362 (1869)). The Supreme Court has also noted the states’ longstanding interest in regulating the foreclosure process, and has imposed a clear statement rule on any statutes that could potentially be construed to impinge on that interest. See BFP v. Resolution Trust Corp., 511 U.S. 531, 541–44, 114 S.Ct. 1757, 128 L.Ed.2d 556 (1994) (describing long history of state regulation of the foreclosure process and declining to read a provision of the Bankruptcy Code as disrupting “the ancient harmony that foreclosure law and fraudulent conveyance law … have heretofore enjoyed”).

*9 The OCC itself has confirmed that state foreclosure laws are not generally within the scope of NBA preemption. See Bank Activities and Operations; Real Estate Lending and Appraisals, 69 Fed.Reg.1904–01, at 1912 & n. 59 (Jan. 23, 2004) (OCC final rule describing state foreclosure laws as generally among laws that “do not attempt to regulate the manner or content of national banks’ real estate lending, but that instead form the legal infrastructure that makes it practicable to exercise a permissible Federal power”).

If there were any doubt as to whether preemption under HOLA was equivalent to preemption under the NBA, the recent Dodd–Frank legislation lays such doubt to rest. The Dodd–Frank Act changed the above-described HOLA preemption analysis and mandates that HOLA preemption would now follow the more lenient NBA conflict preemption standard. See Settle v. World Sav. Bank, F.S.B., ED CV 11–00800 MMM, 2012 WL 1026103, at *13 (C.D.Cal. Jan.11, 2012) (“The Dodd–Frank Act provides that HOLA does not occupy the field in any area of state law and that preemption is governed by the standards applicable to national banks.”) (quoting Davis v. World Savings Bank, FSB, 806 F.Supp.2d 159, 166 n. 5 (D.D.C.2011); citing Pub.L. No. 111–203, 2010 HR 4173 § 1046 (“Any determination by a court or by the Director or any successor officer or agency regarding the relation of State law to a provision of this chapter or any regulation or order prescribed under this chapter shall be made in accordance with the laws and legal standards applicable to national banks regarding the preemption of State law…. Notwithstanding the authorities granted under sections 4 and 5, this Act does not occupy the field in any area of State law.”). Thus, not only is HOLA preemption inapplicable to NBA cases, it is no longer applicable at all to any post-Dodd-Frank transactions.

ii. No Conflict Preemption

Under NBA conflict preemption, Plaintiff’s § 2923.5 claim does not impose any constraints on banks’ lending or servicing powers. Rather, it “only incidentally affect[s] the exercise of national banks’ real estate lending powers” by requiring certain procedural hurdles before a bank may foreclose on real property and transfer said property to a new owner. See 12 C.F.R. § 34.4(b) (exempting from NBA preemption any state laws that incidentally affect banks and concern, inter alia, contracts, torts, rights to collect debts, or acquisition and transfer of real property); Mabry v. Superior Court, 185 Cal.App.4th 208, 231, 110 Cal.Rptr.3d 201 (2010) (finding that § 2923.5 does not create a right to loan modification and that failure to comply with its requirements can only result in a delay in foreclosure).

Other cases are in accord and confirm that Plaintiff’s state common law claims are similarly outside the scope of NBA preemption. See, e.g., Lucia v. Wells Fargo Bank, N.A., 798 F.Supp.2d 1059, 1065–66 (N.D.Cal.2011) (White, J.) (finding that UCL, state contract, and Rosenthal Act claims arising out of failed modifications of home mortgage loans under HAMP were not preempted because the “theories upon which the claims are based do not necessarily impinge upon the bank’s obligations under the NBA” because they are “state laws of general application”); Sutclife v. Wells Fargo Bank, N.A., C–11–06595 JCS, 2012 WL 1622665, at *23 (N.D.Cal. May 9, 2012) (same); see also Gutierrez v. Wells Fargo & Co., C07–05923 WHA, 2010 WL 1233885 (N.D.Cal. Mar.26, 2010) (finding that UCL claims based on banks’ alleged deceptive business practices related to fees and other servicing conduct are not preempted when they do not challenge “a bank’s right to establish a fee,” but rather challenge, e.g., “a bank’s right to deceive or unfairly induce customers into paying them”) (citing Martinez v. Wells Fargo Home Mortg., Inc., 598 F.3d 549, 555 (9th Cir.2010) (“State laws of general application, which merely require all businesses (including national banks) to refrain from fraudulent, unfair, or illegal behavior, do not necessarily impair a bank’s ability to exercise its [federally-authorized] powers.”)).3

*10 Indeed, as noted above, if the Court accepted Defendant’s arguments, it would be questionable whether any of California’s (or other states’) foreclosure laws could avoid preemption. Yet federal law provides no legal framework for foreclosure. Mabry, 185 Cal.App.4th at 231, 110 Cal.Rptr.3d 201. Thus, Defendant essentially asks the Court to eviscerate decades of state foreclosure regulation. The Court finds no authority to do so.

 

 

Tamburri v. Suntrust Mortg., Inc., C-11-2899 EMC, 2012 WL 2367881 (N.D. Cal. June 21, 2012)

 

INTERESTING ATTORNEY FRAUD ALLEGATION IN 5.1M TIBURON SHORT SALE AFTER F/C  SUIT IN MARIN

 

Plaintiffs allege that on January 12, 2012, the day the short sale was to close, Michael Zhao, Buyer Defendants’ real estate agent, informed SPS that defendants were attempting to defraud plaintiffs. Id. at ¶ 34. The FAC alleges that Zhao told SPS that defendants prepared two sets of purported short sale documents. Id. One set, which was given to SPS for its review, provided that no proceeds from the sale would be directed to the Attorney Defendants or would be used to satisfy any junior liens on the property. Id. at ¶ 35. The second set of documents, which reflected a higher purchase price than the documents presented to SPS, provided that some proceeds would go to the Attorney Defendants as well as other junior lien holders. Id. Plaintiffs allege that defendants intended the second set of documents to be recorded as the actual transaction. Id.

Select Portfolio Servicing v. Valentino, C 12-0334 SI, 2012 WL 2343754 (N.D. Cal. June 20, 2012)

What is a Wrongful Foreclosure Action?

29 Aug

The pretender lender does not have the loan and did not invest any of the servicers money. Yet these frauds are occurring every day. They did not loan you the money yet they are the ones foreclosing, taking the bail out money, the mortgage insurance, and then throwing it back on the investor for the loss. We could stop them if a few plaintiffs where awarded multi million dollar verdicts for wrongful foreclosure.
A wrongful foreclosure action typically occurs when the lender starts a non judicial foreclosure action when it simply has no legal cause. Wrongful foreclosure actions are also brought when the service providers accept partial payments after initiation of the wrongful foreclosure process, and then continue on with the foreclosure process. These predatory lending strategies, as well as other forms of misleading homeowners, are illegal.

The borrower is the one that files a wrongful disclosure action with the court against the service provider, the holder of the note and if it is a non-judicial foreclosure, against the trustee complaining that there was an illegal, fraudulent or willfully oppressive sale of property under a power of sale contained in a mortgage or deed or court judicial proceeding. The borrower can also allege emotional distress and ask for punitive damages in a wrongful foreclosure action.
Causes of Action

Wrongful foreclosure actions may allege that the amount stated in the notice of default as due and owing is incorrect because of the following reasons:

Incorrect interest rate adjustment
Incorrect tax impound accounts
Misapplied payments
forbearance agreement which was not adhered to by the servicer
Unnecessary forced place insurance,
Improper accounting for a confirmed chapter 11 or chapter 13 bankruptcy plan.
Breach of contract
Intentional infliction of emotional distress
Negligent infliction of emotional distress
Unfair Business Practices
Quiet title
Wrongful foreclosure

Injunction

Any time prior to the foreclosure sale, a borrower can apply for an injunction with the intent of stopping the foreclosure sale until issues in the lawsuit are resolved. The wrongful foreclosure lawsuit can take anywhere from ten to twenty-four months. Generally, an injunction will only be issued by the court if the court determines that: (1) the borrower is entitled to the injunction; and (2) that if the injunction is not granted, the borrower will be subject to irreparable harm.
Damages Available to Borrower

Damages available to a borrower in a wrongful foreclosure action include: compensation for the detriment caused, which are measured by the value of the property, emotional distress and punitive damages if there is evidence that the servicer or trustee committed fraud, oppression or malice in its wrongful conduct. If the borrower’s allegations are true and correct and the borrower wins the lawsuit, the servicer will have to undue or cancel the foreclosure sale, and pay the borrower’s legal bills.
Why Do Wrongful Foreclosures Occur?

Wrongful foreclosure cases occur usually because of a miscommunication between the lender and the borrower. This could be as a result of an incorrectly applied payment, an error in interest charges and completely inaccurate information communicated between the lender and borrower. Some borrowers make the situation worse by ignoring their monthly statements and not promptly responding in writing to the lender’s communications. Many borrowers just assume that the lender will correct any inaccuracies or errors. Any one of these actions can quickly turn into a foreclosure action. Once an action is instituted, then the borrower will have to prove that it is wrongful or unwarranted. This is done by the borrower filing a wrongful foreclosure action. Costs are expensive and the action can take time to litigate.
Impact

The wrongful foreclosure will appear on the borrower’s credit report as a foreclosure, thereby ruining the borrower’s credit rating. Inaccurate delinquencies may also accompany the foreclosure on the credit report. After the foreclosure is found to be wrongful, the borrower must then petition to get the delinquencies and foreclosure off the credit report. This can take a long time and is emotionally distressing.

Wrongful foreclosure may also lead to the borrower losing their home and other assets if the borrower does not act quickly. This can have a devastating affect on a family that has been displaced out of their home. However, once the borrower’s wrongful foreclosure action is successful in court, the borrower may be entitled to compensation for their attorney fees, court costs, pain, suffering and emotional distress caused by the action. Fortunately, these wrongful foreclosure incidences are rare. The majority of foreclosures occur as a result of the borrower defaulting on their mortgage payments.

THE SAN FRANSICO “SMOKING GUN REPORT”

19 Feb

Audit Uncovers Extensive Flaws in Foreclosures

By
Published: February 15, 2012

An audit by San Francisco county officials of about 400 recent foreclosures there determined that almost all involved either legal violations or suspicious documentation, according to a report released Wednesday.

Annie Tritt for The New York Times

Phil Ting, the San Francisco assessor-recorder, found widespread violations or irregularities in files of properties subject to foreclosure sales.

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Anecdotal evidence indicating foreclosure abuse has been plentiful since the mortgage boom turned to bust in 2008. But the detailed and comprehensive nature of the San Francisco findings suggest how pervasive foreclosure irregularities may be across the nation.

The improprieties range from the basic — a failure to warn borrowers that they were in default on their loans as required by law — to the arcane. For example, transfers of many loans in the foreclosure files were made by entities that had no right to assign them and institutions took back properties in auctions even though they had not proved ownership.

Commissioned by Phil Ting, the San Francisco assessor-recorder, the report examined files of properties subject to foreclosure sales in the county from January 2009 to November 2011. About 84 percent of the files contained what appear to be clear violations of law, it said, and fully two-thirds had at least four violations or irregularities.

Kathleen Engel, a professor at Suffolk University Law School in Boston said: “If there were any lingering doubts about whether the problems with loan documents in foreclosures were isolated, this study puts the question to rest.”

The report comes just days after the $26 billion settlement over foreclosure improprieties between five major banks and 49 state attorneys general, including California’s. Among other things, that settlement requires participating banks to reduce mortgage amounts outstanding on a wide array of loans and provide $1.5 billion in reparations for borrowers who were improperly removed from their homes.

But the precise terms of the states’ deal have not yet been disclosed. As the San Francisco analysis points out, “the settlement does not resolve most of the issues this report identifies nor immunizes lenders and servicers from a host of potential liabilities.” For example, it is a felony to knowingly file false documents with any public office in California.

In an interview late Tuesday, Mr. Ting said he would forward his findings and foreclosure files to the attorney general’s office and to local law enforcement officials. Kamala D. Harris, the California attorney general, announced a joint investigation into foreclosure abuses last December with the Nevada attorney general, Catherine Cortez Masto. The joint investigation spans both civil and criminal matters.

The depth of the problem raises questions about whether at least some foreclosures should be considered void, Mr. Ting said. “We’re not saying that every consumer should not have been foreclosed on or every lender is a bad actor, but there are significant and troubling issues,” he said.

California has been among the states hurt the most by the mortgage crisis. Because its laws, like those of 29 other states, do not require a judge to oversee foreclosures, the conduct of banks in the process is rarely scrutinized. Mr. Ting said his report was the first rigorous analysis of foreclosure improprieties in California and that it cast doubt on the validity of almost every foreclosure it examined.

“Clearly, we need to set up a process where lenders are following every part of the law,” Mr. Ting said in the interview. “It is very apparent that the system is broken from many different vantage points.”

The report, which was compiled by Aequitas Compliance Solutions, a mortgage regulatory compliance firm, did not identify specific banks involved in the irregularities. But among the legal violations uncovered in the analysis were cases where the loan servicer did not provide borrowers with a notice of default before beginning the eviction process; 8 percent of the audited foreclosures had that basic defect.

In a significant number of cases — 85 percent — documents recording the transfer of a defaulted property to a new trustee were not filed properly or on time, the report found. And in 45 percent of the foreclosures, properties were sold at auction to entities improperly claiming to be the beneficiary of the deeds of trust. In other words, the report said, “a ‘stranger’ to the deed of trust,” gained ownership of the property; as a result, the sale may be invalid, it said.

In 6 percent of cases, the same deed of trust to a property was assigned to two or more different entities, raising questions about which of them actually had the right to foreclose. Many of the foreclosures that were scrutinized showed gaps in the chain of title, the report said, indicating that written transfers from the original owner to the entity currently claiming to own the deed of trust have disappeared.

Banks involved in buying and selling foreclosed properties appear to be aware of potential problems if gaps in the chain of title cloud a subsequent buyer’s ownership of the home. Lou Pizante, a partner at Aequitas who worked on the audit, pointed to documents that banks now require buyers to sign holding the institution harmless if questions arise about the validity of the foreclosure sale.

The audit also raises serious questions about the accuracy of information recorded in the Mortgage Electronic Registry System, or MERS, which was set up in 1995 by Fannie Mae and Freddie Mac and major lenders. The report found that 58 percent of loans listed in the MERS database showed different owners than were reflected in other public documents like those filed with the county recorder’s office.

The report contradicted the contentions of many banks that foreclosure improprieties did little harm because the borrowers were behind on their mortgages and should have been evicted anyway. “We can deduce from the public evidence,” the report noted, “that there are indeed legitimate victims in the mortgage crisis. Whether these homeowners are systematically being deprived of legal safeguards and due process rights is an important question.”

A version of this article appeared in print on February 16, 2012, on page A1 of the New York edition with the headline: Audit Uncovers Extensive Flaws in Foreclosures.

Mandelman sounds the Alert “Calling All Lawyers to 5,000,000 Crime Scenes”

23 Jan

 

It’s time for me to have an adult conversation with the experienced practicing attorneys in this country.  Other grown-ups are welcome to sit in as well, but it’s time for children to be in bed or occupied elsewhere, okay?

If there’s no money to be made solving something… no profit incentive… then for the most part, we don’t quite have a handle on to solving it.  For example, we’re not very good at cleaning up our oceans in general, and if there weren’t money to be made cleaning up oceans after oil spills, my guess would be that we wouldn’t be very good at doing that either.
To-date, however, BP has reportedly spent $21 billion cleaning up the Gulf of Mexico since its last mega-disaster, and guess what?  The Gulf of Mexico is pretty clean again… just two years later!  I remember hearing environmentalists predict that it could take 100 years to clean up the Gulf after the Deepwater Horizon catastrophe.  I guess they were underestimating just how much solution $21 billion can often buy.

Well, today we have a mammoth size foreclosure problem in this country, and it’s being talked about like it’s damn near an unsolvable problem… as if solving it would require determining the chemical origins of life, or figuring out whether black holes really do exist in space.

The foreclosure crisis, thank goodness, is not a black hole-type problem as many would have us believe.  It is a problem that, political constraints notwithstanding, exists at the juncture of economics and the rule of law.  In other words… it’s an oil spill… perhaps the worst oil spill of which the world has ever conceived… the Exxon Valdez meets Deepwater Horizon x 100, if you will… but it’s still just an oil spill.

It’s also important to note that as an economics problem alone, the foreclosure crisis is not a particularly challenging one to solve.  Some would rush to remind me that any proposed solution would be rife with “moral hazard,” and while that may be true, it doesn’t make the problem insoluble, by any means.

The elephant in the room is that what we’re facing in this country today is not just a foreclosure crisis, what we’re dealing with with is much better described as a FRAUDclosure crisis.

A couple of years ago, many would have said that my use of the word “fraud” before “closure,” is just hyperbole.  Today, however, anyone voicing that sort of opinion is selling something.  Even a cursory review of last year’s scathing “consent orders,” that federal regulators issued after months spent investigating mortgage servicers… or a quick perusal of the complaints filed against the servicers by attorneys general in Massachusetts, Nevada, Maryland, or Arizona… or by reading any number of published court decisions favoring homeowners… and one can only conclude that use of the word “fraud” is, if anything, understatement.

Additionally, this past year has been a turning point for the general public as far as FRAUDclosures are concerned.  Television’s most venerable news magazine, “60 Minutes,” along with newspaper-of-record, “The New York Times,” joined a long list of others documenting the many ways that banks and mortgage servicers are routinely breaking numerous laws in order to take advantage of homeowners in foreclosure.  It’s now widely understood to be something that’s occurring all over the country, and even though the banking industry continues to try to dismiss publicized instances as insignificant dalliances or “isolated incidents,” their sheer number has made such attempts laughable.  And the levels of wholesale anger and dissatisfaction with government felt among the populace are both palpable and rising fast.

Today, even forecasts from the likes of Goldman Sachs and Amherst Securities peg the number of foreclosures between 10.4 and 14 million by year-end 2014, and those numbers could easily go higher should home prices continue to fall… which they invariably will.  Add those numbers to the millions of foreclosures already water under the bridge, and were talking about a crisis that results in ONE IN FOUR Americans with mortgages losing their homes to foreclosure in the next handful of years.

What I’m describing will unquestionably devastate any hope for recovery in our broader economy for any number of reasons.  For one thing, as banks are forced to recognize their losses incurred on the mortgage-backed securities and CDOs that capitalize their balance sheets, they will become insolvent… and this time many will be forced to fail.  For another, home prices will continue falling pushing more and more homeowners underwater and consumer spending will continue to decline and that will lead to rising unemployment, which will in turn fuel further foreclosures.  And those hopelessly underwater will begin walking away en masse, which will further exacerbate the decline in prices and become impossible to combat.

All of these factors and more will combine to reduce future demand for residential real estate dramatically… perhaps by half, but in addition, with no secondary mortgage market… no ability to securitize debt… even those wanting to buy homes going forward will find credit to be tight and tighter, destroying any potential for recovery in the housing market.

And I’m no longer in a small group of people writing about this deteriorating situation as was the case three plus years ago.  Every day others are waking up to the fact that what we’ve been told about foreclosures to-date by our government and the financial services and related industries, has proven itself to be at best mistaken… at worst misdirection… or, not to put too fine a point on it, outright folderol.

As conservative columnist, Peggy Noonan, has pointed out recently, it’s simply impossible to imagine this sort of future without also seeing social unrest on a scale not seen in this country since at least the 1930s.  Writing recently about the Occupy Wall Street (“OWS”) movement, Noonan echoes my sentiments on the situation to a tee…

“OWS is an expression of American discontent, and others will follow.  Protests and social unrest are particularly likely if people feel they are unfairly losing their homes to support irresponsible, law-breaking institutions that have successfully disregarded the fundamental rules of capitalism and good citizenship.”

The harsh truth is that whatever is done in the future at state or federal levels to mitigate the damage caused by foreclosures, it’s simply too late to prevent our FRAUDclosure crisis from pretty much wiping out our nation’s middle class economy for more than a generation.  As a practical matter, the only real question we face today is how many are wounded and how many are killed… none of us is getting out unscathed.

There should be no question in anyone’s mind… there are only two paths ahead from which to choose.  Both involve fighting a war… but on one path the battle is fought by lawyers in our courts… on the other, by citizens in our streets.

Make no mistake about it… if we are to mitigate any of the  damage being caused, uphold the rule of law, and protect the rights of millions of homeowners… it should be obvious to anyone that WE NEED TENS OF THOUSANDS OF LAWYERS trained in foreclosure defense, loss mitigation and bankruptcy.  And yet, more than four years into the FRAUDclosure crisis, we don’t have anywhere near the number of trained, ethical attorneys required to meet the demand.

We’re all adults here, so let’s not kid ourselves about why that’s the case.  

We all know why we don’t have the lawyers we need to marshall a more effective defense of homeowners engulfed by the FRAUDclosure crisis… it’s because THERE’S NO MONEY IN IT.  Or, at least that’s what lawyers have been told they are supposed to believe.  Not only that, but the message has been that there  shouldn’t be any money in representing homeowners at risk of FRAUDclosure. It’s as if attorneys profiting from representing homeowners at risk of FRAUDclosure is somehow a bad thing.

AND THAT’S JUST 100% BANKER-INSPIRED B.S.

Don’t you see what’s happened here?  We’ve allowed the banks, and the government that’s been bailing them out, to essentially criminalize the profit potential in representing homeowners at risk of foreclosure… and wonder of wonders, miracles of miracles… here we sit with what appears to be an unsolvable problem.

Consider this… bankers say that they’ve been overwhelmed by the millions of homeowners unexpectedly seeking loan modifications and that’s why applying for a loan modification has been such a nightmare.  But, what about the number of foreclosures occurring in the same time frame?  Haven’t there been an unprecedented and unexpected number of foreclosures too?  So,why is it that the banks have no problems accommodating the millions of unexpected foreclosures, but the millions of unexpected loan modifications represent an unsolvable problem?

It’s simple… because on the foreclosure side of the equation, banks allow lawyers to be profitably compensated for handling foreclosures, and sure enough those law firms have figured out how to handle any number of foreclosures that come down the pike… in fact, the more the merrier, as they say.  On the loan modification side of the house, however, profits are a dirty word… and wouldn’t you know it, the problem is unsolvable.  Why am I not surprised?

Over the TWO YEARS following the Deepwater Horizon disaster, BP spent $21 billion to clean up the Gulf of Mexico.  In the FOUR YEARS since the tsunami of foreclosures began, we’ve spent roughly ten percent of what BP spent cleaning up the Gulf… $2.4 billion… and the vast majority of that amount paid to mortgage servicers… and we’re wondering why the problem can’t be solved?

 A MESSAGE TO OUR NATION’S LAWYERS…

It’s the biggest financial opportunity for the legal profession

SINCE THE REAR END COLLISION. 

The fact is… there is a HUGE OPPORTUNITY today to build a very profitable legal practice based on the ethical and effective representation of homeowners caught in the FRAUDclosure crisis.

From the very beginning of the mortgage meltdown, banks have tried to make sure that homeowners were not represented by attorneys when trying to save their homes from FRAUDclosure.   The reason is now apparent: Banks knew it was a FRAUDclosure crisis before the rest of us did because they’re the ones who put the FRAUD into FRAUDclosure.  From the earliest days of the crisis, the banks and the Obama Administration have been reinforcing TWO LIES:

  1. Homeowners at risk of foreclosure don’t need lawyers… they can just call their bank directly.  That’s like the police telling someone under arrest that he or she doesn’t need a lawyer because any questions can be answered by the District Attorney.  It’s a damn lie… homeowners DO NEED LAWYERS to help them save their homes because it’s not just a foreclosure crisis, it’s a FRAUDclosure crisis.
  2. A lawyer who charges a homeowner at risk of foreclosure up front… is a “SCAMMER.”  That is not only a LIE, but it’s a lie to achieve two key bank objectives.  One – It stopped many homeowners from seeking legal representation, thus allowing the banks to do whatever they wanted as related to foreclosing on their homes.  Two – It stopped countless attorneys from building a profitable practice based on representing homeowners at risk of foreclosure.

The California Example…

In California, the efforts to stop lawyers from representing homeowners have been more extreme than in any other state.  Here the campaign to malign the legal profession has been driven by legislative committees and supported by the California State Bar Association.  In October 2009, California’s SB 94 created a law that has effectively prevented lawyers from offering to represent homeowners who are seeking to avoid foreclosure through modification of their loans.  Under the guise of “charging up front makes you a scammer,” SB 94 has made it illegal for a lawyer to charge a homeowner an upfront retainer for legal fees.

Quite predictably, the law has made it difficult or even impossible for California homeowners to find quality legal representation related to seeking loan modifications, forcing those at risk of foreclosure who want to be represented by an attorney into either litigation or bankruptcy.  Writing for The New York Times in December 2010, David Streitfeld’s article titled, “Homes at Risk, and No Help from Lawyers,” described the situation in California related to SB 94.

In California, where foreclosures are more abundant than in any other state, homeowners trying to win a loan modification have always had a tough time. 

Now they face yet another obstacle: hiring a lawyer.

Sharon Bell, a retiree who lives in Laguna Niguel, southeast of Los Angeles, needs a modification to keep her home. She says she is scared of her bank and its plentiful resources, so much so that she cannot even open its certified letters inquiring where her mortgage payments may be. Yet the half-dozen lawyers she has called have refused to represent her.

“They said they couldn’t help,” said Ms. Bell, 63. “But I’ve got to find help, because I’m dying every day.”

Lawyers throughout California say they have no choice but to reject clients like Ms. Bell because of a new state law that sharply restricts how they can be paid. Under the measure, passed overwhelmingly by the State Legislature and backed by the state bar association, lawyers who work on loan modifications cannot receive any money until the work is complete. The bar association says that under the law, clients cannot put retainers in trust accounts.

To make matters worse, SB 94 has recently become controversial.  In late September 2011, Suzan Anderson, who is the supervising trial council of the state bar’s special team on loan modifications, made an unscheduled appearance at the bar’s annual conference, presenting what she purported to be the bar’s new interpretation of SB 94.  Literally hundreds of attorneys and legal scholars disagree, however, and litigation has recently been filed against the bar seeking declaratory relief, so we’ll soon see the courts decide the issue.

The core issue is about when a lawyer who represents a homeowner trying to get their loan modified can be compensated.  The bar claims the law requires an attorney to wait until the very end of the case, however, the actual language contained in SB 94 doesn’t say that… it says lawyers cannot be paid until completing “any and all services (the lawyer) has contracted to perform…” Up until Ms. Anderson’s presentation at the annual meeting, lawyers were dividing services into separate contractual arrangements and accepting payments from homeowners as discreet sets of services were completed.

Regardless of which side of the debate you’re on, the issue highlights how far the banking lobby will push a state legislature and state bar association in an attempt to prevent homeowners from being represented by legal council when trying to to avoid foreclosure, and it should come as absolutely no surprise that SB 94 was born in the state’s Senate Banking Committee, sponsored by Sen. Ron Calderon, who chairs that committee.

Advocates of SB 94 claim that it was needed to stop “scammers” who were preying on homeowners in distress from accepting up-front fees.  As quoted from Streitfeld’s article in The New York Times…

A spokesman for the Mortgage Bankers Association said it simply wanted to protect homeowners from fraud. “Be very careful about anyone who wants you to pay them to help you get a loan modification,” said the spokesman, John Mechem.

The evidence of any sort of army of lawyers-turned-scammers ripping off homeowners has always been thin, and by “thin” I mean nonexistant.  In the two years since the bill became law, the bar has taken some type of disciplinary action related to the representation of homeowners in foreclosure against two dozen lawyers, give or take a few.  In a state with more than 200,000 lawyers and 2 million homeowners in foreclosure, two dozen lawyers disciplined would hardly seem justification for a law that effectively prevents lawyers from helping homeowners get their loans modified.

Last December, Suzan Anderson, who heads up the bar’s task force on loan modifications, told The New York Times…

“I wish the law had worked,” Ms. Anderson said.

It’s also telling that no other state in the country has a law anything like SB 94, in fact, the rest of the states follow the FTC’s Mortgage Assistance Relief Services rule, MARS, which was adopted on January 30, 2011, and it does allow attorneys representing homeowners seeking loan modifications to accept funds in advance into their trust accounts.

The New York Times article also offered the perspective of several California homeowners seeking legal assistance in a post SB 94 world…

Mark Stone, a 56-year-old general contractor in Sierra Madre, feels differently. A few years ago, he got sick with hepatitis C. Unable to work full time, he began to miss mortgage payments. The drugs he was taking left him “a little confused,” he said.

Mr. Stone knew that his condition put him at a disadvantage in negotiations with his bank. So he hired Gregory Royston, a real estate lawyer in Redondo Beach. It took Mr. Royston nearly a year, but he restructured the loan.

 Without the lawyer, Mr. Stone said, “I’d be living under a bridge.
The legal bill, paid in advance, was $3,500. “Worth every penny,” said Mr. Stone, who is now back at work.
“This law,” Mr. Royston said, “took the wrong people out of the game.”

A Bleak Picture in California…

California’s approach to discouraging lawyers from representing homeowners at risk of foreclosure has not served the state or its residents well at all.  California is the “hardest hit” of all 50 states, accounting for one of every five foreclosures in the U.S.  Almost half of California’s homeowners are either underwater or effectively underwater today.  Since 2008, there have been 1.2 million foreclosures statewide, and that number is expected to exceed 2 million by the end of 2012.  And, according to the report published by the California Reinvestment Coalition…

The 2 million foreclosures expected by the end of this year are forecasted to cost the state and its residents $650 billion statewide.

Today, in California alone there are roughly TWO MILLION homeowners in foreclosure.  I don’t know exactly how many we have nationwide, estimates vary, but are in the 5 million range.  I do know that if two million people needed just 10 hours of legal assistance, it would take 20 million man hours.  Assuming a six hour work day and a 260 day work year… that’s just under 13,000 years assuming only one lawyer were involved.  To help two million people, assuming 10 hours each, at best would require more than 10,000 lawyers trained and working efficiently.

How many attorneys do we have  trained and ready to help loans get modified, represent homeowners in foreclosure defense matters and/or in bankruptcy.  Nowhere near 13,000 that’s for sure… in fact, we might not find 1300 either… and many would say the number could be closer to 130, and with the proliferating fraudulent documents… the abuses by servicers… the number of people who are foreclosed on illegally… its become easy to see the disease, and trained ethical lawyers would seem the only cure.

Mandelman out.

~~~

We need a literal army of experienced litigators, and Max Gardner’s Bankruptcy Boot Camp has trained close to 900 attorneys to protect the rights of homeowners in foreclosure.  I’ve attended Max’s Boot Camp… I could never recommend it strongly enough… and often do.  But, there’s more than legal training that’s required here… and if we’re going to attract the number of lawyers we need to fight this war…

The Answer is Money…

What Was Your Question?

Ohio’s former Attorney General Marc Dann is a highly experienced foreclosure defense attorney and a graduate of Max Gardner’s Boot Camp. He’s proven in his own successful practice that lawyers have the opportunity to DO GOOD… and DO WELL at the same time by learning the ins and outs of this, unfortunately, very fast growing and specialized field.  And he’s developed a comprehensive training and ongoing support program that allows experienced foreclosure defense attorneys to immediately access new clients and the right clients, improve operations within their firms, and yes… increase their profitability dramatically.

Marc understands our need for an experienced army of foreclosure defense lawyers, but he also understands the reality that lawyers have to make money in order to operate effectively.  In a phrase, a lawyer that can provide effective representation for homeowners at risk of foreclosure today, should not be worried about losing his or her own home to foreclosure because that benefits no one.

So, Marc has developed and employed best practices in building his own successful foreclosure defense practice, and now he’s teaching other attorneys how to make money in foreclosure defense so that ultimately he will have provided countless thousands of homeowners all over the country with access to highly capable, ethical and experienced attorneys.

Marc Dann’s LAW PROFITS program will take experienced and effective attorneys committed to foreclosure defense and protecting the rights of homeowners, and help transform them into vibrant, profitable firms or individual legal practices.  Some of the innovative solutions Marc will be delivering include:

  • How to cut through the noise created by scammers, reaching out to homeowners in a very honest and compelling way.
  • When and how to sue the bad modification company or bad lawyer.
  • Suing the foreclosure mills for fun and profits.
  • Using Fair Debt Collection Practices and State Consumer Protection.
  • Learn about the new practices available under Dodd Frank.
  • Harnessing TILA and RESPA inside and outside bankruptcy court.
  • Unconventional approaches stay one step ahead of servicer practices.
  • Billing structures, methodologies, and practice accounting.
  • Designing compensation programs that balance the needs of homeowners with the needs of your firm.  
  • Never lose clients – Ongoing communications program that’s turn-key and educates clients so they become fans.
  • Fee agreements – for contingency and hourly clients.
  • Become part of a highly visible network of top foreclosure defense attorneys, and strategic partners.
  • Communications strategies and tactics proven effective and unavailable anywhere else.

Making little or no money in foreclosure defense isn’t doing your clients any favors because you cannot be your best without it.  Marc Dann’s LAW PROFITS is not a pot of gold, or a winning lottery ticket, but it is a proven process and suite of best practices that makes a law practice profitable… essentially immediately.  It’s work, no question about it, but it’s important and gratifying work.

I wholeheartedly support Mar’c Dann’s LAW PROFITS initiative.  And I strongly urge all of the lawyers reading this to take action now by clicking the link below, so you can find out more about what his LAW PROFITS program for foreclosure defense and bankruptcy lawyers can do for you and your firm.  The FRAUDclosure crisis and its ancillary topics, I’m sorry to say, are going to be with us for a long time… a decade plus, if we’re lucky.  Longer if we’re not.  It’s time to settle in and start capitalizing on being one of the best at solving on of the worst case scenarios.

Click below to find out more about…

Marc Dann’s

LAW PROFITS

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